UK: Lessons of the Airbus example FOR THE EUROPEAN FIGHTER.

UK: Lessons of the Airbus example FOR THE EUROPEAN FIGHTER. - European co-operation can work to industry's great advantage.

by Roger Eglin, managing editor of The Sunday Times.
Last Updated: 31 Aug 2010

European co-operation can work to industry's great advantage.

What makes Airbus Industrie such an outstanding example of European industrial collaboration is its ability to compete head on in world markets against a formidable adversary like Boeing. It's partly because of technical capability, an area where Airbus lacks nothing compared to its US rival but just as important is the way Airbus is organised. Financially and corporately Airbus Industrie is a complex animal - so much so that a greater degree of transparency in its financing would be welcome. What really matters, however, is the way the Airbus partners marshal their manufacturing resources.

The partners - France, Britain, Germany and Spain - have swallowed any sense of misguided nationalism and pooled research and manufacturing skills to create competitive enterprise. Britain has developed good wing-making skills so British Aerospace has become Airbus's wing designer and make-in-chief, operating from its Bristol and Chester plants.

The French produce major structural components and electronics and have also become the principal centre of Airbus assembly at Aerospatiale's Toulouse plant. Deutsche Airbus manufactures components and specialises in fitting out aircraft and Casa in Spain makes important components. Except for a new production line starting in Germany that will assemble a development of the best-selling A320, there is no duplication of manufacturing anywhere in Airbus. Even the flight testing and crew training is centred in Toulouse.

There is also a large element of nationalistic pride: anyone going to Toulouse will be left in no doubt that the Airbus is a French creation (and without French determination the project would not have survived its first few shaky years). But Airbus works well - as the recent order from America's United Airlines for 100 A320s, worth £5 billion, demonstrates - because the partners have recognised the benefits of sacrificing narrow national interest.

The same cannot be said of Europe's military project, the European Fighter Aircraft (EFA). With the project's budget estimated to run to $11 billion, the Germans are not alone in questioning the EFA's affordability. At a possible cost of around $90 million an aircraft (which would comfortably pay for three 150-seat A320s), should it enter service as hoped in the late 1990s, the EFA seems, to many, to be an expensive and unnecessary luxury in a post-Cold War world.

With their space age electronics, military aircraft are hideously expensive - the cost of America's planned F22, a stealth aircraft, makes the EFA look like a family saloon. But the Eurofighter's problem is not the cost of electronics but the fact that its collaboration is scarcely more than skin deep. Until the threatened German bale-out, the project provided for the costly multiplication of assembly lines in every partner country: Italy, Spain, Germany and Britain. Ironically the withdrawal of the German assembly line might even help to keep production costs under control. To accompany the proliferation of production lines, each partner would also have had a flight test centre. And there is even a close European rival: France's Rafale fighter. If the EFA is ever to fly, the project must take its cue from Airbus: one assembly line, one flight test centre and an equitable share of work to keep the partners happy. It is the only sensibly cost-effective answer.

What makes the EFA project look even sillier is that some partner companies, particularly in Britain and Germany, are the same companies that have worked so hard to achieve effective collaboration in Airbus. Because of this effort, over 700 A320s alone have been ordered by airlines around the world. No one with any sense would bet on more than a handful of EFAs being sold for export.

The end of superpower rivalry means that the defence industry has to adjust to a world of slimmer budgets and fewer orders. Companies and countries can ease the transition through collaboration. The contraction is well under way. At the end of the 1980s, something like 400,000 British workers were employed in defence-related industries. Keith Hodgkinson, a defence analyst with Lehman Brothers, believes 80,000 of these jobs have already gone. The Eurofighter's defenders say 40,000 jobs in this country alone depend on it. This may be a lobbyist exaggeration but the project's demise could take the defence job losses past the 100,000 mark.

Longer term, the decline in defence should be good for Britain. Compared with major industrial rivals like France, Germany and Japan, defence accounts for a disproportionately large slice of national resources, particularly R and D, yet produces a poor return. More immediately, the defence industry's retreat blows a big hole in jobs and manufacturing capacity. Some of the pain can be muted by a more rational approach than EFA has demonstrated. It is worrying that the Prime Minister has shown a willingness to battle for EFA's survival. What is needed is more government pressure for partnership, collaboration and, if necessary, merger or takeover both within the UK industry and with erstwhile rivals abroad. EFA should set an example or stay on the ground.

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