Budget cuts strike at French defence industry

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Julian Moxon/PARIS

THE FRENCH Government has admitted that the country's defence industry is facing a "critical situation" because of unavoidable budget cuts needed to reduce the national deficit.

Defence minister Charles Millon revealed during a debate on the defence budget on 8 November that he had no choice but to impose a moratorium on some programmes in 1996, saying: "Such is the case, for example, with the Tiger anti-tank helicopter, the Mica and Apache missiles, the future ground-to-air missile and the third generation of anti-tank missiles." Million says that work under way will be concluded, but no decision about further phases will be taken in 1996.

In a separate move, a report for the Finance Commission of the Assemblee Nationale, produced by French parliamentarians, calls for dramatic measures to restructure both the private and state-owned defence industries, to concentrate resources and "...integrate with European manufacturers where necessary".

An unexpected Government reshuffle, on 7 November, only six months after it took office, increases the likelihood of across-the-board cuts. A Government- appointed "strategy committee" had already been carrying out a fundamental review of the entire defence industry, and is due to report by March/April 1996. Spending is likely to be reduced by more than Fr153 billion (£20 billion) over the previous five-year plan covering 1995-2000.

There is increasing uncertainty about France's involvement in several major international programmes, such as the NH90 transport helicopter and the Future Large Aircraft (FLA) transport. The launch of the pre-development phase FLA has been put back by six months, to at least mid-1996, because of funding uncertainties.

Even national programmes previously thought immune from cuts, such as the Dassault Rafale fighter and the second nuclear-powered aircraft carrier, are threatened with major reductions in spending.

The report says that spending levels for 1996 are likely to fall below Fr80 billion, representing a 15% cut in two years. "In these conditions," it says, "...there will be a structural reduction in size", implying "programme cancellations and major improvements in productivity".

According to the report, the entire defence industry will be affected. The three major private companies (Dassault, Thomson-CSF and Matra Defense) will "...necessarily be at the centre of the industrial restructuring", state-owned giants such as Aerospatiale, Giat Industries and Snecma "...are in need of recapitalisation" and "privatisation of certain of these, and their absorbtion, is inevitable".

The report even goes so far as to suggest that Giat Industries, which suffered a record loss of Fr2.9 billion in 1994, is "in danger of disappearing".

The fall in the value of the dollar is blamed for some of the problems, but the report also criticises the failure of French industry to adjust sufficiently to the post Cold-War environment and to note sufficiently the "inevitable movement towards European consolidation".