EADS CEO Sees European Military Cuts Eroding Defense Industry

European Aeronautic, Defence & Space Co. (EAD) Chief Executive Officer Tom Enders said Europe’s defense industry risks a prolonged erosion, with government spending prospects in home markets bleak for years to come.

“In Europe, we face a decade with no growth and more likely further declines in defense budgets,” Enders said today in Brussels at a European Defence Agency conference. That reality affects industrial planning, he said.

Enders is undertaking a major strategic review for the Toulouse, France-based maker of Airbus SAS commercial airliners and military equipment, and is considering a smaller role for defense activities. The assessment comes as European government officials prepare to meet in December to discuss defense issues including closer cooperation.

“The clock is more than ticking,” Enders said. “It is not about strengthening the defense industrial base. We should talk about the further erosion that is happening and in my view is unlikely to stop.”

Enders called for “real, credible, and tangible action that could convince the industry that at the end of the tunnel there is an upswing.” Exports alone won’t sustain industry, because companies seeking business in markets such as India, Brazil and the Middle East will face “cut-throat competition,” Enders said.

New, large defense programs will not be funded in Europe until at least the end of the decade, Detlef Selhausen, Germany’s national armaments director, said at the Brussels event. Cooperation will instead focus on support of equipment, he said.

While Enders said he’s able to readjust resources from military to commercial activities, the troubles in the defense field are compounded by “a very considerable brain drain” toward the growing commercial business.

Enders predicted more industry consolidation, even after his effort to merge with BAE Systems Plc (BA/), Europe’s largest defense company, failed last year on German government opposition.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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