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Strategic Analysis:
A Monthly Journal of the IDSA
Trends in European Defence Industry:
Fortress Europe or Atlantic Defence Industry?
By Deba R. Mohanty
*
Abstract
In the last one decade, the global defence industry has undergone significant changes. It has shrunk in terms of size. It has also become more concentrated. While large companies in the leading centres are on a merger and acquisition spree, it has left medium and small companies facing severe difficulties in adjusting to the changed scenario. The demand for military equipment shows uneven trends. While the demand for high-tech weaponry has gone up which, in turn, has attracted more money in both sales and investment in military R&D, the demand for conventional military equipment has been stagnant. As the second largest military production centre in the world, the European defence industry faces a dilemma today-whether to build a common continental industrial base independent of the US or strive to become a giant Atlantic defence industry. This paper argues that while the former option makes sense for Europe, the latter, though plagued with problems in the short run, might become inevitable for Europe in the long run.
Introduction
The 1990s witnessed a global trend of uneven demand for military equipment. The number of major armed conflicts around the world in 1999, each involving more than 1,000 casualties in a given year, numbered 27 in different regions (in 25 states), out of which two-thirds were in Asia and Africa. Though the number of major armed conflicts (31) declined since 1989, it increased again from 1997. 1 The nature of armed conflict too has undergone changes. The increasing use of modern high-tech weapons, often available through non-state sources, makes exact quantification of the transfers of military equipment difficult. The resultant uncertainty in the security scenario forces many vulnerable states throughout the world to prepare for the possibility of involvement in military conflicts, and keep modernising their armed forces. As a result, the demand for military equipment and consistent developments in defence science and technology in the arms producing and exporting states continue to remain the key features of the military-security sector. However, there has also been a visible reduction in the levels of military efforts by the arms producing countries after the Cold War.
The fall in production and sales value was significant during the first half of the 1990s, though in the second half of the decade, there was a slight increase in most of the arms manufacturing centres. Arms production and sales are indicative of this trend. Arms sales by 100 largest arms producing companies of the Organisation of Economic Cooperation and Development (OECD) and developing countries fell by 15 per cent between 1991 and 1994. 2 It fell further in the subsequent years, coming down to 13.5 per cent in 1995. Since 1995, it has picked up momentum-the growth in arms production was between 0.2 to 3.4 per cent (1995-98). According to the Bonn International Centre for Conversion (BICC), worldwide employment in the arms industry decreased from 17.5 million in 1987 to 11.1 million in 1995. 3 Global military expenditure, which stood at $1,360 billion in 1987, came down to $714.22 billion in 1997. 4 It increased by nearly 2 per cent in real terms and amounted to roughly $780 billion in 1999. 5 Even that is almost one-third less than what it was a decade ago. Military expenditure today accounts for 2.6 per cent of world Gross National Product (GNP). The increase in military expenditure in 1999 is attributable to the rise in the military expenditure of some of the major spenders like the United States (US), France, United Kingdom (UK), Russia, Brazil, China, and Turkey. The continuing increase in military expenditure in South Asia and parts of Western Europe has also contributed to the rise in the world total. There is a downward trend witnessed in major military research and development (R&D) activities by the top arms producers during the same period. 6 However, this is unlikely to last for long as the major spenders like the US, France, UK, Germany and Japan are trying to strengthen their military R&D programmes. In brief, while experts in the field are puzzled by the ongoing armed conflicts, they are equally confused by the overall fall in the sales of military equipment.
The changes in the conditions for arms production beginning in the late 1980s continued to have a strong impact on overall production of weaponry and the defence industry during the mid and late 1990s. The declining trend in the demand for military equipment appears to be slowing down, and in some arms producing countries, the trend seems to have turned toward growth. Even so, the level of demand today is significantly lower than it was in 1987, the peak year of global military spending. Analysis of trends in the main centres of demand and supply suggests that global demand for weapons dropped between one-third and one-half between 1988 and 1997. While the North Atlantic Treaty Organisation (NATO) expenditure on military equipment fell by one-third and Russia's arms procurement budget was reduced by more than two-thirds over the period 1988-97, arms imports by developing countries fell by 33 per cent during the same period. In brief, the post-Cold War international environment has not been friendly for the weapons producers. The rise in the technological sophistication requirements by the armed forces, deeper uncertainties of various domestic and external conditions in the major centres of arms production, uncertainty about the precise nature of the future demand for military equipment-all these have contributed to the kind of scenario that the defence industry faces today.
