Paris worried at US inroads

The French defence ministry is commissioning a study to assess the risks to the French and European defence industries of US companies and investment funds acquiring control of European groups involved in defence activities.

Michele Alliot-Marie, the French defence minister, told the French newspaper Le Monde at the weekend she was "preoccupied" by the interest US investment funds were showing in European defence companies.

While it was "perfectly normal" for US companies to win European contracts, she was worried over the risks for European defence technologies and exports if companies came under US control. French defence groups needed to be more vigilant in future dealings with US companies.

Her decision to launch a study on the issue reflects the heightened climate of suspicion between Paris and Washington following the two countries' deep divisions over the war in Iraq.

Mrs Alliot-Marie timed her statements to coincide with the start of the Paris Air Show, shunned by top US defence officials and the chief executives of leading companies.

France has also become concerned over the European activities of the Carlyle group, the private equity fund it suspects of close links with the Bush administration. Carlyle is expected to finalise this week its acquisition of a controlling stake in FiatAvio, the Italian aero-engine group being sold by the Fiat car group for about ?1.6bn ($1.9bn) to help pay off its debts.

The FiatAvio deal, in which the Italian state-controlled Finmeccanica defence and engineering group will take a 30 per cent minority stake with Carlyle holding the 70 per cent majority, will have to be approved by the Italian defence ministry, which has contracts with the company...

Source : Financial Times, 16/06/2003.