Paris Air Show Displays Prowess

On weak dollar, US jetmakers snatch contracts from Europeans

IN the headlines and in the skies over Paris's Le Bourget airport, it looks like a big power matchup: the United States vs. Europe.

In the air, the latest-model fighter planes screech by - inverted - pull to a 70 degree angle of attack, roll, climb, reverse direction, then fly out straight and accelerate, leaving trails of twisted gray smoke to mark their passing. Lumbering supertransports do implausibly tight turns overhead, and attack helicopters appear to fly upside down.

On the ground, it's an "American offensive," according to the French daily Liberation, as the 41st Paris Air Show opened this week.

On the wings of a weak dollar, American companies are making inroads in European markets and snatching the big contracts needed to maintain jobs in an industry that has too many planes and too few buyers.

* President Clinton personally intervened to secure a $6 billion Saudi order for the Boeing Company and McDonnell Douglas Corporation. The White House announced the order in February 1994, and it is all but confirmed, according to reports released this week.

* In April, the Dutch government opted for 30 US McDonnell Douglas Apache combat helicopters over European rival Eurocopter's Tiger.

* According to British press reports this week, the Apache is favored to win a key British Army contract for 90 combat helicopters. After the Saudi purchase, the British order is the key military contract of the season, expected to be decided in July.

But there are sharp disagreements among industry leaders in Europe and the United States over how to face up to this competition.

Some industry leaders, led by the French, call for a "European preference" in contracts, to combat what they see as aggressive US support for its industry abroad and a seven-year US "Buy America" strategy at home. Others reject such strategies and, instead, aim to build partnerships that ensure a balance of jobs and contracts across national boundaries.

'Disappearing' industry

Days after the April 7 Dutch decision in favor of the US Apache helicopter, the president of France's Aerospatiale warned that the European aeronautics industry is in danger of "disappearing." Serge Dassault, president of the French aeronautics trade association, called for a "European preference," especially in military purchases.

The stakes are especially high in France, which has lost close to 30 percent of its industrial employment in 20 years, according to a report released this week by the French economic institute Rexecode. Jobs in France's aeronautics sector have dropped 15 percent in three years.

"Europe must be preferred in our aeronautic choices," French President Jacques Chirac said when he inaugurated the Paris Air Show last Saturday. "Without European cooperation, our continent's industry would have disappeared long ago in the absence of a critical scale necessary in a world market."

After three years of deficits, Aerospatiale executives had hoped to balance accounts this year, but they had not counted on the impact of a weak dollar, which they say has boosted the competitiveness of American firms by 15 percent over the last six months.

But for Eurocopter spokesman Arnauld Hibon, the key to competition for the Dutch contract was not the weakness of the American currency, but the strength of its culture. "Dutch military officials trained in the US. They are familiar with US equipment. They like the United States and were treated well there. When the buyer expects and knows a certain kind of equipment, how do you compete with that?"

A better product

McDonnell Douglas spokesmen insist they are winning competitions with Eurocopter rivals because they have a better product. But they also emphasize the importance of negotiating "offset packages" that ensure benefits to industries outside the US.

"In the Dutch helicopter contract, we obligated ourselves to provide 100 percent plus of the full contract price to Dutch companies," says McDonnell Douglas spokesman Kenneth Jensen. "The US Commerce Department also spoke for us with the British and Dutch governments."

The value of such offset packages is likely to be crucial in the British decision. Potential British contractors on the project insist that European versus US labels obscure the dynamics of this competition.

"One parameter in the British decision may be that the engines have to be built in Britain," says David Hall, spokesman for Rolls-Royce Military Aero Engines Limited, a potential partner for McDonnell Douglas on the Apache project. "The Apache would be built in Westlands [Britain]; the Eurocopter would be built in Europe, not the United Kingdom."

Many US firms represented at the Paris Air Show see partnerships as crucial to their future.

"I had my doubts about coming under an American label," said Raymond Crucet, spokesman for Vickers Inc., a manufacturer of hydraulic equipment represented at the air show. "I see our company as a global company."

The US Commerce Department announced a new strategy this week to help such US suppliers to develop partnerships with European firms. "Showcase Europe" aims to encourage European corporations to increase their purchases from American suppliers.

"Our first effort is to try to increase US content on the Airbus program," says Peter Frederick, who coordinates the aeronautics effort out of the US Embassy in Paris. "Depending on the aircraft, American manufacturers contribute from 8 to 45 percent of the content of the Airbus program."

"We're not trying to destroy European industry," he says. "We want to participate. We want American companies to become more global."

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