Still a work in progress

When the Indian Government announced the termination of the defence department’s 2010 contract with Anglo-Italian firm AgustaWestland on January 1, it came as little surprise to anyone.

India had been warning about the future of the contract for nearly a year, ever since the arrest of the CEO of the parent firm, Finmeccanica, as well as the head of the subsidiary in February last year.

In August, the Comptroller and Auditor General published a scathing report on the deal and the defence department’s failure to stick to rules set out in the tender.

While there had been murmurings about troubles with the deal ever since 2011, there’s little doubt that things would never have progressed to where they have, had Italian prosecutors not chosen to go for the headline grabbing prosecutions.

The arrests in February came a week before elections, and after a flurry of other scandals (in the same month the CEO of Italian energy firm, Eni, came under investigation over a contract in Algeria, while the world’s oldest bank, Monte dei Paschi, was rocked by scandal). Italy’s Prime Minister Mario Monti pledged to do whatever it took to “clean up” Finmeccanica.

The Italian approach to the case is in marked contrast to the British one.

The UK government, while pledging to provide India’s own investigation into the matter with whatever help it needed, also spoke out strongly in support of the company — which employs around 3,000 at a plant in southern England. Most recently, in December, the UK Business Secretary, Vincent Cable, attended the signing of a deal between AgustaWestland and Norway.

The collapse of the helicopter deal provides a reminder of the imperfect nature of Europe’s joint projects.

Despite lofty intentions and sound business strategies, they can fall foul of the divisions and tensions that remain steadfastly at national borders, or simply the vagaries of domestic politics or campaigns.

A classic example was the failure of talks between the cross-European aerospace and defence firm EADS (now the Airbus Group) and Britain’s BAE Systems.

While a merger between the two was seen as essential for the European defence industry to combat a challenging fiscal environment and competition from rivals abroad, it foundered amid political wrangling between France, Britain and the UK.

While France, which held a large stake in EADS, was eager to maintain an identical level of influence in the new entity, Germany balked at having a smaller level of influence than its neighbour, and Britain questioned the need for any state involvement at all.

Concerns about job losses and the location of the headquarters also weighed in.

Contracts have also been scuppered when political leaders have had to choose between pan-European interests and purely domestic ones.

France’s decision to throw its weight behind Dassault Aviation’s Rafale fighter aircraft instead of the Eurofighter, a joint venture of BAE Systems, EADS/Airbus Group and Finmeccanica, drew criticism from the other partner countries.

All the more so given the success that the Rafale has had, including beating competitors such as the Eurofighter, for a $10 billion combat aircraft contract in India.

Eurofighter have also been ruled out of a contract in the UAE, for which the Rafale remains the forerunner.

While defence may be particularly vulnerable to the intrusions of domestic politics, other areas have not been immune. Eurostar, the joint Belgian, French, British rail project linking the three countries’ capital cities, has been beset by political battles.

Eurostar International found itself mired in controversy and several years of litigation (that ended in 2012) after awarding a contract to build high-speed trains worth hundreds of millions of pounds to German engineering firm Siemens rather than its French rival Alstom.

The full weight of the French government was behind Alstom’s attempt to suspend the contract (France’s national rail network SNCF is the largest shareholder in Eurostar), but a UK high court eventually returned a verdict in favour of Siemens.

Other examples include the failed attempt by Aventis, the French pharmaceutical company, in 2004 to court a takeover by Switzerland’s Novartis to stave off a hostile bid from its domestic rival Sanofi-Synthelabo.

While Germany supported the Novartis takeover, it collapsed in the face of strenuous opposition from the French government.

At times, things can proceed more smoothly. The Airbus commercial aircraft manufacturing division and its military aircraft manufacturing subsidiary are examples of successful European partnerships where politics has largely been left at the door.

While the final assembly line is in France, other partner governments have strongly pushed its case too. Last year, China signed a deal for 50 Airbus planes and an agreement for a plant in China during German Chancellor Angela Merkel’s visit, while in late 2013 Dubai signed a similar sized deal for A350s during British Prime Minister David Cameron’s visit.

Whether the success of the commercial aircraft division can be replicated following the restructuring of the parent Airbus Group in January, remains to be seen.

It is certainly being pitched as a revamp that will do away with the political shackles that have hindered the company in the past, largely because it will focus on commercial operations, rather than defence.

Still, within Europe, examples of convivial cross-border partnership seem the exception rather than the rule. Across Europe, grand visions of economic cooperation and entrepreneurial matrimony readily succumb to competing national imperatives.

The joint venture may seek to take wing, but all too often domestic considerations, whether relating to jobs or cultural sensitivities, seem poised to intervene.

Fitfully, and with ever a nod to persisting national rivalries, the imperfect European project lumbers on.