To overcome such challenges, the defence industry has sought diverse remedies. Consolidation through mergers and acquisitions, concentration through inter and intra-border defence cooperation, and conversion are some of the recent buzzwords in the defence industry today. Among these, conversion has made a comeback after the initial success it had during the 1960s. Some experts have even suggested that its time has come. 7 However, even the much heralded conversion process has not proved to be the panacea for the defence industry's woes. The global defence industry indeed faces an uncertain future in the 21st century. This paper argues that in this complex landscape, the most visible transition that can be witnessed is large-scale concentration in the industries within and between the US and West Europe, which has caught the attention of industry and military watchers. What kind of impact it will have on the global defence industry remains to be seen but it is worth investigating this aspect in detail. This paper makes an attempt to look into this and other trends that have affected the European defence industry 8 in the past decade, and assess the magnitude of the problem. The attempt by the major European defence manufacturers to integrate the whole industry in order to give it a distinct continental identity is visible. Also the attempt to make the industry an integrated Atlantic giant seems to be facing numerous problems. However, the future trend could be toward the latter direction.
The European Defence Industry: Radical Concentration
The European defence industry stands as the second major arms production centre in the world today. There are more than 200 defence manufacturing companies of various sizes, mostly autonomous industrial units, in the seven major states of Europe which are engaged in exclusive military equipment ranging from tanks, fighter aircraft, missiles, submarines to modern electronics and information technology systems. The total employment (both direct and indirect) in these companies was nearly 1.5 million in 1997 out of which 2,50,000 were employed in France, 1,00,000 in Germany and 3,20,000 in the UK. 9 The major companies have reduced their employment since the early 1990s and are expected to cut further in the future-38 out of the total figure in the Stockholm International Peace Research Institute's (SIPRI's) list of top 100 arms producing companies in the world. These top companies together are accountable for 36 per cent of total arms sales across the globe and when combined with the US, account for 92 per cent of the total arms sales. 10 Their combined arms sales touched US$55.4 billion, which constitutes more than one-third of the total arms sales worth US$154.5 billion, in 1998. Compared to the earlier years, these companies have boosted their sales in recent times and, according to industry watchers, are striving hard to maintain the upward trend.
In order to understand the European defence industry, it is necessary to examine the performance of its top companies. British Aerospace (BAe) of the UK stands as the fourth largest arms producing company, producing artillery, aircraft, electronics, missiles and arms (its major product being aircraft). Its total arms sales in 1998 amounted to US$10.6 billion, with a post-tax profit of $1.7 billion. It has a total workforce of 48,000. This giant profit making company has of late been on a merger and acquisition spree. It has become a 50 per cent partner in the joint venture company called European Aero-Systems (formed in September 1998) which will be engaged in research on fighter aircraft; has acquired the military electronics branch of GEC (a major company producing naval and electronics equipment in the UK); is a 20 per cent partner in Airbus Industries 11 (which is into fighter aircraft, missiles, space, electronics, and land systems); and, finally, a major partner in the formation of the European Aeronautic and Defence and Space (EADS) Company, among others. The British GEC which has a large presence in the US, had initial problems in the acquisition process but thanks to selective American clearances, this has become a reality now. 12 In fact, the BAe Systems enjoys a more favourable climate in the US than its other European counterparts.
