BAE, EADS And Britain In The 21st Century


The proposed merger between BAE, the British defense conglomerate, and EADS, the multi-country European aerospace and defense giant is more than a merger of two companies.  It could quite literally help dictate whether Britain remains a proud, independent nation in the world or becomes ever more stuck in the quick sand that Europe and the EU have become.  You might ask yourself how could the merger of two companies could determine the fate of not only nations but perhaps even an entire continent?  The answer is simple, if BAE merges with EADS it will destroy what is left of the British owned industrial base in Britain.  Britain will still have a manufacturing sector within its borders but less and less of it will actually be owned by Britain.  Most of the major car manufacturers are owned by foreign companies, Jaguar by Tata, Mini by BMW, etc.  In fact the defense  industry in Britain led by BAE has been one of the few bright spots for British owned manufacturing in the country and the merger with EADS raises serious questions about whether or not there will be any major British owned industrial companies left if it goes through.  Ceding one of your last strong domestic manufacturing industries to the French is not sound policy.

This is because the merger will accomplish two things, first the company will no longer be British, second the new company will stand to lose access to the all important US defense market.  The fact that the company will no longer be headquartered in Britain might not sound like a big deal at first but then you play out a few scenarios in your head like how do companies achieve synergies when they merge.  Well first off they would eliminate redundancies within the new company.  So that means since BAE is the junior partner in this deal then you could expect much of the white-collar jobs in Britain will quickly be eliminated in order to achieve maximum cost savings.  Hundreds, probably thousands of top paying jobs all eliminated.  Second, the current British government has already done its best to destroy its own armed forces by enacting drastic cuts that happen to be one of the reasons BAE is even contemplating this.  Since they are already dismantling their defense industrial base right now does anybody in Britain really think they will have any incentive to carry out big defense projects like the proposed new British nuclear submarines.  One of the few current incentives about doing this is that it will help maintain the defense industry jobs but if the merger goes through will that still be the case since at least some if not a large amount of the work will be done outside Britain.  I think not.

Secondly, roughly 40% of BAE’s profits come from doing work in the gigantic US defense industry.  They are one of the few foreign companies allowed to do this.  Other companies like EADS do business with the pentagon but are not allowed access to advanced technologies to safe guard intellectual property.  This is not the case with BAE because they have special agreements with the US government allowing them to share in this defense work.  The reason for this is simple, they are British.  Because the obvious special relationship they get access that others like the French and Germans don’t and never will.  This alone should give both BAE and EADS pause about the merger.

Finally, if the deal goes through Britain will be drawn closer to Europe at a time when the Continent is in steep decline.  Losing access to the US market will force the new company to look even more to Europe for work.  This in turn will force the UK to get deeper involved with the EU at a time when many in the country want less to do with it.  And if your forced to look more towards Europe they will no longer be able to be that close to the US.  If I were British I would advocate less severe defense cuts both to maintain capabilities but also to maintain an important part of their economy.  I would also focus even more on joint work in the US defense industry because one, it is bigger and two, you don’t have to surrender more of your sovereignty to the failing EU.

Minefields await for EADS-BAE deal

http://www.rusi.org/analysis/commentary/ref:C50534A0EA81CF/

http://www.thisismoney.co.uk/money/markets/article-2202939/BAE-Systems-merger-EADS-faces-flak-sides.html

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One response to “BAE, EADS And Britain In The 21st Century

  1. You got this precisely right. I am glad that the deal has been shelved. Siding ourselves up further with the EU is exactly what we don’t need. Our country needs more UK owned ownership of key assets not less. France, Germany and even the U.S would not sell up prized assets like we have done in the past and certainly France would not do so again.

    The prices of things such as water and electric supplies sky-rocket and yet UK companies are not allowed to purchase their key national assets. Customers complain but no-one listens… and why should they, the owners are in mainland Europe.

    I also agree about defence spending. The government should sort its priorities out.

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