EADS Abandons U.S. Defense Expansion as Military Spending Wanes

European Aeronautic, Defence & Space Co. is scaling back its ambitions to win a bigger slice of the U.S. military market as it focuses on the most sweeping overhaul of its defense and space operations in more than a decade.

Expanding defense operations in the U.S. is no longer a top priority and will instead be pursued only on an “opportunistic” basis, said Marwan Lahoud, chief of strategy for the Toulouse, France-based parent company of Airbus SAS.

“We will consider competing when we have a superior product to offer and are convinced that politics will not enter into play,” Lahoud said in an interview in Dubai last month.

The muted appetite for expansion is a change of tone for EADS, which until recently aimed to reach $10 billion in annual sales in the U.S. excluding Airbus. With revenue hovering at $1.4 billion and a failed merger with BAE Systems Plc (BA/) that would have opened the door to North America, EADS is instead focused on streamlining defense and space assets to save costs.

Under previous Chief Executive Officer Louis Gallois, EADS pursued acquisitions (EAD) in North America that included Racal Instruments in 2004 and the $960 million purchase in 2011 for communications business Vizada.

Acquisitions in the U.S. are no longer a priority, Lahoud said. Expansion plans in the region also hit a snag after EADS’s award of a contract to build refueling planes was overturned and later given to arch-rival Boeing Co. (BA)

Presidential Helicopter

EADS has opted not to bid on a U.S. contract to provide a new helicopter to ferry the President although the company may offer the A400M military airlifter, which was first delivered to France this year, to the U.S. should a need for such an aircraft emerge. The company in 2006 won a major Pentagon contract to provide light utility helicopters to the U.S. Army.

While EADS is scaling back its military ambitions in North America, it is expanding its civil activities with the planned creation of a final assembly line for narrow-body aircraft in Mobile, Alabama. The planemaker will deliver re-engined A320neo single-aisle jets from from the facility from 2016, with output of 40 to 50 planes annually by 2018.

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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