EADS-BAE Pitch Ripples in Alabama

Boeing, a 50-year veteran of north Alabama’s aerospace scene, and Gulf Coast newcomer Airbus are local players in a multi-continent battle. Sometimes the topic is defense and military spending between Boeing — Alabama’s largest defense contractor — and Airbus parent EADS, a battle that played out for several years before Boeing won a U.S. Air Force tanker contract. Sometimes it’s the commercial jetliner market, where the two companies vie for more and more contracts around the world.

Throughout late September and October, the topic was a potential merger between EADS and British defense leader BAE Systems that fell through in mid-October. Both Airbus and BAE have a major presence in South Alabama, and experts here say the effect of a merger would be enormous — without necessarily saying whether it would be good or bad. Airbus has about 200 employees in Mobile now and plans to add 1, 000 with the advent of its first U.S. aircraft assembly line here. BAE Systems has more than 800 workers at its Mobile shipyard. Analysts told the Mobile Press-Register that such a merger could give the two European firms enough clout to win American defense contracts.

Within a day after the proposed $45 billion merger hit the headlines, response poured in from two continents. Boeing called for a rigorous review, with an eye to “national security” concerns, and said it would expect to be part of that review, Bloomberg reported. The Financial Times reported that European governments were scrutinizing the plans. Union leaders in Europe also want to make sure terms of any merger don’t undermine union positions, the Daily Telegraph reported. And the Wall Street Journal talked about the roles of four governments in the merger approval process.

On the eve of an October 10 deadline for a decision, European governments quashed the plan, with the Germans particularly opposed, the BBC reported. 

What does it mean? According to the U.K. newspaper The Guardian, failure of the merger may make BAE “prey” to American defense companies Boeing and Lockheed Martin.

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And it means less competition for U.S. defense contracts. Writing in the St. Louis Post-Dispatch, David Nicklaus said of the German deal breaker, “For that favor, Boeing should send Chancellor Angela Merkel a thank-you note.”

Nedra Bloom

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