Ethnocentric vs. Regiocentric Consolidation in the Aerospace and

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“In the case of commercial-class aircraft manufacturing, structural changes in the international system and industry dynamics act as centripetal forces impelling states and corporations toward collaboration, while the industry’s strategic value acts as a centrifugal force impelling protectionist policies designed to avoid perceived vulnerabilities associated with mutual dependency.” 31 Several different, partly opposing forces have been shaping the commercial aerospace industry in recent years and decades. At the international systemic level, Golich identifies the following four centripetal forces: “First, transnational interdependencies extend across an increasing number of political boundaries and link a growing number of issue areas. Few national leaders believe that it is possible to disengage from the network of economic interdependence. […] Second, power capabilities are more equally, if still asymmetrically, distributed among states. […] The growth of aerospace manufacturing capabilities in Europe and the newly industrialising countries of Brazil, Indonesia, and Israel reflect this change. […] Third, the large foreign debt that emerged as a structural problem in the 1980s depresses purchasing power. […] Finally, market dimensions are no longer delineated by a series of distinct national markets linked by trade.” 32 Dramatically changing dynamics within the commercial aerospace industry itself have also acted as centripetal forces pushing the companies concerned towards closer (national and transnational) collaboration; i.e., FDI 33 , co-production and licensing arrangements as well as collaborative undertakings to design, produce, and market aerospace products as well as systems: 34 “During the last fifty years the industry has been transformed into a sector characterised by an oligopolistic production structure, an extremely high survival risk, and intense competition for sales in a global market. […] Technological advances have extended developmental lead time, increased launch costs, complicated marketing, and lengthened the time between initial research and revenue earning.” 35 31 Golich (1992) p. 902 32 Ibid., pp. 902-903 33 FDI = Foreign Direct Investment 34 Golich (1992) p. 924 35 Ibid., p. 903 22
Virtually all of these industry dynamics are driven by the exponentially rising R&DP costs of building next-generation aircraft. For example, the average commercial aircraft manufacturing costs per seat increased from US$65,000 in 1970 to US$275,000 in 1991 – a more than four-fold increase in 21 years. 36 As a result, soaring R&DP expenditures “have increased the proportion of launching cost to equity from 42 percent (for the development of the Douglas DC6 in the 1940s) to 155 percent (for the development of the DC10 in the late 1960s and early 1970s)”. 37 Detailed shipment statistics by the US Department of Commerce cited earlier also illustrate the exploding average unit costs for both US commercial and military aircraft. 38 In 1971, the average US civil aircraft cost US$367,000; the corresponding average figure for military aircraft stood at US$2.9 million. By 1987, the average price of a US commercial aircraft had skyrocketed to US$6.7 million; in comparison, US military aircraft cost an average US$36.1 million. In 1999, US civil aircraft, on average, cost US$13.1 million while the corresponding figure for military planes stood at US$99.7 million. 39 Pentagon procurement programmes have long been hampered by major delays and cost overruns: 40 “Every service has to some extent mortgaged its future by failing to contain equipment costs, and by trading existing equipment and force elements to develop new systems that it may never be able to procure in the numbers planned. These failures in cost containment have been compounded by the failure to make realistic assessments of technology and production capabilities, and the failure to set reasonable performance specifications and then stop the grow of technological risk and even more demanding performance specifications over time.” 41 “Almost every major aircraft development programme is in so much trouble that the replacements are stuck in a morass of procurement and development problems, cost explosions, and rifts within the [DoD] 42 . Fifth-generation tactical aircraft are affected by significant delays and cost increases.” 43 36 Ibid., p. 907 37 Golich (1992) p. 906 38 ITA (2006) 39 In 1983, legendary US aerospace executive Norm Augustine pointed to the problems arising from the fact that unit costs of next-generation military aircraft rise exponentially while defence budgets only grow linearly. Coining what has become known as “Augustine’s Law”, he extrapolated this trend and took it to a tongue-in-cheek extreme: “In the year 2054, the entire defence budget will purchase just one aircraft. This aircraft will have to be shared by the Air Force and Navy 3½ days each per week except for leap year, when it will be made available to the Marines for the extra day.” See Law 16 in Augustine (1983). 40 Art (1972) pp. 95-114 41 (Cordesman & Kaeser, 2008) p. 1 42 DoD = Department of Defense 43 (Cordesman & Kaeser, 2008) p. ii 23
