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Moscovici: Arms firm merger will need scrutiny

French finance minister Pierre Moscovici said Monday that the merger of British arms maker BAE Systems and European aerospace giant EADS must be "examined thoroughly" in a process that "will take time".

Published: 17 September 2012 17:49 CEST

Moscovici: Arms firm merger will need scrutiny

BAE Systems

Moscovici, addressing a press conference in central London after holding regular talks with British counterpart George Osborne, added that the BAE/EADS tie-up raised "a lot of questions" which needed to be resolved.

"We are examining the project" alongside the German government, the finance minister told reporters.

"We are asking a lot of questions concerning strategic interests of such a merger, the industrial effect, the possible synergies, the governance of the entity, the future of our defence industry, and employment," he said.

Moscovici added that "it will take time" to address these various issues which must be "examined thoroughly and discreetly".

BAE Systems and EADS announced last Wednesday that they were in merger talks to create a global aerospace and defence leader that would compete more effectively against rival US giant Boeing.

The two groups face a deadline of October 10 to finalise their projected $45-billion blockbuster merger deal that would create the world's biggest aerospace company.

The French and German governments hold big stakes in EADS, while the British state has a golden share in BAE that allows it to veto deals that it perceives not to be in the public interest.

Under the plan being discussed, the two groups would issue special golden shares in BAE Systems and EADS to each of the French, German and British governments.

The talks then envisage BAE Systems owning 40 percent of the enlarged group, with EADS holding a 60-percent stake.

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Airbus-maker EADS set to cut 1,000 French jobs

An Airbus A350, made by aerospace giant EADS, which on Monday announced the loss of 1,000 French jobs. File Photo: Eric Cabanis/AFP

The 1,000 layoffs, part of a major restructuring in the face of falling orders, will take place over the next three years, French union Force Ouvrière said in a statement.

The job cuts will also affect the group's work force in Germany, France, Spain and Britain, the company said in a statement.

The news came after a meeting of its European works council with chief executive Tom Enders, whose bold plan to merge the conglomerate with Britain's defence group BAE Systems was torpedoed last year with a surprise veto by Germany.

"We need to improve our competitiveness in defence and space – and we need to do it now," Enders said, according to the statement.

"With our traditional markets down, we urgently need to improve access to international customers, to growth markets. For that to work, we need to cut costs, eliminate product and resource overlaps, create synergies in our operations and product portfolio and better focus our Research and Development efforts."

He added: "That's what the restructuring and integration plan for our defence and space business is all about."

An industry source said about 2,600 of the jobs cuts would hit Germany, around 1,700 come in France, with some 700 in Britain and another 600 in Spain

Anticipating fierce resistance from labour representatives, the company said it would do what it could to cushion the impact of the job cuts, due to be completed by the end of 2016.

Furloughed employees will be offered redeployment in 1,500 jobs at the company's Airbus and Eurocopter divisions.

About 1,300 short-term contracts will not be renewed, and with voluntary measures, the company estimated final redundancies to come in at between 1,000 and 1,450 employees.

"The Group also intends to enter into negotiations with its works councils to seek agreements on labour cost reductions which could help mitigate the social impact of the restructuring plan," it added.

EADS has previously announced that it is changing its name the name of the group to Airbus to raise its public profile.

The overhauled defence and space division, to be called Airbus DS, will have a streamlined legal structure to cut costs and be up and running by January 1, the company said.

Shares in EADS rose 0.82 percent to 50.49 euros in Paris on the news.

But a French union, the FO Metalworkers' Federation, reacted angrily to the announcement, protesting that EADS on the whole "is doing well financially and its order books are in good shape".

It said the group's focus on improving its profit margin should not come at the expense of its staff and urged the French state as a major shareholder to fight to protect jobs.

"FO calls on EADS to avoid layoffs and appeals to its sense of responsibility and solidarity so that no employee will be left behind," it said.

Enders has stressed that the company cannot continue with business as usual while government clients are increasingly resorting to cuts to the military to shore up strained public finances.

He has cited lost orders worth several billion euros (dollars) in Germany alone that the company had thought were certain.

In November, Germany's biggest union IG Metall held industrial action as a warning against the company's expected restructuring plans.

But the overhaul is seen by management as unavoidable after the failed plan to merge with BAE.

That was shelved after objections from Germany, which had worried it would trigger major job losses.

The success of the Airbus division came after a radical restructuring in 2007 in a plan that originally called for 10,000 job cuts, but in the end cost 7,900 jobs.

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