The most dramatic development in the European defence industry so far has been the decision in September 1999 to create the first major intra-European aerospace and defence company, EADS, by combining the arms producing activities of Aerospatiale Matra, DASA, Spanish CASA, and others. EADS came into being on July 10, 2000. It has a combined annual revenue of $22 billion, which puts it in the third place in the rankings of international defence companies, behind Boeing ($55 billion) and Lockheed Martin ($28 billion), and just ahead of BAe Systems ($21 billion). 13 One of the main challenges for this newly formed company is its complex management and ownership structure. The top management is shared between two chief executive officers, one French and one German, and its style is predicated on the devolution of decision-making to the lowest level possible within its five principal divisions (Airbus, military transport aircraft, aeronautics, space, and defence and civil systems). There is an imbalance in these divisions: Airbus is by far the biggest revenue earner, and EADS lacks a strong position in defence electronics, essential for integrating and producing advanced military systems. EADS is also heavily dependent on joint ventures with BAe Systems for over two-thirds of its revenue. The process of industrial integration in this single case seems to be far more complex than other major mergers in the same field, such as that between Boeing and McDonnel Douglas and between Lockheed Martin Marietta. In fact, EADS involves a much greater number of companies and the situation is further complicated by its labyrinthine ownership arrangements. The French and Spanish governments' equity stakes are involved, although somewhat diluted through a series of holding and pooling companies. The immediate ownership of the company is still split between the public, which has a 34 per cent stake, and a holding company controlling the remaining 66 per cent. This holding company is itself owned by Daimler Chrysler (46 per cent), the Spanish government (8.5 per cent) and another French holding company (44 per cent). It is this company through which the French government has its share in the EADS action. This giant effort has also received jolts from partner companies who have been engaged in bilateral mergers. 14 Another crucial point is that the pace of integration within EADS is largely dependent on developments within the state-owned French arms industry because Germany and the UK have made private ownership a fundamental requirement for their participation in EADS and view state ownership as a likely obstacle to the necessary industrial restructuring.
The BAe's acquisition of Marconi Electronic Systems and the creation of EADS have created the ground for the reorganisation of the missile, radar systems and space activities of the companies involved into three large West European joint ventures, linking the two conglomerates to one another and to other major companies. In the missile sector, a joint venture between the missile sectors of the British-Italian Alenia Marconi Systems and Franco-British Matra BAe Dynamics has resulted in the formation of the New Matra BAe Dynamics. This joint venture, whose major partner is Matra BAe Dynamics, ranks as the eighteenth major arms manufacturing company (before the merger) in the world, with arms sales of nearly $2 billion in 1998. The new Matra BAe Dynamics also holds a 30 per cent share of the missile business of Daimler-Chrysler Aerospace. The share may be increased to 49 per cent in the near future. The second merger in the field of satellite activities is between DASA and Matra Marconi Space Systems to create Astrium. In this venture, BAe Systems and EADS are the two parent companies. The third major merger is between the radar activities of the old BAe and old Alenia Marconi Systems. This joint venture is known as the New Alenia Marconi Systems. These joint ventures involve the activities of the parent companies in entire industrial sectors rather than being limited to specific armament programmes. Another important feature of these activities is that they include a major part of the West European production in the respective sectors-a balance between major and specific need based priorities. A third feature is that a number of companies which are outside these joint ventures are either linked to them through minority shares or are planning to join in the future.
Production of military vehicles has remained fragmented in Europe. In 1998, there were as many as 37 producers of military vehicles and artillery systems. 15 Major armoured vehicle manufacturers are from France (GIAT, Panhard and Renault), Germany (Henschel, Krauss-Maffei, Rheinmettal and Wegmann), and the UK (Alvis, GKN and Vickers). Large-scale concentration in this sector has been witnessed, especially during the latter half of the 1990s. In November 1998, the military vehicle business of GKN merged with Alvis. In 1999, the major German company, Rheinmettal, made a series of both national and international acquisitions. 16 It acquired the military activities of the Swiss Oerlikon Contraves from Oerlikon-Buhrle and the military activities of the German company IWKA-Kuka Wehrtechnik and Henschel Wehrtechnik. It also increased its stake in the Dutch major Eurometaal. The acquisition of British Vickers by Rolls Royce has created expectations of further concentration in the European military vehicles sector.
