France, Germany clash over EADS-BAE headquarters: sources

Tue Oct 2, 2012 10:13am EDT
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By Gernot Heller and Tim Hepher

BERLIN/LONDON (Reuters) - France and Germany have collided over the location of the headquarters for a new aerospace giant to be formed from a planned merger of Europe's EADS and Britain's BAE Systems (BAES.L: Quote), sources familiar with the matter said on Tuesday.

France wants the group's headquarters to be based in Toulouse, its southwestern aerospace capital where the Airbus planemaking subsidiary of EADS is based, but Germany is pressing for the group to be headquartered outside Munich, they said.

The apparently incompatible demands constitute one of the hurdles that must be addressed in tough negotiations now getting under way in private, after a very public war of words about the creation of a new global defense group broke out on Monday.

Shareholders, executives and politicians have clashed over the 60:40 merger ratio in favor of EADS, state participation and now a behind-the-scenes battle over the headquarters as talks go down to the wire ahead of an October 10 deadline.

"This is just the start; everyone pitches for the maximum they can get and then you have negotiations," said a source close to talks between firms, governments and key shareholders.

UK arms firm BAE Systems (BAES.L: Quote) and EADS, controlled by public and private interests in France and Germany with Spain as a junior partner, are in talks to create Europe's answer to U.S. aerospace giant Boeing (BA.N: Quote) with a value of $45 billion.

The squabbling over headquarters - echoing lobbying between countries for the right to host international organizations - has emerged as a sensitive issue of national pride as Germany fights to retain its standing in one of its flagship projects.

EADS was created from a merger in 2000 and quickly became a further symbol of Franco-German integration alongside the euro, but within half a decade it had become the focus of industrial tensions between the two main euro zone economies.   Continued...

Visitors look at aircraft models at the EADS booth during the ILA Berlin Air Show in Selchow near Schoenefeld south of Berlin, September 13, 2012. REUTERS/Tobias Schwarz