Defense concentration
The EU is in the midst of a run of concentration in the defense sector. The trend toward cross-border alliances and mergers is picking up pace, as cash-strapped governments are finding it harder than ever to prop up ailing armaments companies just for the sake of pride and subsidized employment. The technological challenges of keeping up-to-date is a challenge few countries, and few companies, can support.
As in the US, however, this moves make national governments all the more dependent on a small number of suppliers for each need.
Ships
According to a Wall Street Journal piece ("Shipyards to Test 'Champion' Theory", 5/28/2004), Europeans governments are trying to reduce their "bloated" shipyard economy, Using the models of EADS (the European Aeronautic Defense and Space group), the maker of Airbus). Some leaders are trying to merge together some of Europe's 20 shipyards, dropping the weak sisters.
Recently, the first step was made when two German companies merged, ThyssenKrupp AG and Howaltswerke Deutsche Werft AG (HDW). HDW, according to the story, already has shipyards in Sweden and Greece.
France is working on a merger of its top shipyards, Thales and Directions Constructions Navales (DCN). And there is evidence that ThyssenKrupp is interested in a merger with DCN. There are all kinds of issues from public ownership and corporate politics, to nationalism that are holding these moves up, Also in play are the operations of newly bankrupt Alstom SA, an engineering company which has just been bailed out by the French government.
From a European point of view, the clock is ticking, and US firms, in an already concentrated market, are looking aboad for growth.
Europe is plagued by overcapacity in its naval shipyards. Despite recent orders for British and French aircraft carriers, overall orders from cash-squeezed European defense budgets are declining. On top of that, U.S. companies have begun to sniff around more attractive purchase candidates such as HDW, risking that just the unprofitable metal-bashing units will be left by the time Europe consolidates.
Tanks
General Dynamics, the maker of the Abrams tank in the United States, has extended its position in the military armored vehicle business. It got regulatory OK for its purchase of the sole British manufacturer in that field, Alvis plc. Alvis is the maker of Vickers Challenger tank used by British forces.
In recent years, the company has bought the main tank suppliers in Austria, Switzerland, and Spain. The transaction was for over half a billion dollars.
Helicopters
Britain's only helicopter maker Westland has been sold by the UK government to Italian firm Finmeccanica. In fact, the Westland holdings made up 50% of a joint venture called Agusta Westland. The company produces both commercial and military helicopters.
Now it looks like BAE, Britain's largest defense contractor, is negotiating to take a major stake (40%) in the helicopter venture.
1:45:10 PM 
|
|