Not much has happened in the shipbuilding sector of the European defence industry. There was only one merger in this sector in the last two years. The German HDW and the Swedish Kockums Naval Systems decided to merge in September 1999. This was the first intra-European merger in the shipbuilding sector. HDW has also been expected to participate in the consolidation of shipbuilding at a national level by merging the two shipyards of Thyssen Industrie-Blohm & Voss and Thyssen Nordseewerke. 17
A major hindrance in the concentration of the European defence industry, among others, is the slow progress in privatisation of the French state-owned industries. Indeed, the French defence industry has been under tremendous pressure to go private. Resources to maintain the status quo in the defence industry, and privatisation, it is believed, will help relieve this burden. The French also need to improve competitiveness in the field of global export markets for which they need to significantly upgrade their products. And, perhaps, most importantly, they need to keep pace with their counterparts like the UK, Germany and the US for which they need to be integrated in the process of a European defence industry. After much deliberation over this crucial issue, they have finally agreed to privatise, in phases, their core industrial units like Thomson-CSF, Alcatel Space, Dassault Aviation, and others. An agreement with Dassault Industrie for the transfer of its subsidiary, Dassault Electronique, to Thomson-CSF was completed in 1999. Dassault Aviation, in 1998, transferred 46 per cent of its share to Aerospatiale. Aerospatiale has been privatised by merging it with Matra Haute Technologies. A series of agreements have followed between the companies engaged in restructuring, setting out responsibilities in the areas of avionics, missile systems and satellites. Aerospatiale and Thomson-CSF are expected to continue missile production. Aerospatiale is also expected to continue its satellite business. 18 In brief, the French government has taken significant steps towards privatisation. However, this process will take a long time to produce results. Pressures from countries like Germany and the UK have accelerated this process, but till date, the privatisation process can only be termed as partial.
Significant concentration in various sectors of the European defence industry has led to the establishment of a small number of international companies dominating the respective sectors. They have linked themselves with share holdings, joint ventures, and armament cooperation programmes. They have also linked themselves with other minor companies in their respective fields, thereby, increasing the prospects of further concentration.
Trans-Atlantic Military Industrial Links: Fortress Europe or Atlantic Defence Industry (ADI)
The emerging military industrial scenario in Europe, dominated by large-scale national as well as intra-state mergers and acquisitions and radical restructuring in major centres of arms production, has led to increased interest in the last couple of years in trans-Atlantic military industrial links of different kinds. The effort to achieve increased competitiveness and a need for interoperability between US and European equipment and infrastructure used in joint military action, sharing of critical technologies and the need to build a common Western centre of military production have reinforced this interest. This link has brought out two distinct debates: a future trans-Atlantic divide in arms procurement and the development of two military industrial fortresses or a common ADI. There are, however, strong interests on both sides of the Atlantic in resisting the former and supporting the latter. First, the strong traditional link between the US and UK, and to a less extent between the US and German and Italian companies. Second, the interests of the US companies engaged in Europe negates the development of a trans-Atlantic divide. 19 And third, the requirement for interoperability in the military equipment of NATO member countries. Continued concentration on both sides of the Atlantic is, thus, concurrent with a process of wider internationalisation of arms production.
The predominant form of trans-Atlantic military industrial ties was government armament collaboration projects. In such cases, the European companies were mostly in subordinate positions. However, since the late 1990s, the European companies have shown interest in trans-Atlantic company integration. The major British and German companies have been involved in merger and acquisition activities with companies in the US. The German Daimler Benz, the parent company of Daimler Benz Aerospace, merged with the US company Chrysler in 1998. 20 Around the same time, the British GEC acquired the US military electronics company Tracor. This takeover was agreed to in April 1998 for a price of $1.4 billion, and received swift approval. 21 The BAe, GEC, and Daimler Chrysler Aerospace have shown interest in acquiring units left over from the proposed Northrop Grumman-Lockheed Martin merger, and continued interest in acquisition of suitable US companies.
