By Robert Wall
LONDON--Europe is bracing itself for another setback in its bid
to penetrate the U.S. defense market.
European missile maker MBDA--a joint venture of BAE Systems
(BA.LN), Airbus Group NV (EADSY), and Finmeccanica SpA
(FNC.MI)--has been trying to interest the Pentagon in buying its
dual-mode Brimstone air-to-ground missile. The weapon, said MBDA,
would give the U.S. military a way to strike moving vehicles with
enhanced accuracy.
The effort is only the latest for the business to crack a market
dominated by the likes of domestic defense companies Raytheon Co.
(RTN) and Lockheed Martin Corp. (LMT). But the U.S. market remains
hugely attractive to European defense suppliers since the Pentagon
vastly outspends Europe on defense. The White House has asked
Congress for $585.3 billion in military spending in the fiscal year
starting in October. The U.K. is spending about $56 billion this
year.
MBDA shareholders are familiar with the challenges. Airbus
aggressively bid for a program to provide airborne tanker planes to
the U.S. Air Force. The European plane maker was part of a winning
team to sell modified A330 jetliners to the U.S. military, only to
have the decision overturned on procedural grounds. Chicago-based
Boeing Co. (BA) won the second round offering a modified 767
airliner.
AgustaWestland, the helicopter arm of Finmeccanica Spa, was part
of a winning bid to provide EH101 choppers to the U.S. to carry the
President. That contract also was abandoned. United Technologies
Corp.'s (UTX) Sikorsky has since been given the go ahead to provide
the helicopter that serves as Marine Corps One when the President
is onboard.
There are rare exceptions. Back in 2006, Airbus won a lucrative
contract to provide helicopters to the U.S. Army.
MBDA says the Brimstone missile would give the U.S. the ability
to target ground vehicles with more precision and using fewer
weapons than used now. The European missile combines two seeker
types, including a small radar, to be more precise, the company has
said.
MBDA last year demonstrated the use of the missile from the
General Atomics Reaper drone to the British government. The
European missile maker has held discussions with different parties
in the U.S. on the use of the weapon.
"This is a test case," Antoine Bouvier, MBDA chief executive
told reporters in London. The Pentagon has a capability gap
Brimstone addresses and the European company has offered to give
the U.S. design rights, he said, adding that the U.K. government
also has backed the deal. "If we have failed to enter with such a
perfect case there is something wrong about [market]
accessibility," Mr. Bouvier said.
Pentagon acquisition chief Frank Kendall said he is open to
foreign products to help maintain competition in the U.S.
Mr. Bouvier said if the Brimstone effort fails it would weaken
U.S. credibility on having an open market. "I'm not overly
optimistic" of success, he added.
Even so, MBDA won't exit the U.S. market where it also has an
industrial footprint including facilities in Alabama and
California. The U.S. represents about 50% of the potential market
for MBDA, so the company needs to be present, Mr. Bouvier said. How
it maintains that presence will need to be reassessed, though, he
said.
Write to Robert Wall at robert.wall@wsj.com
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