Julian Moxon/PARIS Andrea Spinelli/GENOA

GEC-Marconi and Italy's state-owned Finmeccanica have sealed a wide-ranging strategic alliance covering the bulk of their respective defence activities. The deal follows months of negotiations and is thought likely to boost stalled European attempts to consolidate the defence sector.

The agreement, exclusively revealed in Flight International's 2-8 July issue, calls for a joint venture company to be established covering missiles, naval systems, ground-based radars and command and control systems, including air traffic control.

Separately, the two will establish part-ownership of each other's avionics and armoured vehicle and guns businesses. GEC-Marconi will become leader in avionics and will acquire a minority holding in Alenia Difesa's avionics business, while the Italian company will take a minority share of GEC-Marconi's Guns and Armoured Vehicle Business, and be responsible for co-ordinating activities in the sector. Both companies will retain the right to continue meeting national-defence requirements.

Industry observers say that the agreement reflects the high degree of synergy between the two companies. Alenia Difesa president Pierfrancesco Guargualini has recently reorganised Alenia Difesa's operations into five divisions (radar systems, missile systems, naval systems, Ortobreda and avionics systems) to better match the structure of the corresponding GEC-Marconi activities.

The deadline for defining specific agreements in each sector has been set as the end of the year, but the two have agreed to begin planning joint research, production and marketing of most of their current products.

Only a few activities are not included in the deal. These are communications, where GEC-Marconi already controls the Italian communications sector through its GEC-Marconi Italia business; sonar, in which the UK company is allied to Thomson-CSF(Thomson-Marconi Sonar); and space, where GEC-Marconi is closely tied to Matra, through Matra Marconi Space.

The two companies say that the deal "-promises to attract other partners and speed up the process of the European defence industry's convergence-which has hitherto been slowed by political fragmentation and enduring nationalism". They add that the alliance, while creating a smaller group than those seen in recent US consolidations - the two have a combined turnover of around £2 billion ($3.3 billion) - will establish a competitor providing "better prospects for growth and reactivity to the whole sector".

The move heralds a wider restructuring of GEC-Marconi's operations, with the UK company being active in attempting to pull together deals to acquire the defence arm of Siemens in Germany as well as looking for a stake in Thomson-CSF and negotiating a tie-up with a US company.

On a wider front, GEC is overhauling the group's activities in the UK-French GEC-Alsthom power-station and rail joint venture, and its GPT telecommunications tie-up with Siemens.

Source: Flight International