Page 1 and 2: THE LONDON SCHOOL OF ECONOMICS AND
Page 3 and 4: Abstract This thesis relies on real
Page 5 and 6: The final word of gratitude goes to
Page 7 and 8: 6.4 Growing US unilateralism and th
Page 9 and 10: EEA European Economic Area EEC Euro
Page 11 and 12: Chapter 1: The Aerospace and Defenc
Page 13 and 14: status vis-à-vis all potential cha
Page 15 and 16: The cooling in transatlantic relati
Page 17 and 18: Even though America and its Europea
Page 19 and 20: acquisition of MDC - the smallest o
Page 21: 1.2 The economic and strategic impo
Page 25 and 26: Aerospace companies also deliver si
Page 27 and 28: Unless we act soon, we may find tha
Page 29 and 30: interdependent relationship between
Page 31 and 32: The increasing importance of techno
Page 33 and 34: 1.3 The consolidation of the US and
Page 35 and 36: “A cursory look across four facet
Page 37 and 38: procurement agency within the Minis
Page 39 and 40: 1.4 International collaboration and
Page 41 and 42: US aerospace companies. 138 As a re
Page 43 and 44: had managed to replace MDC as the w
Page 45 and 46: “It is both morally and political
Page 47 and 48: important political dimension. Toda
Page 49 and 50: International anarchy means that th
Page 51 and 52: turning it into a US-dominated acad
Page 53 and 54: Unipolarity can be a very stable 19
Page 55 and 56: competitiveness declines and it wil
Page 57 and 58: It is striking to note that success
Page 59 and 60: for pre-contract award procedures r
Page 61 and 62: increased economic scale and effici
Page 63 and 64: autonomy as a result of unequal tra
Page 65 and 66: notwithstanding. The third benchmar
Page 67 and 68: Despite public pronouncements in su
Page 69 and 70: of international law: yesterday tho
Page 71 and 72: deeply-entrenched reliance on (conf
Page 73 and 74:
Let’s turn to neo-liberal institu
Page 75 and 76:
exemplified by the BMD / EADS merge
Page 77 and 78:
isk, high-stakes environments are m
Page 79 and 80:
It is obvious that liberal institut
Page 81 and 82:
politics, including human rights an
Page 83 and 84:
generic. But many national security
Page 85 and 86:
(such as rules and models) that def
Page 87 and 88:
esurgence than the newly-liberated
Page 89 and 90:
political coordination at the gover
Page 91 and 92:
Germany have not only a bilateral
Page 93 and 94:
process of interest is ‘transpare
Page 95 and 96:
thus promises particularly useful i
Page 97 and 98:
are particularly common. 337 As a r
Page 99 and 100:
Finally, this methodological sectio
Page 101 and 102:
“There are no fixed recipes for b
Page 103 and 104:
Chapter 3: The Boeing / McDonnell D
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4.7 percent of GDP. Yet even at the
Page 107 and 108:
F-22 production line closes, Boeing
Page 109 and 110:
3.2 Corporate strategies to deal wi
Page 111 and 112:
from potentially aggravating milita
Page 113 and 114:
3.3 “The Last Supper”: how the
Page 115 and 116:
aseline year, clearly distorted the
Page 117 and 118:
primes also raised alarm, especiall
Page 119 and 120:
administration’s volte-face took
Page 121 and 122:
ethic” 464 that dominated the thi
Page 123 and 124:
3.5 Boeing, McDonnell Douglas, and
Page 125 and 126:
with Boeing’s sheer size and corr
Page 127 and 128:
its leadership position compared to
Page 129 and 130:
Prior to Boeing’s take-over, MDC
Page 131 and 132:
Furthermore, Boeing hoped to levera
Page 133 and 134:
After the Americans realised in lat
Page 135 and 136:
FTC’s unconditional approval of t
Page 137 and 138:
transnational R&D and production st
Page 139 and 140:
civil and military aircraft manufac
Page 141 and 142:
In the military aircraft domain, in
Page 143 and 144:
Most of the defence projects were b
Page 145 and 146:
greatly extended the range and scop
Page 147 and 148:
In 1983, UK Defence Minister Heselt
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NATO” 616 , a not-for-profit orga
Page 151 and 152:
4.2 The failed EADC 632 and BAe / D
Page 153 and 154:
Finally, EADC’s shareholder inter
