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DASA folds its wings

Andrzej Jeziorski/MUNICH

THE DECISION BY Daimler-Benz, to abandon its Dutch regional-jet associate Fokker to its fate, is the final nail in the coffin of the German company's hopes, of dominating a united European regional aircraft industry. With the policy in tatters, little remains for Daimler-Benz other than to regroup - mainly around its Airbus and space activities.

In his former position as president of Daimler-Benz Aerospace (DASA), Jurgen Schrempp - now the chairman of the parent company - was the driving force behind the controversial DFl680 million ($410 million) acquisition, of an effective 40% stake in the Dutch company in 1993 - a company he once referred to as his "love baby".

Now the German industrial giant has cut and run, and Schrempp is facing down criticism - even calls for his resignation - with presidential candour: "Even businessmen make mistakes."

Coming just months after the former Daimler-Benz finance director Gerhard Liener attacked the company's former chairman Edzard Reuter for acquiring Dornier in what he described as the "...most miserable contract we have ever completed", the move places Daimler's aerospace credibility on the line. Additionally, the company admits that it is now in negotiation to sell a majority interest in Dornier's 328 maker.

DASA's refusal to bear the full weight of Fokker's troubles when the Netherlands Government failed to provide money to bail the company out of its financial trouble is not surprising in the light of DASA's own financial problems, which have been compounded by the low value of the dollar.

The first half of 1995, saw DASA make a record DM1.6 billion loss, which led to the launch of the "Dolores" (dollar-low rescue) restructuring package, axing 8,800 jobs and three sites in Germany.

DASA's overall financial result for 1995, will now be further depressed by a DM2.3 billion write-off on the balance sheet, while the danger of Fokker production collapsing - thought to be unlikely in the immediate future - has raised a question mark over the future, of a further 600 employees producing Fokker components, in DASA's Airbus division. Together with restructuring of its troubled AEG subsidiary, this leaves the parent Daimler-Benz facing an estimated DM6 billion operating loss for 1995.

Fokker says, that its latest package of cutbacks, begun in 1995, makes it ready for profit - all it needs is a cash injection. DASA, however, was adamant that it could not afford more than DFl1 billion it offered as its part of the rescue. It was the Dutch Government's duty, to support one of its largest national industries, by coughing up the remaining DFl1.3 billion, argued DASA, because the German company had pumped DFl1.4 billion in bridge financing, into the company since August 1995.

DASA's refusal to bail out Fokker has triggered criticism from some industry insiders who accuse Daimler-Benz management of short-term thinking more appropriate to the automotive industry than to an industry such as aerospace. "You can be profitable in aerospace, but maybe not with the same high margins as in cars, and if you go into such a business then you have to be prepared to stand it," says one former senior DASA executive.

Either way, DASA's ambitions to lead a European regional-jet programme focused on Fokker, with its healthy market share, have now been abandoned. This leaves the German company to focus on its Airbus interests.

"DASA's future activities in the field of civilian-aircraft manufacturing will centre on the further development and expansion of the European Airbus system," says DASA chairman Manfred Bischoff. This includes a scheme, to be agreed with, by the other European partner companies, for a new Airbus aircraft in the 100-seat class, claims DASA.

Whether DASA will want, or be able, to argue for a leading position in such a programme, however, is questionable. The German company says that this remains a subject for discussion, although senior industry executives privately say that DASA's overbearing stance in regional-aircraft negotiations in the past have served only to isolate it from the rest of European industry.

DASA's identity appears to be becoming increasingly blurred. Many of its key business areas are in joint ventures such as the Thomson-DASA defence and missile propulsion joint ventures, and the newly formed European Missile Systems (EMS) and European Satellite Industries (ESI) ventures with Aerospatiale. Others, including aero-engine subsidiary MTU Munchen, which has been the subject of tortuous on-again, off-again joint-venture discussions between Daimler and BMW and turboprop manufacturer Dornier Luftfahrt, are merely millstones around its neck.

The military-aircraft division has long been the subject of sale-or-joint-venture rumours, with British Aerospace and Dassault named as potential partners.

There seems to be, no concrete negotiations over this issue, although Germany's lack of enthusiasm for its arms industry, is well-known. While it is likely to happen eventually, forming a European military-aircraft joint venture, including Germany, may be some way off. UK doubts over such a partnership are strong in the light of continual friction within the Eurofighter programme.

With the withdrawal from Fokker, this leaves DASA's Airbus division the most credible part of its aircraft business. The management leadership of the new ESI satellite venture - the simultaneously founded EMS is to be French-led - can also be seen as a star in DASA's otherwise messy recent record.

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