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October 21, 1999
Boeing joins trans-Atlantic venture to develop missile for Eurofighter
By BRUCE STANLEY
AP Business Writer
LONDON (AP) -- Competition to market the next generation of air-to-air missiles intensified Wednesday with Boeing Co. teaming up with British Aerospace PLC and France's Aerospatiale Matra SA in a bid to arm the Eurofighter jet.
By bringing U.S. heavyweight Boeing on board, the European partners in the Meteor missile project hope to beat out another American defense industry power, Raytheon Co., for the $1.7 billion contract with Britain's Royal Air Force.
Boeing's move marks another step in cross-border cooperation in the arms industry -- a politicized business that until recently was conducted largely by national companies.
Ten years after the end of the Cold War, defense companies are grabbing for shares of a shrinking arms market, and competitive pressures are inspiring a wave of mergers. The latest round of deals would combine European aerospace companies seeking to become tougher competitors against the Americans, including Boeing, the industry leader.
At the same time, more joint ventures are expected between European and U.S. companies.
"We do believe that trans-Atlantic relationships are in the best interests of the industry and of customers on both sides of the ocean," said Jim Schlueter, a spokesman for Boeing's military operations.
Seattle-based Boeing also wants to help sell the Meteor in the United States.
"Because it will be a pseudo-U.S. project as well, the Pentagon should be more sympathetic to the idea of buying Meteor missiles for itself," said Zafar Khan, an aerospace analyst in London with French bank Societe Generale.
In a related move, British Aerospace and Aerospatiale Matra have agreed with Italy's Finmeccanica SpA to pool their missile operations into a single business. The combination, also announced Wednesday, would be second only to Raytheon in that business.
Boeing and its European partners will compete head-to-head with Raytheon to supply missiles for the 232 Eurofighter Typhoon jets that Britain has ordered. The Eurofighter is being developed jointly by Britain, Germany, Italy and Spain.
Britain's decision is crucial for the Meteor's success elsewhere in Europe, analysts said. Other European military customers are eager to buy the Meteor, but are wary of the high costs of developing the missile. If Britain places a big order, it could bring down the Meteor's price for all buyers.
Boeing will help make the Meteor's systems compatible with U.S. aircraft and other countries. It also will provide expertise in low-cost manufacturing, Schlueter said.
Boeing will act as an adviser and won't take an ownership stake in the venture, which will continue to be controlled by the European partners through a partnership called Matra BAe Dynamics.
Boeing and BAe have already worked together to develop the Harrier jump jet and T-45 naval trainer. The Meteor project takes their relationship "to the next step of real trans-Atlantic cooperation," Schlueter said.
Boeing, which makes the Harpoon anti-ship missile, sees the Meteor as a good opportunity to expand into the air-to-air side of the missile business.
The Meteor missile will have a range of up to 25 miles, and the companies developing it hope to market it wherever Eurofighters might be sold.
BAe spokesman Simon Raynes said he believed the Meteor partners have a big advantage over Raytheon.
"We need a European missile because we believe that having an American missile could put restrictions on the export of Eurofighter to certain countries," he said.
Raynes said the Meteor is more advanced and probably also more expensive than Raytheon's missile.
There was no immediate response from Raytheon's headquarters in Lexington, Mass., to calls seeking comment on the Boeing deal.