Speaking of management destroying value: EADS & BAE
2012/09/13 Leave a comment
Might be getting a little out of my wheelhouse today, but BAE and EADS are both unmanned aircraft manufacturers, if relatively small time players thus far. News of their merger is HUGE in the defense world. But take a look at what their stock prices are doing (EPA:EAD) and (LON:BA).
With almost a day to digest the announcement, it looks like BAE’s stock price has settled about 2-3% higher (or almost within the range of previous variation) after some initial shenanigans, but EADS’s stock is down about 15%. The market does not look favorably on this merger. This is a reasonably common pattern to see the acquiring company’s stock tank, but still I think that it provides a strong comment to those wringing their hands about America’s so-called decline in aerospace.
It appears that the A380 has been a commercial disaster and that being a Western defense contractor without reliable access to the U.S. market (however unjustified the tanker competition rules may be) is not a good idea. I’m not sure that tying up with BAE will magically fix these problems–though if they really can eliminate €1B / year in overhead, there might be something to do.
However, it seems that the real shortage for creating value is management attention. I’m not sure how becoming bigger and cutting more overhead is really going to change things at the new B/EADS. Maybe if they focused on opening European airspace to unmanned aircraft faster than the U.S. is doing and came out with cheap and innovative products with broad military and commercial applicability… nevermind.