Defence Analysis is the authoritative monthly publication published by Francis Tusa. As a Defence commentator and writer, Francis Tusa has won a solid reputation for his insight and understanding of the complexities that surround Defence issues and military trends. He first came to prominence during his commentaries on ITN television over the Gulf War period. He now appears regularly on Sky television as a Defence commentator.

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December 2002

Mid-November produced a flurry of reports emanating from Paris about the internal structure and management of EADS - specifically that there should be a swift end to the dual manning of key posts of managing director and chairman and that, more and more, the man to take over should be French. French sources argue that on the defence side EADS is increasingly fuelled by France, not by Germany, and that this inherent structural weakness in the German leg of the stool should be owned up to, admitted, and acted on.

Strange to tell, responses from EADS's German side were hardly slow to emerge. Equally strangely, the views were pretty much opposite to those of Paris. However, the adverse attitude was marginally modified by some comments from German EADS officials who confessed that weak and uncertain German defence budgeting did not help - but actually hindered - the company's planning and policy-making.

The evidence that condemns Germany comes from significant hesitations in many areas. Just think about vacillations over A400M - where Germany has always said it will be the biggest customer - as well as over the Meteor BVRAAM. Lack of German commitment here has held up the progress of EADS Germany orderbooks, and thus, so the story goes, have harmed the company as a whole. And yet, and yet … At the same time, some forget that in aerospace terms at least, EADS is not short of German government work. Think of the Euros 750-million or so that will be spent in 2002 and 2003 on Typhoon, as well as Euros 150-200-million on Tornado upgrades. The evidence indicates that on an annual, comparable basis, more money is being spent by Germany on Typhoon than on Rafale by France.

Defence Analysis's best guess is that over the next two years at best (worst?), the two programmes will have equal spends; from EADS Germany's point of view, its government is actually spending 10-20 per cent more than France is on Rafale. Although EADS holds a stake in Dassault, it receives little of this revenue, so the case is even more slanted towards Germany.

From the German viewpoint also, Berlin would point out that its firm commitments to the NH90 transport helicopter are currently stronger than those of Paris. Remember, apart from the naval versions (high value, to be sure), France will be late in buying the bulk of its NH90 tactical transport helicopters.

It is perhaps only in the missile field that EADS France has true justification for its "attack" on its colleagues. Think of the SCALP EG programme, Mica AAM deliveries, nuclear missile projects, the SCALP Navale programme now launched - these put into perspective Berlin's hesitation over Meteor (not that France is that fussed about Meteor really).

However, the contract announcement to proceed with the Taurus cruise missile ought to start to tilt things in this field back towards Germany - although from a position of severe deficit. What is evident is that EADS defence division CEO, Tom Enders, is the man who arguably has been given "Mission Impossible" by his bosses. The plan was to make EADS less reliant on Airbus, and more balanced, trying to mirror Boeing in this respect. Attempting this when one leg of the EADS tripod is wobbly is, naturally, difficult.

But even with the extra funding found in France for the loi de programmation 2003-08, not that much cash will automatically head towards EADS - much is earmarked for new ships and armoured vehicles, as well as to cover the existing procurement spend deficit. This, yet again, reinforces the unstable nature of EADS in a business sense. Things can only get worse if the German budget situation deteriorates. Spain cannot compensate for the inequalities between the two big brothers. And this explains why EADS - in defence terms at the very least - is exceptionally keen to break into both the UK and US markets.

THE PAIN IN SPAIN?

There may be signs that further financial and budgetary troubles are affecting EADS in a different way, in a different country. And it isn't just Germany that could be the cause of EADS worries but also Spain, "junior" partner of the trinational EADS entity.

Recent reports have - bizarrely - suggested that Spain might split its attack helicopter purchase into two. Instead of buying 24-36 helicopters from one supplier it might buy half from a different manufacturer. It is believed that this option would see the order split between EADS's Tiger and Boeing's Apache.

Now, how on earth can this make sense? Tactically and doctrinally it may be prudent to possess a heavy attack helicopter and a lighter armed scout. But this is only logical costwise if the quantities are far larger than the 12 or so that would fill each purchase. The incremental extra costs of two supply and support lines for such small numbers of helicopters ought to rule this out immediately.

Is it the case that there is a major split in Spain? On the one hand, is it that the military wishes to buy the Apache? Yet, on the other, is Madrid is being pressed by EADS to buy Tiger for industrial reasons? Might there have been threats that if Spain does not opt for Tiger then some of the EADS plants in country may be shut down? And further, has it been suggested that without more business from Spain the chances of A400M production being placed there are slim? There is, surely, much room for such suspicions.

Content featured in this month's Defence Analysis

• UK Defence Procurement - TOO SLOW TO MAKE GOOD?
• Chief of the Defence Staff Admiral Sir Michael Boyce - A WISE MAN
• Thales CV(F) Bid - PLAYING CATCH-UP
• UK MoD Posting Lengths - NOT LONG ENOUGH
• British Army Future Rapid Effects System - NICELY STITCHED UP
• Polish Fighter Contest - ROUND THREE
• NAO UK WAH-64 Longbow Apache Report - SLOW WARPATH
• European Land Systems Industry - THE FIELD STRETCHES OUT
• Future Integrated Soldier Technology Programme - NO MONEY IN CAPABILITY?
• Private Finance Initiative Problems - KICKING THE STOOL AWAY?
• UK Defence Budget - NO SLACK AT ALL
• Typhoon Crash - POOR TIMING
• Italian Defence Budget 2003 - PRESSURE, EVER PRESSURE
• UK and European Digitisation - RUNNING TO CATCH UP - BUT KEEPING ONE'S DISTANCE
• DEFENCE INDUSTRY NEWS
• DEFENCE DIVERSITY

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