New French President Faces Major Aerospace, Defense Decisions
(Source: defense-aerospace.com; published May 10, 2007)
By Giovanni de Briganti,
Defense-aerospace.com


PARIS --- In a campaign dominated by the candidates’ personality rather than their political programs, defense and security issues were more neglected during this presidential contest than in any other French election in living memory.

Indeed, it was only because both leading candidates failed to answer very simple questions about France’s nuclear submarines – how many SS(B)Ns for Segolène Royale; how many SSNs for Nicolas Sarkozy – that defense issues hit the headlines at all.

The aerospace and defense industry fared no better. If it did briefly interest the candidates, it was only when they scrambled to oppose Airbus’ now-famous Power 8 restructuring plan and its attendant 10,000 job cuts, and subsequently condemned the generous golden parachute provided to Noel Forgeard, former CEO of both Airbus and EADS.

Given that France’s defense sector underwent an unprecedented decline under the 12-year rule of President Jacques Chirac, president-elect Nicolas Sarkozy will have to take a number of major policy decisions in the coming months.

The first is whether to build a second aircraft carrier, and whether to launch it as a joint program with Britain, as planned. The three-ship, Anglo-French carrier program was due to be launched before Easter but wasn’t, and a final decision is now increasingly urgent if the ships are to be commissioned in time to meet naval requirements.

The second is how to re-launch arms sales to Saudi Arabia. A number of pending contracts, covering a large number of helicopters, Airbus tanker aircraft, and even Rafale combat aircraft, were originally planned to be signed last year. However, Chirac’s insistence that the Rafale be included in the first contract led the Saudis to delay all planned purchases until after the election.

Saudi Arabia will now probably look for reassurances that Sarkozy will maintain France’s “special relationship,” and its independent, pro-Arab foreign policy, before signing any of the contracts. Any delay will provide opportunities for British and US manufacturers to undercut French positions in the kingdom, so making up with the Saudis is an urgently-needed initiative for French industry.

The third major defense decision facing Sarkozy is whether to restore defense spending to the levels set out in the current 5-year defense spending plan, which Chirac allowed to fall despite earlier promises to scrupulously respect funding levels. However, economic and social welfare programs are likely to have first call on the new government’s purse-strings, making it difficult, if not impossible, for defense funding to cover all procurement bills coming due. These include, among others, the new Barracuda-class attack submarines and the FREMM frigates, due to be developed jointly with Italy.

Sarkozy also will have to decide what position to take regarding EADS and Airbus. Although he often speaks as an economic liberal, Sarkozy is not shy about protecting national industries, as he clearly demonstrated in 2004, when he put together a rescue package, including government financing, for the French Alstom engineering group, and in 2006, when he opposed EADS’ planned closure of its French Sogerma facility in Bordeaux.

Ostensibly, the question is whether, and how, the new French government will allow Airbus’ Power 8 plan to be implemented in light of widespread opposition by trades unions and many parliamentarians. In fact, the real issue is whether Sarkozy will allow EADS to keep its current management and governance structures, or whether he will push for a more rational organisation.

The issue is complicated by the fact that the current German government has shown itself to be quite protectionist in terms of Germany’s role in EADS, and of German Airbus factories.

Having many times made the point that decisions - and management appointments - should be made on their merits alone, it will be instructive to see how Sarkozy will manage this issue in light of his close friendship with Arnaud Lagardere, a major EADS shareholder and its co-CEO.

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