Julian Moxon/PARIS

DASSAULT AVIATION chairman Serge Dassault has publicly rebuffed reports that he is against a merger with Aerospatiale and says that the talks are "on the right track". His remarks came as the French Government is mooting the idea of nationalising Dassault to form a merger.

French president Jacques Chirac has made it clear that he expects the merger to go through, setting a 30 June deadline for a study group to report on how it could be achieved. A source close to the talks confirms that "-there will be something in two or three weeks, and we expect there will be a positive solution".

Dassault says that he is talking only to the defence ministry and that he has still had no contact with Aerospatiale president Louis Gallois, whose resignation he has demanded as a merger condition.

Dassault has yet to comment officially on the merger, but its chairman is known to be opposed to an alliance with the loss-making and overstaffed Aerospatiale.

There is little overlap between the two in terms of products and their corporate structures are widely different. Dassault has already made cuts to become more competitive, while Aerospatiale has yet to achieve many of its reforms. "Dassault is profitable, Aerospatiale has heavy losses. That makes the idea of a merger difficult to justify commercially," says an industry source.

The French state controls 45.76% of Dassault through the Sogepa holding company, which also controls Aerospatiale. The Dassault family owns 49.9%, while the rest is publicly owned. One solution likely to be favoured by the Government is for the merger to take place under Sogepa. This would require the purchase of Dassault's stake, which, if assessed by its latest stock-market value of Fr530 ($103) per share, is worth around Fr5.4 billion.

Dassault has said publicly that this figure "-is not a good indicator" of the company's value, placing it closer to Fr13 billion.

Chirac, who is known to be close to the Dassault family, wants the merger to create his much-vaunted "aerospace hub" within the French industry. Some observers believe that he may be overtaken by events, since Dassault has already agreed on a fighter-aircraft alliance with British Aerospace, and Aerospatiale is moving towards mergers with Germany's Daimler-Benz Aerospace and possibly other major European aerospace players.

Any merger will be fraught with social problems resulting from the inevitable reduction of Aerospatiale's workforce necessary to create an efficient company. Dassault has already cut its numbers from 17,000 to just 9,000, but Aerospatiale remains saddled with 40,000 employees, which sources say will have to be cut by at least 10,000 to ensure that the alliance is competitive.

"We're looking at a very difficult summer," says one source close to the industry.

Source: Flight International