Chapter 21

The Defense Industry’s Transatlantic Debate

Mr. John Weston
Chief Executive, BAE SYSTEMS

In my view the following topics are important to the debate we are currently having on both sides of the Atlantic and hence they formed the key elements of this year’s Defense Industry Panel debate.

Is there Any Real Danger of Developing Fortress Europe or Fortress America?

• Does the formation of BAE SYSTEMS and EADS mean that the European market will be more difficult for the Americans to penetrate?
• Does Fortress America exist today?
• Does the industry’s current structure internationally support competition or protectionism?

Is Government Ownership of the Industry a Significant Issue?

• Does it matter if European governments retain significant shareholdings in the European defence industry?
• Can the European industry rationalise and be truly competitive on a global basis?
• Does the current debate about the health of the U.S. industry and about what the Department of Defense can do to help represent similar government involvement in U.S. industry?

Is the Global Model of the Industry an Unattainable Dream?

• Could we envisage transatlantic corporations competing as equals in the U.S., Europe and around the world?
• Is competition becoming more or less important to European governments?
• Can effective competition be maintained in the U.S. market going forward without greater international involvement?

Is the Distinction Between Horizontal and Vertical Integration Relevant Today?

• To what degree does a prime contractor need to be vertically integrated?
• What is the ideal structure of the industry from the customer’s point of view?
• What is the ideal structure of the industry from a prime contractor’s point of view?
• What is the ideal structure of the industry from a supplier’s point of view?

How Important is Size in the Industry?

• Is size important for market impact?
• Is size important for research and development intensity?
• How large a company can we manage effectively?
• Was the consolidation of the U.S. Industry a mistake, or are there lessons to be learned from the division of the cost benefits?

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