Is the US defense industry too commercialized?
economy : Fear of "Fortress Europe" - the US is already behind the consolidation in the aerospace industry
With the merger of DaimlerChrysler AG and Aérospatiale Matra SA, a consolidation begins in the European arms industry that has largely been completed in the United States. There have been numerous amalgamations in the United States in recent years. The military and civil aerospace industry has been shaped by various mergers and acquisitions.
But even after the Franco-German company marriage, two US companies remain at the top in terms of sales in the international industry: on the one hand Boeing with sales of 56.2 billion dollars and on the other hand almost half with sales of 26.2 billion dollars so big Lockheed Martin Corp. Both companies themselves emerged from mergers.
In 1996 Boeing merged with McDonnell Douglas Corporation. Lockheed and Martin Marietta merged in 1995 to form what is now Lockheed Martin. The new European Aeronautic, Defense & Space Company, or EADS, to which DaimlerChrysler Aerospace and Aérospatiale Matra have merged, comes in third place with an equivalent of $ 22.7 billion in sales. It is followed by two more Americans, the Ratheon Company ($ 19.5 billion) and Northrop Grumman Corporation ($ 8.9 billion).
Since 1993, the US government has specifically promoted the concentration process in view of shrinking defense spending. The number of providers was too large and the utilization of many smaller companies was too low.
When Lockheed Martin wanted to bring Northrop Grumman under his wing in 1996, the Washington cartel watchdogs turned themselves across the board. The merger in the US aerospace industry, considered to be the climax, failed in 1997.
The effects of the Franco-German merger on the United States are difficult to understand at the moment, especially since the political component is likely to play a decisive role alongside business considerations. Phil Condit, chairman of the Boeing Company's board of directors, said in an initial statement that the commercialization of ore competitor Airbus was to be welcomed. He was referring to a complaint from Boeing that subsidizing the European consortium violated competition rules. However, Condit added that the merger would not change anything as things stand at the moment.
For the US government, however, the merger is a clear defeat. For almost a year, the Pentagon has been trying to prevent consolidation within Europe and advocated transatlantic mergers and alliances. It was only in December that the Pentagon's head of purchasing, Jacques Gansler, warned that the emergence of a "Fortress America" and a "Fortress Europe" could mean that in the end both of them would fight for arms contracts for the Third World. And on Thursday the Pentagon announced that the "Fortress Europe" model could undermine transatlantic cooperation because the development of American and European military technology now went separate ways.
Warnings are also given of the dangers of joint military operations, such as the last one in the Kosovo conflict. Last but not least, the model could undermine competition, the Pentagon pointed out, if European companies were now to be given preference in awarding contracts for political reasons. Meanwhile, analysts on the stock exchanges are warning of expectations that are too high. In the US, arms mergers have not yet paid off for investors.
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