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Exit EADS BAE. Should you take out your handkerchief?

(BRUSSELS2) They spent a few nights together one summer evening, found each other to their liking, but their parents put the kibosh on it... This is, in a way, the sad story of the failed BAE + EADS merger. Is this a reason to cry out loud? Should we see absolute drama? Proof of the failure of European Defense. The death of the European spirit, etc. ? Stop… I don’t believe it.

A drama ? There are many attempts at fusion. Some fail before completion, others close to completion (this is the case in this case), and finally others once the merger is complete (which is much more serious). The conditions of the “express”, hussar merger, desired by the directors of EADS were industrially justifiable: having one large European group rather than two. And then EADS and BAE already have certain links, certain projects that they carry out and can carry out together. In a certain way, we can thus arrive at additional connections. It will probably not be as effective, not as beautiful, especially on the stock market. But would it really be less effective? In fact, the danger – if there is a danger – is to potentially throw BAE into the arms of Boeing.

EADS BAE the ideal? The EADS-BAE merger was rather complicated. And the weight of the Americans in the future group, not really fully evaluated. To say that international competition imposes a single European aircraft manufacturer is undoubtedly a good postulate. Is this automatically a sign of effectiveness, Not sure? The principle of “Big is beautiful” does not always find a corollary in terms of success in terms of influence and market share. We could even say that other European aircraft manufacturers are on the market, at least in terms of military aircraft. Saab for the Gripen and Dassault for the Rafale, for example, are in competition with the Eurofighter, co-manufactured by EADS and BAE. Our two manufacturers can therefore grow externally (because that was the objective) by joining forces with other manufacturers on the continent or even beyond the continent.

Germany at fault? This is the version widely given in the (at least French) press. It is certain that Berlin put a stop to the process. However, are his demands insane? Is there not a risk in joining a structure without knowing whether your partner will then increase the capital by holding more of a majority? Beyond questions of financial arrangements, there is a sort of hiatus between Paris and Berlin, a lack of trust which does not favor rapprochements. But also undoubtedly a change of attitude, already observed on many European issues, Germany is there, strong, powerful. She no longer intends, as in the past, to be considered an important but accommodating partner. Berlin has its mood swings and shows it. We must take into account this new situation, which is not cyclical, but structural.

To be continued on B2 club, excerpts from several personalities who spoke in the (British) House of Commons on this merger.

The death of the defense industry? There are other areas where connections are not only possible but necessary. In the naval industry, with the Spanish or the Italians, failing to be able to do it with the Germans. In the armored vehicle industry, too. In a way, this failure can galvanize some people. In any case, the budgetary and industrial context makes reconciliations not only desirable but necessary. And the common legal framework has been established – in particular the European directive on public procurement. In the next 5 years, the European industrial landscape will perhaps not resemble that which exists today.

So let's stop crying. Let's see where the other merger opportunities are. And let’s build, realistically…

Nicolas Gros Verheyde

Chief editor of the B2 site. Graduated in European law from the University of Paris I Pantheon Sorbonne and listener to the 65th session of the IHEDN (Institut des Hautes Etudes de la Défense Nationale. Journalist since 1989, founded B2 - Bruxelles2 in 2008. EU/NATO correspondent in Brussels for Sud-Ouest (previously West-France and France-Soir).