Europe’s arsenal

Hundreds of years ago in Europe, it was hard to beat a moat when protecting a castle or fortified town. Water can be an unforgiving foe, particularly when regular swim lessons at the local pool are a few centuries off. Flash forward to the 21st Century and the Atlantic, at least in the defense market, is beginning to look like a moat. For all the Pentagon’s efforts at stirring competition, European firms couldn’t have had a tougher time cracking the military aerospace market. U.S. politics are largely to blame.

With that in mind the possible tie-up of two of Europe’s largest defense contractors, EADS and BAE Systems, looks like an acknowledgment that the one last chance at cracking the U.S. market is to create a pan-European aerospace champion that would dwarf any publicly-traded defense enterprise ever attempted. It is a step toward a shareholder-owned arsenal system in Europe, something at odds with how businesses are run in thriving industries.

Such a move won’t go over well in the U.S. because it’s not an option for Lockheed Martin, Northrop Grumman, Boeing and their peers. Further consolidation among America’s biggest firms doesn’t make much practical or financial sense. As well, the combined forces presented by a European supercontractor will only raise the ire of lawmakers in Congress who are willing to fight one another tooth and nail to preserve jobs back home.

Imagine what will happen when they look up and see a new threat to their interests on the other side of the moat.

Read more in my piece at Bloomberg Businessweek.