In response to the intense debate in the industry on trans-Atlantic mergers and acquisitions, and in particular to the growing European interest in acquiring US companies, the US government initiated a policy review in the mid-1990s. In 1998, Defence Secretary William Cohen formed two special panels to consider the impact of the internationalisation of the defence industry on technology and security: one on globalisation and security under the aegis of the Defence Science Board, led by Jacques Gansler; and the other on globalisation of business and industry under the Defence Policy Board, led by John Hamre. The first panel addressed the implications for US security of the increasing reliance on foreign sub-contractors and on civilian components of the military equipment and also of foreign ownership of US arms producing companies. The second panel was given the task to study the general commercial and economic impact of globalisation. An important result of this review came out indirectly in late 1999. Deputy Defence Secretary John Hamre, while presenting the US government's position on trans-Atlantic links, in a speech on October 25, 1999, to a group of European and US defence industry and government representatives, made it clear that while there was plenty of room for trans-Atlantic cooperation, the US was in favour of formulating a comprehensive regulatory framework first. 22 In fact, regulatory frameworks on both sides of the Atlantic have not yet allowed the complete management of the technology and industrial security challenges of a transnational corporation. It is one of the major problems that the concept of trans-Atlantic defence cooperation faces today. Even the Department of State started looking into it only since late 1999. However, the transnationalisation of defence industrial production needs political control as there is fear that increased concentration may result in a shift of leverage from the government to industry. 23 It is perhaps due to this reason that the US has been unable to go in for it in a big way so far. This inability might in due course of time prompt the European states to go for an Atlantic divide along military production lines. 24
Along with the above argument runs a parallel thinking, especially among the Europeans, on the need for an Atlantic Defence Industry to challenge the 'others'. Traditionally, interaction between the US and Europe has been explained exclusively by European dependence on American economic and military power. 25 However, several initiatives during the Cold War period, designed to organise defence procurement in a pan-European manner, had resulted in a kind of recovery from dependence and aspirations for greater independence from the US. But the period that followed the end of the Cold War resulted in downward pressures on defence budgets, which forced a reevaluation of the viability of these pan-European defence initiatives. Overt state direction of industry was increasingly unable to address the twin military production problems of efficiency and technical sophistication. The European defence industry, thus, during the late 1980s and almost the whole of the 1990s, has been striving hard to maintain the previous position through a series of initiatives in which trans-Atlantic defence industrial cooperation is expected to play a key role, for both the present and the future. A future ADI is, thus, beneficial to both sides of the Atlantic. 26
From Trans-Atlantic to Internationalisation
Not satisfied with the present defence industrial scenario which is still in an embryonic form as far as the European or Atlantic defence industry, is concerned, prominent producers like the UK, France, and Germany have made a number of important acquisitions in smaller arms producing countries in recent times. In 1999, the French Thomson-CSF, which was not involved in the major concentration events in Europe, was among the most active in acquiring companies or shares of companies in other regions. Thomson-CSF and Transfield Holding of Australia have formed a joint venture which acquired the Australian major ADI (one of the biggest arms producing companies in Australia) in 1999. In late 1999, a French consortium led by Dassault Aviation, Thomson-CSF, Aerospatiale Matra, and SNECMA agreed to acquire a 20 per cent stake in Embraer (the biggest aerospace company in Brazil). This move has been strongly resisted by the Brazilian Air Force. 27 Thomson-CSF has also bought African Defence Systems (Altron), a premier defence electronics company, while Celsius of Sweden has acquired a 49 per cent stake in Grintek Avitronics of South Africa (again, a defence electronics company), DASA of Germany has acquired a 33 per cent stake in Reutech Radar Systems, and last but not the least, Vickers of the United Kingdom, a major military vehicle manufacturer, has bought Reumech OMC, Astral and Gear Ratio (all in the military vehicles sector). 28 With the South Korean announcement in April 1998 giving the green signal to foreign ownership in its arms industry, the West has become more active than before to grab this opportunity. This was evident when, in the Korean effort to integrate its aerospace companies to form a giant company KAI, which suffered a high level of debt, and the subsequent decision to raise up to 30 per cent of its capital requirements through investments by foreign majors, US and West European companies like Boeing, BAe Systems, Lockheed Martin, Aerospatiale were selected as possible foreign partners for KAI. 29 The foreign acquisition trend has not stopped here. In late 1999, Thomson-CSF and Samsung Electronics formed a joint venture to produce military electronics communications, naval combat systems, and air defence systems. Thomson-CSF also acquired 50 per cent of the military electronics activities of Samsung Electronics. 30
Ownership of, and industrial partnership in, companies in the smaller and less advanced countries in other parts of the world by the major European companies is a recent development. It has several dimensions. First, the growing global concentration in the defence industry leaves little option for the giant companies to advance their interests and, thus, they try to acquire small companies to not only make a presence in the respective countries in matters of defence production but also strive to improve output. Second, the big companies prefer to invest their money in smaller units where they can have a better say in management than in the bigger ones where there are problems of management sharing. 31 Third, although such acquisitions raise important national security issues in the case of the smaller countries, it gives a sense of advantage to the big players. And fourth, in such sprees, a small group of large US and West European companies are assuming an increasingly dominant position in the global defence industry. This problem needs to be addressed.
