September 14, 2012
Credit: Credit: EADS Cassidian
Even as it creates the world’s biggest aerospace company, the proposed merger of Europe’s defense and aviation giants may help U.S. rivals win defense contracts, at least in the short-term, experts said Thursday.
The combination of Airbus parent EADS and Britain’s BAE Systems could embroil them in a lengthy complex integration that would limit their ability to win new business.
“We’ll probably increase Raytheon’s market share,” said William Swanson, chief executive of Raytheon Co, which makes missile defense systems and other defense technology.
“When you put companies together in a contracting marketplace, your team has their head down, trying to figure out how to make things work rather than looking up and figuring out how to make an opportunity out of the situation,” he said.
Swanson, who helped Raytheon integrate its own complex acquisitions during the last big wave of consolidation in the 1990s, was among those questioning whether the blockbuster deal would yield the synergies, savings and scope its proponents envision.
To be sure, EADS and BAE Systems would have $93 billion in sales and 220,000 employees, based on 2011 numbers, exceeding Boeing Co’s $68.7 billion. And it would combine BAE’s deep connection in the U.S. defense market with Airbus’ growing U.S. presence in the commercial jet business, symbolized by its plans to build a plant in Alabama.
The plant “is not going to have a material effect on Boeing’s ability to sell 737 maxes,” said Alex Pietsch, director of the Governor’s office of Aerospace for the state of Washington, referring to Boeing’s next generation single-aisle jet.
“But if they start doing military work there and do other programs there and are successful in convincing the politicians that they’re buying American, it might be able to get a military contract” that it wouldn’t otherwise be given.