Outlook: BAe won't be fooled into playing French cricket

IT ALWAYS did look hopelessly optimistic to expect the aerospace industries of Europe to come up with a battle plan for rationalisation in the space of three months. That was what the politicians wanted but given the long years these companies have already spent dancing around the idea of consolidation, it never seemed very likely.

The political impetus behind last December's exhortation to British Aerospace and GEC and their counterparts in France and Germany to "rationalise or die" was impressive enough. Tony Blair, no less, signed the trilateral statement along with the French President, Jacques Chirac, and the German Chancellor, Helmut Kohl. Even so, getting a "clear plan and timetable for action" out of their respective national champions by 31 March was about as likely as the Americans getting a Security Council mandate to bomb Baghdad.

When it comes to competing in world defence markets, there can be little doubt that sooner or later even companies the size of BAe, Daimler-Benz and Aerospatiale will wilt under the firepower that can be assembled these days by Lockheed Martin, Boeing and Raytheon.

For the Europeans, however, the main difficulty has always been that of agreeing just who the enemy is - the Americans or each other. Hence the bellicose words yesterday from BAe. Its top brass has made it plain that it has no intention of playing cricket with the French. This is shorthand for not ceding an inch in any eventual three-way merger to an industry that is still state-owned in both name and mentality.

Aerospatiale's internal restructuring yesterday into separate aircraft, space and defence subsidiaries, "to support its role as the major French player in the construction of a Europe-wide civil and military aerospace industry", may look good on paper but it will have fooled no-one down at Farnborough.

It will be a minor miracle if BAe and its partners in the Airbus civil aircraft programme (including the French) have sorted out whose assets are worth what in time for the consortium to start functioning as a single corporate entity by this time next year. It will be a bigger miracle if the participants have agreed the framework for an all-embracing European defence company. Until the French government bites the bullet and puts its aerospace industry on the same footing as others through a stratagem of privatisation, the chances of meaningful rationalisation look slim.

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