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Some In Germany Upset About EADS' Performance

When there is a monopoly in any industry it can cause issues with the customer base. In Europe due to the decline in defense spending there has been a major contraction in that industry. There are basically only one major company left in each country. EADS is even bigger having combined portions of the French and German aerospace industry to produce large airliners and also to produce military hardware. Through growing by mergers and acquisition the company has expanded its business products and lines to include a diverse amount of military equipment. EADS also participates in the different conglomerates set up like Eurofighter to produce new tactical aircraft for multiple EU nations.

It is reported that some in the German government and military are unhappy with EADS performance on some contracts. There are complaints that schedule and cost goals have not been met leading to delays in fielding the amount of desired equipment. This has not only been with large aircraft programs such as the Eurofighter Typhoon and helicopters but also with electronics and other systems.

The A400M transport program is being held up as the latest example of problems. This is the premier military aviation program in Europe right now and it is two years or more behind schedule. This will also increase the cost to the customers as they have agreed to renegotiate the contract and probably forfeit some of the fees that should have been paid back for non-performance. Unfortunately unless Germany wants to start buying American or Russian their sources for these types of aircraft are limited.

EADS also provides pressure as they provide large amounts of jobs in Germany as well as France. When the A380 airliner program was being restructured due to problems and delays there were difficult discussions between the two halves of the company over whom was to blame and which country would lose more jobs. EADS is not only important as an economic engine but also because it provides some national pride in what it can produce compared to the rest of the world.

If the German government wants to pressure EADS they only have limited means. Financial penalties only end up hurting their own economy. Buying from someone else without offsets also reduces the investment in their own economy. Competition is limited due to the lack of large programs to execute. The U.S. faces the same issue with some of their planned programs like the KC-X new tanker. Only Boeing, EADS and some Russian companies are able to bid. In the future if there is a decline in defense spending the U.S. could see its domestic sources even more limited then now.

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