BAe/Marconi Merger Threatens Consortium Challenge

British Aerospace PLC's (BAe) plans to buy Marconi Electric Systems from Britain's General Electric Co. (GEC) and create the world's third-largest defense company aren't likely to produce a long-expected European-consortium challenger to U.S. domination of the global defense industry. BAe announced the purchase this week. Germany's DaimlerChrysler Aerospace AG, which has been urging an alliance among British, French, and German defense contractors, says the all-British deal is a mistake. "This is not a European merger. It is only going to complicate efforts toward European integration," claims a company spokesperson. "In fact, it is going to make a link between us and BAe impossible. We shall look elsewhere for partners." But where? France, which is stubbornly refusing to privatize state-owned Aerospatiale, cannot provide the answer. The merged BAe/Marconi Electronics will be known as New British Aerospace, employing 99,000 people, and, with estimated revenues of US$20.6 billion, trail only Boeing Co., Seattle, and Lockheed Martin Corp., Bethesda, Md.

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