WHETHER BOEING IS really talking to McDonnell Douglas (MDC) about a co-operation, which might or might not lead to a merger, the mere thought of such a move has sent shock waves through an already shell-shocked aerospace industry. Immediate reactions have painted a potential merged company as a market-dominating, competition-killing, anti-trust-breaking colossus, which would quickly smother most of its competitors. Immediate reactions would be wrong.
There is no doubt that a Boeing/MDC merger would create the world's biggest aerospace company. It would certainly, with a turnover approaching $35 billion a year, be bigger than the previous giant, Lockheed Martin, whose turnover is approaching $23 billion.
In relation to other industries, however, even at $35 billion, Boeing/MDC would be, if not exactly small fry, hardly the biggest of whales either. It would be roughly half the size of a General Electric, a Daimler-Benz or a Siemens, and a fraction of the size of the big motor-manufacturers, computer manufacturers and the like. It would also be fairly diversified, serving military and civil markets, with combat, transport and rotary-wing products, but not a wholly diversified conglomerate.
Its size would be more important in some - but by no means all - of the individual market sectors. In airliners, it would be a little bigger than Boeing is now; in fighters, hardly at all (depending on the outcome of the USA's JAST programme); in helicopters, potentially much bigger (again, depending on the eventual size of V-22 Osprey orders).
No matter how much bigger it became, however, a Boeing/MDC would probably dominate no more markets than do its individual potential constituents now. After rationalising its airliner production, it would still be the dominant force. Its fighter activities would still be in head-on competition with those of Lockheed Martin, as would its military transport business.
Already, MDC and Lockheed Martin each have much greater strength in fighters than do the European fighter-builders, whether individually (Dassault, Saab) or collectively (the unhappy British Aerospace/Daimler-Benz Aerospace/ Alenia/CASA Eurofighter consortium). That strength - despite the Europeans' collective weight in Airbus Industrie would be made even greater through the civil/military market balance of a Boeing/ MDC merger. MDC's military business would provide counter-cyclical strength to Boeing's civil business. It is especially there, therefore, that European competitors would find the greatest justification for their fears.
Those fears should arise not so much from the balanced market strength of a Boeing/ MDC as from the apparent inability of the Europeans to do anything to counter it.
Their business and cultural differences allied to their differing ownership, means that a trans-national Europlanes company must remain for the foreseeable future just a pipe dream. Attempts by the more commercial partners in the Airbus consortium - by far the most successful European joint venture, and therefore the most logical candidate for being put on a real-world footing - have so far been defeated by these problems. If the Airbus structure cannot be regularised, there must be little hope of any other significant pan-European reconstruction.
The environment in the USA - ant-trust regulations notwithstanding - is far more conducive to the sort of "blue-skies" thinking which had produced these latest merger rumours. There are no state holdings, but lots of state research-and-development funding. There is comparatively little social legislation to act as a barrier to job mobility and flexibility.
All those advantages are potentially available to the European aerospace companies, but, until now, there has been no political will (at either government or industrial level) to make them available in reality. The greatest service, which a Boeing/MDC merger could perform, might not be to the stockholders and employees of those two companies, but to those of their European competitors. That's not because Boeing and MDC would be providing some sort of shining example - but because their actions might, at last, scare the Europeans into some real action.
Source: Flight International