BAe spurns Europe to seek US defence partnership

BRITISH AEROSPACE yesterday dealt a crushing blow to hopes of creating a single European aerospace and defence company, by declaring that its aim was to forge a global partnership with a major US contractor.

The growing rift between Europe's leading aerospace companies was further underlined after senior executives at Germany's DaimlerChrysler Aerospace (Dasa) made it clear that an alliance with either BAe-Marconi or Aerospatiale Matra of France was now out of the question.

The decision of the British and the French to seek "national" solutions to the problem of defence restructuring has fatally damaged the project launched by European leaders two years ago to create an all-embracing aerospace holding company covering both civil and military markets.

It has also infuriated the Germans and made them determined to create a rival grouping built around Dasa, the Spanish state-owned company Casa and Alenia of Italy.

Speaking at the start of the Paris airshow, John Weston, chief executive of BAe, predicted that the industry would consolidate into just two global players.

He said that BAe's pounds 7bn merger with GEC-Marconi, which had sent a "galvanising shiver" through Europe's aerospace industry, was a step along the road to BAe joining one of these two global aerospace partnerships.

BAe, the original advocate of the single European aerospace and defence company, also appeared to pour scorn on the idea that such a concept could ever be put together. "It is totally impractical to suggest that you could knock eight companies together and make one," said Mr Weston. "This is not about creating fortress Europe."

Meanwhile, Manfred Bischoff, the chairman of Dasa, cancelled a planned press conference in Paris to fly to the US. Hot on the heels of Dasa's merger with Casa of Spain, there are suggestions that the German company is attempting to put together a deal with Northrop Grumman, which was blocked from merging with its US counterpart Lockheed Martin last year.

However, Sir Dick Evans, the chairman of BAe, said it was "inconceivable" that the US administration would allow Dasa or any other foreign aerospace company to acquire Grumman after it had refused to allow the Lockheed takeover to go ahead.

He said that in the longer term there would be two or three global aerospace companies, each of them with a major US presence. But it was important for the US to decide what its policy was towards further consolidation on a transnational scale and how it would deal with the implications for US defence security.

Meanwhile, ministers from the four Airbus countries - Britain, Germany, France and Spain - will meet in Paris today in a bid to kickstart the stalled process of transforming the consortium into a single corporate entity. Sir Dick said the four governments needed to "re-energise the Airbus partnership and revisit the whole concept of the single corporate entity in light of the latest developments in Europe".

Dasa's takeover of Casa and the privatisation of Aerospatiale following its merger with Matra have raised hopes that the project can be resurrected after stalling last autumn. Noel Foregard, chief executive of Airbus, who has staked his job on the consortium changing its status, said it was "an absolute necessity to make the transformation as soon as possible".

He added that, because all four partners now shared the same private sector culture, he was "very optimistic" that a breakthrough would be made. But he declined to outline a timescale for the single corporate entity.