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EADS Sees Simplified Defense Portfolio Through Corporate Revamp

European Aeronautic, Defence & Space Co. will streamline its military and space product lineup as it integrates activities as part of a company revamp that will adopt the Airbus name across the group.

“You are going to see, over time, probably a slight simplification and rationalization of the portfolio,” Christian Scherer, head of strategy at the Cassidian defense unit, said today in London. “The Cassidian portfolio is extremely complex and could benefit from simplification.”

Cassidian, with more than 1,000 products, may cease some activities and focus principally on aerospace, which may lead to the restructuring of maritime offerings, he said. Cyber activities will remain part of the business, Scherer said.

EADS Chief Executive Officer Tom Enders announced in July the company would adopt the name of its commercial aircraft unit Airbus for the entire group and merge defense and space activities to help weather shrinking demand. The Airbus name is also supposed to help drive exports by increasing market recognition.

Cassidian and Astrium, the two units being combined in Airbus Defence & Space, are already undergoing portfolio reviews to determine what can be abolished, Scherer said. Those are independent of the larger restructuring and will be rolled out over time, he said.

Tight Timeline

The merger of defense and space activities should be completed by mid-2014, Scherer said, adding that the timeline is tight given the complexities. The management lineup should be settled this year so operations from January will begin to be focused around the new structure, he said. Eliminating some positions will help yield cost cuts, he said.

The combination of defense and space assets is not a precursor to revive merger efforts with BAE Systems Plc (BA/), Scherer said. The two companies attempted a combination last year to create a stronger rival to Boeing Co. (BA) in a deal that failed amid German government opposition.

The U.S. remains a target for defense sales growth for the integrated company, Scherer said. Opportunities include sales of the A400M military transport, and also of Airbus A330-based refueling planes, he said.

The U.S. has opted for the Boeing 767-based tanker offering after a long-fought competition that EADS had won at one point. The Boeing plane leaves the U.S. with some areas in the Pacific where it can’t provide refueling capacity, which the A330 version could plug, he said.

Airbus will not pursue an emerging U.S. Air Force effort to provide a new Air Force One aircraft to transport the president.

“We do not anticipate bidding for Air Force One,” EADS North America spokesman Guy Hicks said by e-mail. “Our strategic intent when we bid on our major programs is to industrialize in the U.S. to support production. The likely number of aircraft involved with the Air Force One program would not support our strategic model for growth in the U.S.”

EADS has said previously it also would not pursue a program to provide the U.S. Marine Corps with a helicopter used to transport the president. A team involving Finmeccanica SpA (FNC)’s AgustaWestland won a previous bid before the chopper contract was canceled because of rising costs.

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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