Whither European Defence Industry?
Before the current trends in the European defence industry are assessed, it is important to link these to the overall defence industrial scenario of which it is an integral part. The global defence industry, in the last one decade, has shown profound changes in several aspects. First, it has shrunk in terms of size. Second, as a corollary, it has become more and more concentrated. This, however, is debatable as the process of concentration in the leading centres of military production shows complex pictures. While large companies in the leading centres are on a merger and acquisition spree, it has left medium and small companies in severe difficulties in adjusting to the changed scenario. Third, the demand for military equipment shows uneven trends. While the industry is eying the technological sophistication in military equipment and thereby producing fewer numbers for prospective buyers, especially in the US and Europe, the same is not the case in other centres. While the demand for high-tech weaponry has gone up, which, in turn, has attracted more money in both sales and investment in military R&D, the demand for conventional military equipment has been stagnant, if not decreasing. If the first half of the 1990s show significant reduction in production and exports, the second half seemed to have closed the gap. In brief, a complex picture is what has emerged in this scenario and as the industry is still in transition, it will take some time to stabilise, after which the trends can be examined in detail. Fourth, the employment scenario in the defence industry is not encouraging. It has gone down substantially during the last one decade and is expected to go further down in the future. As the industry contracts, the employment sector faces the challenge of adjustments. It is already visible in major centres of arms production where unemployment has become a major socio-economic issue. National governments are finding it difficult to tackle this problem. Fifth, the emerging global order prompts several second tier producers to expand their horizons in the military field. Thus, when countries like Israel, South Africa, Australia and others try to expand and compete, they face a stiff challenge from front-ranking countries in the global arms market. This has resulted in two distinct pictures-while they are competing with the majors at one end, their inability to sustain their industries from foreign invasion through joint ventures and military-technological cooperation has impinged on their domestic security policies, at the other. The current trend of internationalisation of arms production will eventually wipe out the small producers from the concentrated global arms market where only the big guys will call the shots. And, finally, the once powerful conventional weapons will shrink in size. Huge military aircraft, warships, main battle tanks (MBTs), and large-sized missiles will probably lead to production of miniature versions fitted with electronics and information related technologies. If this becomes a reality, then only a few globally competent companies will operate and their monopoly may lead to further dominance of the West. It is said that by 2010, there may be only four major aircraft manufacturers in the West.
