EADS/BAE SYSTEMS MERGER HAS BEEN SIMMERING FOR YEARS
By Julian Nettlefold

18 Sep 12. The announcement last week of the proposed EADS-BAE Systems merger (takeover!) did not just happen because BAE was suffering from a sudden drop in sales, that was the catalyst, together with the loss of the Indian fighter contract, to drive Ian King to open discussions with Tom Enders. Seizing his moment, Tom Enders made the proposal public.

Seasoned BATTLESPACE readers will know that this process to sell BAE Systems and for the UK to ‘get out of defence’ started years ago. BAE Systems’ roots come from the nationalised UK aerospace companies used to a monopoly with no competition, thus the management was steeped in this culture. Certain faction in all parties in the House of Commons would welcome its demise, Gordon Brown being a known anti-defence protagonist and others such as Oliver Letwin believed to see defence as peripheral and expensive.

The process to run down and exit defence was made very clear at a meeting the Editor attended the Policy Exchange Think Tank briefing in September 2004.

At the meeting, Antonia Feuchtwanger, an Evening Standard journalist launched her book, ‘THE BEST KIT’. When the Editor rang the Think Tank’s offices he was told that the basis of the funding for the Group lay with a Conservative bias, as many members worked for Central Office.

When the Editor arrived at the meeting what was expected to be a sea of blue turned into one of red with some blue tinges on the outside. The imposing figure of Clare Short M.P. and the selection of literature, including the ‘Escaping The Subsidy Trap’, written by the Oxford Research Group, confirmed the way the evening would progress. The only beacon was General Sam Cowan, former head of the Defence Logistics Organisation, chosen as one of the speakers who fought his corner well, giving a very erudite speech.

We have always had a policy at BATTLESPACE that we should not stray into areas of the industry we know nothing about and attempt to write in-depth comment, military strategy being one example. The same should apply to people who have no experience of the machinery of industry and the defence industry in particular.

The Book ‘ESCAPING THE SUBSIDY TRAP’ was written by two academics, Paul Ingram and Roy Isbister. Whilst not denying their academic prowess, they appear to understand little about how long it takes to establish new industries once the old ones die. The coal industry quoted often last night is a prime example where communities are still struggling to bring in new industries to replace the demise of the industry which had been the life blood of their communities for years. There is a great deal of fact in the book which suggest huge subsidy to the UK Arms Industry; on closer examination, the result was that ‘they are all at it’, and that the UK is probably the country from the majors with the least support for exporters as the current complaints about ECGD reflect. The US FMS system dwarfs anything else in the world.

More worryingly for those coveting their jobs in the industry the study points out that, ”Far from providing jobs, UK Government support for arms exports divert investment away from more effective job-creating economic activity.” A very broad sweeping remark which ignores the plight of the thousands of GEC workers whose pension are now ruined. Lord Simpson and John Mayo, who had far more training than the authors of this book sold the crown jewel GEC-Marconi defence electronics business, just before the C4I boom started, and diversified into telecoms. The result was the collapse of the UK’s largest industrial conglomerate, nurtured for years by its founder Lord Weinstock, who undoubtedly died of broken heart.

The two joined GEC with £3bn in the bank and a credit line totalling £10bn; with the help of City bankers they blew the lot on a spending spree into the telecoms industry. As the FT said, ‘if the Yanks are selling, get