ARMS TRADE-U.S. siren call irresistible for Europe arms makers
(Reuters correspondents worldwide are looking this week at how recession and changing threats are affecting the global arms trade. For highlights, please double-click on [ID:nARMS])
* Recession adds to challenge of cracking U.S. defence deals
* Acquisitions seen key for access to U.S. market
* U.S. defence spending also under pressure with cuts expected
* Europeans led 73 pct of U.S. defence acquisitions by value last year
ROME, June 9 (Reuters) - European defence companies will step up their frantic search for a slice of the U.S. defence market -- even if a new U.S. administration, spending cuts and a recession make an already difficult mission harder still.
The United States accounts for about half the world's defence spending and has long attracted -- and frustrated -- European firms like Franco-German EADS (EAD.PA) and Italy's Finmeccanica (SIFI.MI) which are eager for a foothold to spur their global ambitions.
But the dominance of U.S. rivals has hampered them, a problem which analysts say will be made worse by a more dove-ish new U.S. administration, planned cuts to big-ticket programmes and a rise in protectionist tendancies amid a global recession.
"It has never been easy for European companies to break in to the U.S. market and it just got a whole lot harder," said Doug McVitie of Arran Aerospace consultancy. "The defence budget is not expanding like the (former U.S. President Ronald) Reagan Star Wars years and they won't allow foreigners waltzing in."
Analysts say that Europeans facing flat or lower defence spending at home are unlikely to be deterred, making more joint ventures or acquisitions like Finmeccanica's $4 billion purchase of U.S. firm DRS Technologies last year inevitable.
European-led acquisitions accounted for 37 percent of U.S. defence sector deals and more than 73 percent by value in 2008, as a weak dollar provided a powerful incentive, according to a study by Jane's Industry Quarterly.
"If your domestic market is shrinking but your shareholders still expect growth, that means looking at the United States -- which is like a siren call for the defence industry," said Guy Anderson, lead analyst at Jane's Information Group.
"And to do business in America, you've got to be in America. You've got to have a footprint. Acquisitions are going from nice to have to a necessity." Continued...
