TI in French link-up: Merger will rationalise world aerospace industry

BRITAIN'S TI Group and Snecma of France are negotiating to merge their Dowty and Messier-Bugatti landing gear activities, creating potentially the world's largest aircraft landing gear business, with sales approaching pounds 300m.

The aim is to create a 50-50 joint venture to be named Messier-Dowty. Tony Edwards, head of Dowty Aerospace, will become chairman and chief executive with Jean-Paul Bechat of Snecma as deputy chairman, while TI has the right to appoint its own chief financial officer, implying tight UK management control.

The moves mark another step in the rationalisation of the world aerospace industry.

Airframe manufacture is dominated by three firms - Boeing, Airbus Industrie and McDonnell Douglas - while engine manufacture is concentrated in the hands of GE and Pratt & Whitney in the US and Rolls-Royce in the UK.

While Messier-Bugatti and Dowty have divided up Airbus orders between them, their two main US competitors - Cleveland Pneumatic, recently bought by BF Goodrich, and Menasco - have shared Boeing landing gear orders, although Messier-Bugatti is a sub-contractor to Menasco on the Boeing 777.

According to Mr Edwards each has around 20 per cent of the broad landing gear market. Industry analysts estimate that on big aircraft programmes Cleveland may soon have a share of 40 per cent, which would match the new joint venture.

Mr Edwards said the deal depended on regulatory approval on both sides of the Atlantic. Customer reaction had been 'very positive' and he expected the European competition authorities to adopt a global rather than narrowly European attitude.

No detailed financial information on the two businesses is being made available. Messier-Bugatti will contribute the bulk of sales and both companies are described as profitable.

TI shares, which have underperformed since the pounds 500m takeover of Dowty last summer, rose 4p to 340p. Analysts said the link-up with Messier-Bugatti would give TI the market leadership in landing gear it lacked with Dowty on its own.

The joint venture is not expected to lead to rationalisation since there is little competitive overlap, but both companies will continue to pursue cost reductions independently.

Dowty, where the head count has fallen by 12 per cent since its acquisition, recently announced the loss of 200 jobs, which was intended to take account of the reduced prospects for aerospace component sales.

Future cost savings are expected to come from more optimal production planning, including greater use of Dowty's modern Montreal manufacturing plant for large landing gear.