France Signals Readiness To Join European Defense Alliance

After more than a year of changing its position, France seems to be restructuring its defense industry to join a Europe-wide venture that could give Europe's U.S. rivals a run for their money. Lagardre Groupe SCA is surrendering its Matra Hautes Technologies unit for a stake in state-controlled Arospatiale SA, merging the two companies in a new group in which the French government will retain only a minority stake. Under pressure to move quickly, the French government has acted to ensure that it plays a key role in Europe's defense restructuring following the recent purchase by British Aerospace PLC (BAe) of the British General Electric Co. PLC's Marconi defense unit. The new French partnership ranks No. 5 among the world's civil and military aerospace groups. Already allied to BAe and Germany's DaimlerChrysler Aerospace AG (DASA), it stands No. 2 behind Raytheon-Hughes in missiles and No. 3 behind Raytheon-Hughes and Lockheed Martin Corp. in satellites. The French consolidation move opens the way to a full-fledged partnership among France's high-tech manufacturers, DASA, and BAe-Marconi to challenge U.S. defense dominance.