Industries in Europe

Industries in Europe

Competition, Trends and Policy Issues

Edited by Peter Johnson

This important book, a successor volume to European Industries, brings together a number of in-depth and authoritative studies of key European industries, providing fascinating insights into their nature and characteristics.

Chapter 13: Defence industries

Keith Hartley

Subjects: economics and finance, industrial economics


Keith Hartley INTRODUCTION: AN INDUSTRY RESPONDING TO CHANGE Following the end of the Cold War, the 1990s was a period of major change for the defence industries in Europe, the USA and the former USSR. Disarmament led to smaller armed forces and a reduced demand for equipment (weapons) reflected in the cancellation of new projects, a ‘stretching’ of development programmes and smaller production orders. Defence industries responded to disarmament with job losses, plant closures, a search for new markets (for example arms exports; diversification), mergers and exits from the industry. The US industry responded with a series of major mergers, especially in the aerospace industry where 22 firms in 1990 were consolidated into four large companies by 1997. The ‘big four’ US defence and aerospace companies were Boeing, Lockheed-Martin, Northrop Grumman and Raytheon. Larger American companies able to obtain economies of scale and scope represented a major competitive threat to Europe’s defence industries. As a federal state, the USA has a single army, navy and air force which provides a large national market for its defence industries. In contrast, the member states of the European Union (EU) each provides its national armed forces and supports a small-scale national defence industry. However, the EU is committed to developing a Common European Security and Defence Policy (CESDP). By the late 1990s, this policy had resulted in two new initiatives. First, a commitment to create an EU Rapid Reaction Force of 50–60000 troops by 2003. This force will be available...

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