Transfer Pricing Associates

Aerospace and Defense Industry: Are brands relevant or just another toy for politicians?

post Wednesday November 28, 2012


The proposed €36bn merger of BAE Systems and EADS has fallen apart. The failed tie-up with EADS means BAE is facing anger from investors and the US, says Carola Hoyos, the chief energy correspondent of Financial Times.

The concept of “brand” seems to work differently in the aerospace and defense industry. The business decisions are tightly related to politics. The end of the wars in Afghanistan and Iraq and the cuts in US and European defense spending are also not on the side of BAE. According to Financial Times, “the most extreme change in strategy could involve the company being broken up into pieces; its important US arm, source of 43% of its revenue, being spun off or sold; and the rest of the company – business in the UK, Australia and Saudi Arabia – left to limp along.”

What killed the deal? According to Financial Times’ analysis, US defense companies concerns about the emergence of a big competitor on the US soil. The US government concerns about the potential links between BAE’s US operation and parent with French and German influence. UK government demands BAE maintain its industrial base, to do so it needs to ensure national security and job safety. The German government demands a HQ in Germany, parity with France in terms of stake holding; while the French government demands the right to increase stake in the new company.

Are brands relevant in the aerospace and defense industry or are they just another toy for politicians?

Source: Financial Times

Image Source: Free Digital Photos

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