Endnotes
Note *: Deba R. Mohanty, Associate FellowBack
Note 1: For a detailed description of major armed conflicts around the globe in the 1990s, see Adam Daniel Rotfeld, "In Search of a Global Security System for the 21st Century", SIPRI Yearbook 2000 (Oxford: Oxford University Press, 2000), pp. 1-14. Back
Note 2: See Ian Anthony, "Politics and Economics of Defence Industries in a Changing World", in Infraim Inbar and Benzion Zilberfarb, eds., The Politics and Economics of Defence Industries (London: Frank Cass, 1998), p. 3. Back
Note 3: See Bonn International Centre for Conversion, Conversion Survey: 1996 (Oxford: Oxford University Press, 1996), p. 1. Back
Note 4: See Jasjit Singh, "Trends in Defence Expenditure", in Jasjit Singh, ed., Asian Strategic Review: 1998-99 (New Delhi: Institute for Defence Studies and Analyses, 1999), p. 24. The SIPRI estimate for the year 1997 stood at $740 billion. The year 1998 witnessed a slight increase to $745 billion. See n. 1, p. 9. Back
Note 5: n. 1, p. 9. Back
Note 6: For a detailed account of expenditure in military R&D by the major arms producing countries, see Eric Arnett, "Military Research and Development", in SIPRI Yearbook 1999 (Oxford: Oxford University Press, 1999), pp. 276-88. Back
Note 7: For arguments in favour of conversion, see Jacques S. Gansler, Defence Conversion: Transforming the Arsenal of Democracy (Cambridge, Massachusetts: MIT Press, 1995). Also see Llyod J. Dumas, ed., The Socio-Economics of Conversion From War to Peace (Armonk, New York: M.E. Sharpe, Inc, 1995). Back
Note 8: The European defence industry is a loose term applied to only major West European arms producing countries like the UK, France, Germany, Italy, Netherlands, Sweden, Spain, and Switzerland. Among these, the thrust of the paper is on the first four countries. Back
Note 9: J.A.C. Lewis, "Three French Unions Join in Battle Against '98 Cuts", Jane's Defence Weekly, August 27, 1998, p. 19. Back
Note 10: n. 1, Table 6.1, p. 302. Back
Note 11: Airbus Industrie was established in 1970 as a company which makes no profits or losses in its own right. The distribution of shares among the partners was: Aerospatiale 37.9 per cent, Daimler-Chrysler Aerospace 37.9 per cent, BAe 20 per cent and CASA 4.2 per cent. Transformation of Airbus Industrie into a unified European company was delayed till late 1999. Back
Note 12: A. Nicoll, "US Set to Relax Military Rules for UK Aero Engine Arm", Financial Times, January 11, 2000. Back
Note 13: The Military Balance: 2000-2001 (Oxford: Oxford University Press, 2000), p. 42. Back
Note 14: The first such case before a proposed EADS came in the autumn of 1998 when BAe and DASA began negotiations for a bilateral merger ahead of a joint agreement on EADS, and in January 1999, when the British GEC agreed to merge its military electronics and naval shipbuilding business, Marconi Electronics Systems, with the BAe. See n. 1, p. 403. Back
Note 15: "Armor May Not Yield to Europe Consolidation", Defense News, August 31-September 6, 1998, p. 10. Back
Note 16: For details, see Peter Lock, "Rheinmetall: A Paradigm of Restructuring of the Defence Sector in Germany", Discussion paper for the European Commission's Targetted Socio-Economic Research Programme (TSER), 1999. Back
Note 17: n. 1, p. 309. Back
Note 18: The above information is cited in detail in n. 6, Table 10.6, p. 404. Back
Note 19: See A. Nicoll, "Lockheed Chief Warns of Risks of a "Fortress Europe", Financial Times, October 30, 1998. Back
Note 20: For a detailed account of this trans-Atlantic merger, see "The Daimler Chrysler Emulsion", The Economist, July 29, 2000, pp. 65-66. Back
Note 21: "US Officials Give Quick Nod to GEC's Buy of Tracor Inc", Defense News, June 15, 1998. Back
Note 22: "Transatlantic Deals in Defence Don't Fly", International Herald Tribune, November 2, 1999. Back
Note 23: Ann Markusen, Should We Welcome a Transnational Defence Industry? (New York: Council on Foreign Relations, 1998), p. 2. Back
Note 24: This argument is discussed in Jeffrey Becker, "The Future of Atlantic Defence Procurement", Defense Analysis, vol. 16, no. 1, pp. 11-14. Back
Note 25: For a brief history of the relationship, see Mary Kaldor and Genevieve Schmeder, The European Rupture: The Defence Sector in Transition (Lyme: The United Nations University Press, 1997). Back
Note 26: For an argument in favour of ADI, see n. 23, pp. 9-32. Back
Note 27: As cited in n. 1, pp. 312-313. Back
Note 28: These activities are cited in Table 6.3 in n. 1, p. 314. Back
Note 29: See "Two US-European Alliances Complete for ROK Aerospace Deal", in Foreign Broadcast Information Service, Daily Report-East Asia (FBIS-EAS), December 24, 1999, p. 11. Back
Note 30: n. 28, p. 11. Back
Note 31: This point is well argued in "Building a New Boeing", The Economist, August 12, 2000, pp. 68-69. Back
Note 32: n. 13, pp. 38-39. Back