EADS's embarrassing public rifts are damaging its hard-won image as a global player that has put national rivalries behind it

Americans watching from the sidelines must be enjoying it. Many Europeans probably have their heads in their hands. Just when EADS and its fellow continental Europeans looked finally poised to loosen the stranglehold of domestic manufacturers in the US defence market, along comes a classic European power struggle that must confirm every transatlantic prejudice of the region's industry as a cauldron of Machiavellian rivalries, string-pulling politicians and deep-rooted national enmities.

For four and a half years, EADS has been on a charm offensive to convince the world that it has put behind it its past as an awkward arranged marriage of four legacy businesses from three countries - two formerly state-owned, two private. Its current cheery advertising campaign emphasises the cosmopolitan mix of its employees - Americans, Australians and Britons as well as French, German and Spanish - all working for one EADS. The twin chief executive set-up of Frenchman Philippe Camus, from LagardŠre, and German Rainer Hertrich, from DaimlerChrysler, was unorthodox but appeared to work: the two have a strong working and personal relationship and have simply got on, most of the time, with overseeing their own distinct chunks of the business and dealing with their respective national shareholders and governments.

Although Hertrich told colleagues last summer that he planned to step down next year, the circumstances of his announcement - coming after rumours of behind-the-scenes manoeuvring in the highest circles of French government to engineer an EADS merger with Thales and replace Camus and Hertrich with Airbus boss Noel Forgeard as single chief executive - expose serious fissures between the French and German camps.

Berlin's meagre defence budget and the fact that, unlike France, it does not have a financial stake in EADS, have always given the Germans an inferiority complex within the organisation. Of the 12 members of EADS's executive committee, five are French and four German (a thirteenth, a German, retired last year and was not replaced). Although Paris's stake in Aerospatiale was watered down to 50% when it merged with LagardŠre-owned Matra in the late 1990s and to just 15% of the new EADS in 2000, French cabinet ministers have always felt it their birthright to influence the destiny of what they believe is their national aerospace champion. This sort of political grandstanding infuriates EADS executives over the Rhine, who have a much more Anglo- Saxon attitude to business, and certainly sparked Hertrich's outburst in a German newspaper about "personal ambition" being behind recent French moves.

A spat that is as much about egos and politics as the direction of the business will not derail EADS. After all, the company's success over four years has been due to it securing a competitive edge in products from airliners to helicopters, missiles to space technology. However, such a public tiff is bound to harm EADS's export prospects, particularly in the USA. Americans believe French politicians - already a despised breed after the country's refusal to back the USA in Iraq - wield a much bigger influence on EADS than they actually do (the French government appoints just one member of EADS's supervisory board - and his day job is running the railways). Boeing's troubles over the US Air Force tanker contract had considerably cut the odds on EADS making a historic breakthrough in the US defence market. Now it looks as if the European company has shot itself in the foot, with opponents certain to cite these cross-border animosities as proof EADS cannot be trusted with a sensitive Pentagon contract.

EADS clearly still has some growing up to do. Its heritage can never be swept under the carpet. The aerospace industries of France and Germany were products of politically driven post-war industrial reconstruction. Because of the continent's history, EADS would never have evolved from pioneering aviation businesses in the way Boeing and Lockheed Martin did. But the sooner the French government divests its stake (and LagardŠre and DaimlerChrysler concentrate on publishing magazines and making cars, as they have vowed to once the A380 goes into service), the quicker EADS will become a truly global business. Perhaps one of the first steps to that goal would be replacing Camus and Hertrich not with a Frenchman and German, but with a single chief executive from a neutral country...a Briton, an Italian or Spaniard. Even - whisper it - an American.

Source: Flight International