Failed BAE-EADS merger makes return to pre-deal status quo impossible

The collapse of the proposed $45 billion merger of EADS and BAE Systems can be traced directly to the German government's waning influence within EADS, and its burning desire to transfer prized research work and other key assets of EADS subsidiary Airbus from France to Germany, reports Reuters.

The merger was an attempt by EADS' German CEO Tom Enders, who had soothed over tensions between France and Germany over Airbus' control in the past, to free the company from the heavy-handed influence of those two governments, the story said. In the aftermath of the failed merger, the company's Toulouse, France-based Airbus unit has become even more oppressed by government influence, particularly from the German government which is pushing for more jobs, greater technical knowledge and more management influence.

Insiders familiar with the situation say the wrangling is likely to tear apart Airbus and damage its global competitive edge, the story said. In February, many months before the merger talks began, Germany's aerospace czar, Peter Hintze, submitted a list of demands in which it sought to correct a perceived imbalance within Airbus that was detrimental to German manufacturers. Enders, to preserve the company's competitive edge, rejected the demands. In June, Enders began serious merger talks with BAE.

Unfortunately for Enders, observers never gave the merger more than a 50-50 chance of succeeding, the story said. Hintze, a close ally of German chancellor Angela Merkel, fought long and hard against the merger. In September, the German government delivered a hefty, seven-point list of conditions. Enders agreed to all accept one: that he transfer the operational command center of EADS firm from its new location in Toulouse, to Ottobrunn, just outside Munich.

In the following weeks, Merkel became increasingly skeptical about the deal, and she ended it in October with a call to the French president, the story said. Obsevers say that hard feelings among shareholders, leadership and the two governments have made a return to the status quo before the deal impossible.

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