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EADS – IT WILL TAKE MORE THAN MARKET FORCES!

06 Oct 06. As the news with regard to the dire situation regarding the A380 project, U.K. MoD hard man, procurement supremo Lord Drayson waded in to the debate. The Times reported that the Ministry of Defence has told European politicians to stop meddling in the future of EADS, the aerospace and defence group, hinting that if they do not the Government would reconsider its role as a multibillion-pound customer. (See: BATTLESPACE UPDATE Vol.8 ISSUE 10, 09 March 2006, EADS EXCELLENT RESULTS SUGGEST FURTHER RESTRUCTURING DEBATE; BATTLESPACE UPDATE Vol.8 ISSUE 21, 24 May 2006, EADS AT A CROSSROADS)

Lord Drayson, the Defence Procurement Minister, said that he was concerned that normal corporate governance at EADS was being hampered by political interference.

He told The Times: “As a key customer, we see it as important for EADS to move in a direction that is free from political interference.”

Howver, the problems at EADS which go further than the A380 also include the possible delay of the A350 XWB which is being produced at very low margins with existing A350 customers receiving good deals on their existing contracts to keep them sweet. Boeing is attacking on all sides with not only the new 747-8 which Emirates is believed to be considering instead of the A380 but also an enhanced 737 which will attack the most profitable Airbus project, the A320

But, restructure of EADS is beyond ‘Free Market Forces’ as suggested by Drayson and will require Government support to enable this key technology area to survive. Whilst BAE Systems was right to dispose of its stake in shareholders interest, the U.K. Government could easily have bought the stake to ensure that the U.K. remains in the forefront of aviation development. The French Government and Lagardère, its key defence group, own a total of 22.5 per cent of EADS. DaimlerChrysler, which often acts in the German interest, also owns 22.5 per cent. The Spanish Government holds 5 per cent and the Russian Government 5 per cent. Both are rumoured to want a larger stake in EADS. The quid pro quo for increased investment by either country will be a fight to wrestle the wing production from the U.K. Tony Blair, who earlier this year basked in the glory of the A380 launch and visited Farnborough has said nothing about this crisis which is typical of this Government which has no industrial strategy. Readers will remember his speech in 1997 where he promised to ‘wire up the U.K.’ with broadband which prompted Labour colleague Lord Simpson to buy a rag bag of over valued U.S. (very apt!) networking companies, a move that bought the once-mighty GEC to its knees. The demise of the U.K.’s largest Company and a core technology supplier was greeted with little interest by Tony and no investigation was ordered. Last year another giant, Rover followed hard on its heels with the lightweight Patricia Hewitt intervening only after the Company had gone bust! Few will have noticed the 40% drastic drop in U.K. exports to Europe, a great deal of which was supplied by GEC and Rover. But Blair does not care, like David Cameron, they both have little interest in industry and are moving towards a statist regime where money appears to grow on trees. I am sure all our readers noticed that Europe as a central issue was avoided by both parties at their recent conferences. Blair championed Europe until the French and Dutch referenda destroyed his hopes of being European Leader. His stance on Iraq was the final nail in his European coffin to the delight of Jacques Chriac.

But, like all U.K. present Industrial Policy which takes place on the hoof, does the Government see Boeing as the saviour of the aerospace industry and will this result in our dismemberment from European involvement in aerospace?

The FT reported that Boeing is looking to buy into the UK defence sector in response to a shift by the British government towards greater protection of its domestic arms industry. The UK, the biggest western mi

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