Brussels, 07/07/2008 (Agence Europe) - The euro's appreciation compared to the dollar and, to a lesser extent, the rise in fuel prices are challenges for the aeronautics and defence sector in Europe and could have an adverse effect on employment in the sector, said the representatives of the Aerospace and Defence Industries Association of Europe (ASD) at a conference in Brussels on 3 July. While the European Central Bank (ECB) was announcing, in Frankfurt, its decision to raise interest rates (EUROPE 9696), the ASD joined the ranks of those who are cynical about this policy, sounding a note of caution that a strong euro could entail relocation and, because of this, job losses on the European market. Speaking before the press, ASD President Åke Svensson, announced his intention to meet ECB officials in the near future to discuss the euro's rate of exchange compared to the dollar.
Mr Svensson told the press that the euro's strength compared to the dollar has had a direct impact on the competitiveness of European aerospace and defence products on the global market. He pointed out that every time the dollar devalues 10 cents compared to the euro this entails losses of beneficiary margins of one billion euro for the largest companies such as Airbus. The biggest losses have occurred in the aeronautic and space industry where prices are in euros but which sell in dollars. “The ASD will continue to seek the support of the European Commission and of other European institutions so that they recognise and react to market distortion caused by currency volatility”, he said. He explained that the consequences of currency volatility are serious for industry and the loss of profits that arises from this has a direct impact on the ability of companies to invest in research and innovation. He went on to say: “Manufacturing companies have found a single remedy for currency volatility” which is the establishment of “new installations in North America (in the dollar zone) or in the emerging countries of Asia” where production costs are lower.
As far as the rise in fuel prices is concerned, Mr Svensson stressed that the impact of this change in Europe has been “slightly attenuated by the strength of the euro”. “This is not a satisfactory solution”, he said, however, calling for more effective instruments to be set in place in areas such as energy, taxation, and the distribution of goods, as well as measures against fuel price speculation. François Gayet, ASD Executive Director, confirmed that, in order to avoid losses, companies tend to relocate their activity either to Asia where “there is a clear demand” or “towards the dollar zone”, not only in the United States but also, for example, to Mexico (for more details, consult Mr Gayet's interview in our specialised publication “Europe Diplomacy and Defence”). Such a situation could gradually lead to a significant loss of jobs in Europe, he warned. He also pointed out that research and development (R&D) was the “key factor to competitiveness” and deplored the fact that it is still under-financed at European level.
Presenting the results of the defence sector for the year 2007 (combining land and naval systems, military aircraft and avionics), Mr Svensson said he thought that it had been a “satisfactory” year with turnover 4.7% up on the previous year. The area of defence land systems showed growth in both turnover and employment (3.6% and 2% respectively), largely driven by “activities in Germany”, with good results achieved by the Krauss companies - Maffei Wegmann and Rheinmetall, “and in the UK” (with the success of armoured vehicles produced by BAE Systems). The area of defence naval systems showed a 6.3% increase in turnover compared with 2006, with “important shipbuilding programmes” in a number of countries, including the UK, where the Royal Navy awarded a €5.7 billion contract for the construction of two aircraft carriers to the consortium formed by the BAE Systems-VT Group joint venture and Babcock; Germany, where the navy ordered four frigates from a consortium led by ThyssenKrupp Marin Systems, with delivery of the first unit scheduled for 2014; and Italy (a submarine destroyer). (A.By./transl.jl/rt)