13 October 1998

BAe and Daimler close to link-up

British Aerospace and Daimler Benz Aerospace are edging closer towards an agreement on a link-up, though both companies yesterday attempted to distance themselves from speculation about early developments.

Senior executives from the two groups have been involved in a continuous dialogue about an alliance that industry analysts feel could result in the creation of a new holding company early next year, with BAe in the driving seat.

Executives say little has changed in recent weeks and a company statement yesterday said BAe was continuing to talk with all the leading European defence and aerospace companies, including Daimler Benz. The statement said:"It is too early to say whether any of these discussions will result in definitive proposals."

Daimler Benz said it did not rule out a two-way alliance but, with its eye on Paris, said that it still favoured a three-way link-up involving Aerospatiale, the French state-controlled group. French government officials reacted coolly to the latest suggestions of an Anglo-German alliance. The feeling in Paris was that they were aimed at trying to force further concessions to reduce state involvement.

Both BAe and Daimler Benz are reluctant to embrace a French partner with a government as shareholder, although they acknowledge that a restructuring programme has gone a long way towards meeting their reservations.