When BAE Systems sold its one-fifth stake in the European Airbus project to EADS in 2006, declaring its intention to focus instead on defence sales in the US, I predicted that ‘the best bits of BAE’ would end up under American ownership while the rest would ‘go the way of the Comet’, the 1950s British airliner that was knocked out of the competitive skies by the Boeing 707. Since then, BAE has worked assiduously to reinforce its position as one of the few foreign-owned suppliers to the Pentagon: it has 40,000 employees over there under a feisty female American boss, generates 40 per cent of revenues from US sales, and like BP does its best to pretend not to be British. But now BAE and the Franco-German-Spanish EADS propose to merge — thereby instantly jeopardising relationships in Washington, where no one trusts the French or the Germans, everyone fears the loss of high-tech defence secrets, and the commercial interests of Boeing and Lockheed Martin prevail over any stated belief in free markets.
Is this the fatal step that will make my prediction come true, or an about-turn in the nick of time? After a decade of unpopular wars, with defence cuts looming both sides of the Atlantic, a business plan predicated on continuing Anglo-American military co-operation is no longer an obvious winner.
On the other hand, EADS has made a huge success of Airbus, and has a healthy balance sheet and forceful management under a German former paratrooper (there’s a tag for the tabloids to play with) called Tom Enders. British strengths in civil aerospace still reside largely in BAE and the Airbus UK factories at Filton and Broughton, so there’s logic in bringing them back together at a time when long-term global demand for passenger aircraft looks strong.
BAE and EADS are already partners in the Eurofighter project, and Anglo-
European mergers such as Royal Dutch Shell and Unilever have an honourable track record, whereas British companies from Marconi to Marks & Spencer have come unstuck in American markets.
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