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Major European Aerospace Merger Sends Shockwaves Around the Globe

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Posted on Oct 2, 2012
Photo by Luis Argerich (CC-BY)

By William Pfaff

PARIS—The first of the presidential debates is supposed to be confined to domestic American issues, which is nearly all that the candidates have talked about during the campaign until now.

Foreign affairs have forced their way into the campaign on a couple of occasions, and the Benghazi affair may do so now, but the assessment of the campaign planners in both parties seems to be that the American people aren’t very interested.

This may be true if the majority of Americans are like Mitt Romney, whose remarks on foreign policy matters have been so clueless that one wonders if he would subcontract all of American foreign policy out to Israeli Prime Minister Benjamin Netanyahu (or to the surviving American neo-conservatives, which would amount to the same thing). He has already said that he would put the Israeli leader in charge of American Middle Eastern policy—for good or ill.

He would thereby be following the West European lead, whose governments have given control of their foreign policy to the United States for more than 70 years (all but the French—there’s always a French exception; they fought their Indochina and Algerian wars, and subsequently elected Charles de Gaulle to lead them, without asking for American permission).

Europe has found this convenient, since there have been few specifically European security crises—other than in Yugoslavia, and even there Europe eventually handed things over to Richard Holbrooke, despite the fact that the West European members of the U.N. Protection Force in the country possessed the military means necessary to halt the Bosnian Serb siege and the slaughter of their erstwhile Muslim neighbors. The Europeans were too timid to act on their own. The Dutch were too timid even to intervene at Srebrenica in 1995, while over 7,000 Bosnian men and boys were massacred.

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Now the West Europeans are contemplating handing their independent arms and aerospace companies over to a conglomerate that would bestow on the United States an effective veto over the greater part of Europe’s rival defense industry. Are Mitt Romney and Barack Obama aware of this?

The CEO of the European EADS defense and aerospace company (which includes Airbus), Tom Enders, who is a German, proposes to merge his company with the British military manufacturer BAE Systems. A merger, as executives of the companies confidently claim, would provide integration and advantages that could protect both from the economic consequences of the slump and the expected fall in post-Afghanistan U.S. and European military orders. (There even would be a bonus if anyone should start still another war in the Middle East.)

The merger plan and the discussion around it have all but totally ignored the political issues at stake. EADS began with Airbus, which was created by France’s Aerospatiale, Germany’s DASA and Spain’s CASA to compete with Boeing. Everyone else laughed in America and most of Europe when this was proposed. Airbus is today the leading world constructor of commercial transport aircraft, while Boeing is in second place.

In addition to Airbus, EADS includes Eurocopter civilian helicopters (which manufactures in the U.S. as well as Europe) and Ariane space launchers, and it is the world leader in each of those sectors. It also manufactures satellites and military missiles, is a collaborator on the Eurofighter military aircraft, and is building the forthcoming heavy military transport aircraft, the Airbus A400M.

BAE today is the culmination of a series of mergers of virtually all of the great names in British aviation and military electronics, the most recent being that of British Aerospace with Marconi Electronic Systems in 1999. Since 1999, the company has shifted much of its activity to the U.S. where it has become the 10th largest U.S. government contractor (according to General Services Administration figures). A major portion of its stock ownership is American. Its classified work for the U.S. government is set apart from the rest of the company, and only Americans are allowed to work on these contracts.

EADS today is controlled by the stockholdings of the French government and the Lagardere company, a former military contractor, and two German companies. Despite the fact that the French and German governments effectively created the company, the merger proposal would only give them “golden shares” with a power of veto over further mergers. Mr. Enders envisages the removal of all European government influence—which the U.S. Government opposes. (British opposition to the merger today focuses on its potential for undermining the supposed existing British-American “special relationship.”)

This all seems to add up to the suicide of EADS as a European company by merger with a company which already has ceded its high-added-value work on the most advanced technologies to the United States. If so, it seems to be the end to autonomous European aerospace.

There are plenty of other objections to the proposed deal, but its political implications are immense, and so far have had little discussion. The whole thing bears the sign of a well-known business phenomenon, which usually ends badly—CEO megalomania. Mitt Romney has undoubtedly seen this before.


Visit William Pfaff’s website for more on his latest book, “The Irony of Manifest Destiny: The Tragedy of America’s Foreign Policy” (Walker & Co., $25), at www.williampfaff.com.

© 2012 Tribune Media Services, Inc.


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