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UK MPs to probe aerospace merger

A group of British deputies tasked with scrutinising defence policy announced on Monday an inquiry into the possible merger of BAE Systems with EADS.

Published: 24 September 2012 16:54 CEST

UK MPs to probe aerospace merger

Photo: BAE Systems

The Defence Committee, made up of MPs from across British political parties, said the inquiry spanning October and November would examine the impact of a tie-up on British defence, "including the protection of sovereign capabilities."

It comes as Berlin said that Germany and France were in "intensive" talks with each other, European aerospace giant EADS and British arms maker BAE Systems regarding the possible €35 billion ($45 billion) deal.

The proposed deal has raised major concern in Britain on fears that it would put a key strategic company in foreign control.

It has also sparked worries over Britain's political relationship with the United States, from where BAE wins almost half of its business.

"The (British) Defence Committee is today announcing its inquiry into the possible merger of BAE Systems with EADS," a statement said on Monday.

"The merger of two such large defence contractors would have a significant and strategic impact on their relationships with UK, US and European governments.

"It could also radically alter the defence industrial base in these countries. The inquiry will examine the likely impact of such a merger on UK defence including the protection of sovereign capabilities and the nature of the defence industrial base," the statement added.

BAE Systems and the European Aeronautic Defence and Space Company (EADS) revealed this month that they were in talks to form a global aerospace and defence leader that would compete more effectively against US rival Boeing.

Crucially, however, the proposed transaction would give BAE 40% of the proposed enlarged group and EADS the majority 60% stake.

Under the plan being discussed, the newly merged group will issue special golden shares to each of the French, German and British governments, to replace their current ownership structures.

Britain has a special share in BAE but does not get involved in the day-to-day running of the business.

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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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