Just when you thought things could not get hotter in the transatlantic dispute over industry subsidies, Dassault Aviation boss Charles Edelstenne, current president of French industry association Gifas, has thrown a large jalepino chilli into the mix by stating that small suppliers must be entitled to the same state support as Airbus.

Edelstenne’s reasoning is that the country’s small and medium enterprises (SME) are in crisis. While Airbus and large suppliers benefit from a buoyant airline market, businesses down the supply chain are being squeezed because of rising costs caused by the high euro, competition from lower-cost economies and being forced by customers to take on more of the burden of developing new technology.

He is not calling for a blank cheque; rather, he says, a transparent system of repayable loans is a proven way of boosting investment in technology with government invariably recovering its outlay. But his comments to French aviation journalists last week will further enrage hot-headed elements in the US Congress who think Europe’s aerospace companies are competitive only because they are permanently suckered to an open tap of state largesse.

The US government has already scorned a promise by the four Airbus governments – France, Germany, Spain and the UK – to delay releasing funds to support development of the Airbus A350 until 2007, stating that all launch aid is “completely unacceptable”.

Edelstenne is right in one respect. In today’s industry, with programme risk being pushed down the supply chain and suppliers  keen to add value and innovation rather than simply building to print, healthy research and development spending by SMEs is key. But in France, it is virtually static. Money paid to Airbus for the A350 would likely filter down the supply chain,  but SMEs are cut off from direct access to these funds. In that sense, targeting spending at the lower tiers of the industry might produce more tangible returns.

Where he – and perhaps current French political thinking – is wrong is in seeing the problem as one of keeping jobs within a national aerospace supply chain. This is an obsession in France, where job protection and not “exporting” jobs is seen as higher priority than job creation and exporting products.

As our report on French industry two weeks ago showed, there is scarcely a French aerospace industry left in the old-fashioned sense. French-owned businesses such as Latécoère and Safran have huge stakes in Boeing programmes while overseas suppliers are increasingly opening sales offices and production facilities in the south of France to tap into Airbus’s procurement budget.

So who gets the money – a subsidiary of a US corporation building components for Airbus or a French company busily supplying Boeing or Bombardier? France has got world-leading aerospace companies. They must be encouraged to compete aggressively in a global market.
Featherbedding them with soft loans will make them less, not more, competitive.

Source: Flight International