INTERVIEW-Boeing, like BAE, sees global defence mergers
By Bradley Perrett, European aerospace & defence correspondent
LONDON, Jan 31 (Reuters) - Boeing Co. <BA.N> on Wednesday endorsed BAE Systems' <BA.L> forecast that mergers could produce two or three transatlantic defence giants within 10 years.
"I do think it is likely to happen," Boeing Chairman and Chief Executive Phil Condit told Reuters in an interview.
"It certainly is one (possibility) that has a lot to recommend it."
Top industry executives believe U.S.-based Boeing and Britain's BAE, the world's biggest defence contractor, are obvious partners if their governments can agree major international mergers in this most nationalist of industries.
BAE group marketing director Charles Masefield said on Tuesday that transatlantic mergers were likely because of the need to share limited defence budgets and especially because European firms needed access to the U.S. market and technology.
But the defence industry has always been managed by its customers, the governments, and little can happen until they become comfortable with greater reliance on foreigners for weapons.
"I think they are close," said Condit.
"It seems to me there is a lot of benefit in that process (of transatlantic consolidation)."
"I think there is a lot of positive things for governments to think about as they wrestle with this."
BOEING, BAE HABITUAL PARTNERS
Condit would not say whether BAE was his preferred partner, but he describe the advantages of consolidation among companies that habitually work together -- which Boeing and BAE do.
"If you sit down with someone and work with someone, that is a very positive force," he said.
"You get to know how they work. You get to know their strengths and weaknesses and so the predictability of the (arrangement) gets better.
"But that is not the only path" to consolidation, he noted.
While Boeing and BAE are often fierce competitors, they have a long history of cooperation. BAE has twice licensed McDonnell Douglas, which Boeing absorbed in 1997, to build British planes for the U.S. Navy and Marines.
Like BAE, Condit said transatlantic mergers would bring greater competition to each market -- the United States and Europe -- while creating bigger markets for the companies.
It would also help U.S. and European armed forces to work together, overcoming the current problem of their being equipped with incompatible weapons and systems. Technology is another driving force behind transatlantic consolidation, since European weapons are often less advanced than U.S. equipment.
Conceivably, the United States could reject consolidation and instead expect European countries to buy advanced equipment from U.S. manufacturers.
But Condit said that approach would result in Europeans sticking with their own systems, falling further behind.
GOVERNMENTS UNENTHUSIASTIC
The U.S. government has so far shown little enthusiasm for continental European defence companies.
While BAE is a significant Pentagon supplier, and has been permitted to buy extremely sensitive operations from U.S. defence group Lockheed Martin Corp. <LMT.N>, no continental company has a significant military business in the United States.
And at least one continental government, that of France, shows equally little enthusiasm for U.S. connections.
One senior defence source said last week that Paris saw serious problems with U.S. equity in French defence firms.
But Thales SA <TCFP.PA>, one of the two main continental companies with defence interests, is French. The other, European Aeronautic Defence & Space Co NV (EADS) <EAD.DE><EAD.PA>, is roughly half French. However, Thales last month sealed a joint venture with U.S. defence firm Raytheon Co. <RTNa.N> in ground-based air-defence systems. EADS is developing a relationship with Northrop Grumman Corp. <NOC.N> and has some connections with Lockheed. |
