* EADS CEO sees gloomy outlook for European defence industry
* European defence spending set to decline further, he says
By Adrian Croft
BRUSSELS, March 21 The chief executive of
European aerospace firm EADS, predicted more shake-ups
in the defence industry on Thursday as he painted a gloomy
outlook for the sector both domestically and in export markets.
"I think there will be more consolidation happening, but we
had one prominent example last year where industry tried to
provide some meaningful consolidation and politics interfered,"
CEO Tom Enders said, speaking at the European Defence Agency's
He was referring to last year's failed $45 billion merger
between EADS and Britain's BAE Systems. The deal, which
would have created a European defence and aerospace giant,
collapsed in the face of political differences between the three
governments involved - Germany, France and Britain.
The squeeze on European governments' finances meant the
continent's defence industry faced further declines in
government defence spending, he said.
"Our assessment by and large in Europe is that we will have
to face a decade with no growth, more likely further decline in
defence budgets," Enders said.
"We reckon industry has (to face) a further decline of the
defence budgets. I think that is very important and all of us
are drawing conclusions from that."
He said EADS was in a fortunate position because it made
products that armed forces needed, such as air transport and
refuelling planes, and the company could in addition re-adjust
resources from military to commercial products. EADS also makes
Many European governments have slashed defence spending in
response to the financial crisis. Only a handful of NATO
countries meet the alliance's target of spending 2 percent of
their Gross Domestic Product on defence, and Enders said he
believed defence spending by Britain and France, Europe's
military heavyweights, would probably fall below that level.
Trying to compensate for European weakness by focusing on
export markets outside Europe, was "very difficult because that
smart idea is on everybody's mind", he said.
"The Americans, the Europeans and everybody who has a
defence business goes to the growth markets and guess what? It
is always the same countries, it's India, it's Brazil, it's the
Middle East where we all meet and have a cut-throat competition,
so that is not an easy thing," he said.
"On top of that, those countries (leading emerging
economies) are increasingly raising the hurdles - technology
transfer, production transfer, all of that. It is much less a
business case to do that than it was 10, 20 years ago."
"The clock is more than ticking. It is not about
strengthening the (European) defence industrial base, we should
talk about the further erosion that is happening and in my view
it is unlikely to stop," he said.