Daimler-Benz Aerospace (DASA) has issued an upbeat report on its efforts to turn the business round during 1996, but warns that the group still faces "massive problems" from its missiles business.

DASA president Manfred Bischoff, presenting a year-end briefing ahead of the group's full results in mid-February, admits that there are concerns over the defence- and civil-systems division, hard-hit by military budget cuts. He singles out "massive problems" in the missiles business leading to "considerable losses" in 1996.

Some of the deficit was offset by a good performance from information and communications businesses elsewhere in the division, but he says that it will show a loss when full results are announced.

Bischoff warns that further cuts in the German military budget would make it "questionable" as to whether DASA can maintain its defence-systems capacity.

"The ongoing decrease in budgets is not only a threat to national capacities, but it would also be a weakening of the German position in restructuring this industry within Europe," says Bischoff. He adds that DASA has already made massive cuts in this field, and now faces "further unavoidable measures".

Werner Heinzmann, president of the defence- and civil-systems group, says that DASA is determined to stay in the sector, despite its problems. He confirms that partnership talks are talking place in Germany over a missiles joint venture with systems house Bodenseewerk Gerätetechnik (BGT), part of the private Diehl group.

DASAsignals that its part in wider European missiles consolidation will depend on the French Government's decision over the privatisation of defence-electronics giant Thomson-CSF.

Aerospatiale is now joined with Alcatel and Dassault in a bid to buy the company, potentially creating another major missiles coalition to rival the Matra-BAe Dynamics joint venture sealed in 1996.

DASA had long-running negotiations for partnerships with Aerospatiale in missiles and satellites, but put the talks on ice following France's withdrawal from key missiles and space programmes. DASA was also linked as a possible partner for the Matra-BAe tie-up, which then looked set to control the Thomson-CSF missiles unit.

Elsewhere within DASA, the group was buoyed up by healthy demand from civil markets, with the MTU propulsion business showing a dramatic 35%in sales and 28% growth in orders.

Overall group sales rose by 13%to DM13 billion ($7.8 billion), while the boost from civil markets also helped to raise order intake by more than 50%. DASA's cutbacks showed through in the loss of nearly 2,000 jobs during the year which, combined with the strengthening of the US dollar against the deutschmark, could help the group on its planned recovery. Bischoff expects DASA to add another DM1 billion to sales this year, mainly from Airbus deliveries.

Bischoff says that Airbus is in talks with a potential US partner company on the A3XX programme, although evading comment on reports that those negotiations are now centring on Northrop Grumman.

Source: Flight International