Page 155 and 156:
With combined annual revenues in 19
Page 157 and 158:
(#1), and missiles (#2). Furthermor
Page 159 and 160:
Finally, EADS’s Defence and Civil
Page 161 and 162:
4.3.1 Aérospatiale Matra (AM) AM w
Page 163 and 164:
4.3.2 DaimlerChrysler Aerospace AG
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4.4 The Galileo Global Navigation S
Page 167 and 168:
[T]he military implications of Gali
Page 169 and 170:
compatible with national security,
Page 171 and 172:
lost ground in Afghanistan, Russia
Page 173 and 174:
France - backed by German financing
Page 175 and 176:
and the combat systems that go on t
Page 177 and 178:
industry restructuring caused certa
Page 179 and 180:
Chapter 5: Going American: Explaini
Page 181 and 182:
Washington embraced the ethnocentri
Page 183 and 184:
More recently, EADS / Airbus teamed
Page 185 and 186:
sensitive US technologies 832 and e
Page 187 and 188:
5.2 Growing foreign dependence of t
Page 189 and 190:
need to be achieved during a relati
Page 191 and 192:
Technology” in 1990 to analyse
Page 193 and 194:
their sovereignty but also to vital
Page 195 and 196:
However, with the deterioration of
Page 197 and 198:
5.3 The rise of economic rivalries
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which military conflict between maj
Page 201 and 202:
European relations, especially in d
Page 203 and 204:
5.4.1 The DaimlerChrysler merger:
Page 205 and 206:
ankruptcy or swallowed by one of it
Page 207 and 208:
Regulatory approval for the deal wa
Page 209 and 210:
5.4.3 Deutsche Telekom’s take-ove
Page 211 and 212:
commitments in the WTO and would af
Page 213 and 214:
5.5 Moving both towards and away fr
Page 215 and 216:
the UK, France, Germany, and Russia
Page 217 and 218:
Chapter 6: Building Europe and Bala
Page 219 and 220:
1966. 1036 1037 It was not until th
Page 221 and 222:
Going into the Maastricht negotiati
Page 223 and 224:
The 1995 election of President Chir
Page 225 and 226:
Bulgaria be part of NATO’s first
Page 227 and 228:
Europe needs strengthened armed for
Page 229 and 230:
While the Americans dominated the a
Page 231 and 232:
illicit and dangerous transfers of
Page 233 and 234:
“This is not fundamentally a prob
Page 235 and 236:
In July 2004, the European Defence
Page 237 and 238:
1183 Ibid. collectively. And, of co
Page 239 and 240:
using the “Three Ds” language.
Page 241 and 242:
administration’s freedom of movem
Page 243 and 244:
decision that made America - especi
Page 245 and 246:
so one expects to find conflict”
Page 247 and 248:
candidate Nicolas Sarkozy even made
Page 249 and 250:
companies win crucial multi-billion
Page 251 and 252:
aircraft business in the early 1980
Page 253 and 254:
Mercantilists, by definition, are g
Page 255 and 256:
slowly wither and die in the face o
Page 257 and 258:
Despite these rather dramatic indus
Page 259 and 260:
defence-related industry has experi
Page 261 and 262:
persisted because of “inaction”
Page 263 and 264:
European economic and military stra
Page 265 and 266:
In April 1998, the French, German,
Page 267 and 268:
EADS) were already cooperating thro
Page 269 and 270:
The initial merger discussions betw
Page 271 and 272:
(in the case of privatised companie
Page 273 and 274:
7.3 Britain and the US Defence Mark
Page 275 and 276:
take-overs of Tracor and AES / Sand
Page 277 and 278:
To this day, America has failed to
Page 279 and 280:
Chapter 8: Conclusion This thesis u
Page 281 and 282:
armaments cooperation. Even more im
Page 283 and 284:
In Europe, the transnational EADS m
Page 285 and 286:
easy for key EU members like France
Page 287 and 288:
Finally, realism can also account f
Page 289 and 290:
coordinated response to ensure the
Page 291 and 292:
GAO’s decision” 1385 . Just a f
Page 293 and 294:
Annex Table 1: Economic Weight of t
Page 295 and 296:
Table 4: FY1987-FY2007 DoD Budget A
Page 297 and 298:
Interviews: Cohen, Eliot, Robert E.
Page 299 and 300:
BBC Monitoring Europe, „EU, Franc
Page 301 and 302:
Chao, Pierre and Niblett, Robin,
Page 303 and 304:
Doyle, Michael, “Kant, Liberal Le
Page 305 and 306:
Giegerich, Bastian, “Navigating d
Page 307 and 308:
Holmes, Kim, “US-European Strateg
Page 309 and 310:
Kolodziej, Edward A., “Making and
Page 311 and 312:
Maynard, Michelle, “Daimler consi
Page 313 and 314:
Neuman, Stephanie G., “Defence In
Page 315 and 316:
Robertson, George, NATO Secretary G
Page 317 and 318:
_____, “Telekom faces FCC hurdle
Page 319 and 320:
US Arms Control and Disarmament Age
Page 321 and 322:
Operations, US House of Representat
Page 323:
Willcock, John, “DASA remains pri
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