Merger Would Strengthe En Us En; Boss of Flintshire Factory Says Propose E Ed Defence and Aerospace Alliance Would Help Both Companies M to Take on Americans. MartinWilliam Ms Reports

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THE creation of a PS31billion defence and aerospace behemoth could depend on how many political demands are made on EADS and BAE Systems. Airbus boss EADS (European Aeronautic, Defence & Space), which employs more than 6,000 people in Flintshire, is pushing to join forces with the Lancashire-based company, but obstacles have already been put in their way.

Jobs at the Broughton factory are secure, as the deal seems to be focused on building a group 60% owned by Franco-German-Spanish EADS and 40% by BAE, which would make them the world's largest arms firm ahead of Lockheed Martin and grant Europe an all-round aerospace player rivalling Boeing.

The possibility of a new European defence giant is at a delicate political phase, with national concerns growing over security and jobs.

After the companies laid out basic proposals to create the world's biggest arms firm, it is now the turn of British, French, German and Spanish governments to put forward demands in exchange for their backing.

Some will have been displeased with reports which this week revealed the united business could be called 'Airbus', and each government is likely to have a list of concerns ranging from German fears over jobs to French worries over the loss of state influence or Britain''s need to ensure the creation of a European supergroup... all of this and making sure BAE's solid sales in America and reputation remains untarnished.

A source this week said the companies were ready to listen to European governments, but stressed their responses could "make or break" the deal.

EADS and BAE declined to comment on the political factors involved in completing the merger.

However, an EADS spokesman did say they were in "good, advanced discussions" with the governments concerned.

He added: "When we have their concerns and requests on the table, we and BAE will jointly look at them and determine whether they can be reasonably accommodated within the governance structure we have in mind."

New Airbus President and CEO Fabrice Bregier hopes the union will get the green light and believes a combination of the two companies would "strengthen" them.

He said: "An EADS and BAE Systems combination is not expected to affect Airbus and its employees in daily operations. Airbus'' organisation, product plans, engineering, manufacturing and strategies for the future should continue as is."

Mr Bregier added: "Airbus has a traditional and long-standing relationship with BAE Systems.

"Until 2006 Airbus was jointly owned by EADS (80%) and BAE Systems (20%). Several thousand of today''s Airbus team members came to us as BAE Systems employees and it remains an Airbus supplier with whom we collaborate on R&D projects.

"Our companies are neighbours in key locations such as the UK, where many of the 10,000 UK. Airbus professionals work in close proximity with the 35,000 employees of BAE Systems."

German Chancellor Angela Merkel said on Monday that her government was studying the merger.

"We are discussing and evaluating the EADS-BAE merger plans and we are in discussions with others on this. We will give an answer within the deadlines," Merkel told news reporters.

Under British stock market rules, the two companies have until October 10 to announce whether they plan to go ahead.

Weekend reports highlighted the risks to BAE''s US defence sales if France''s role encroaches on Britain''s "special relationship" with the United States, where EADS recently clashed with a defence lobby.

Britain''s former First Sea Lord, Admiral Lord West, warned that the BAE-EADS deal would cost jobs and threaten Britain''s security if it went ahead, according to reports. …