UPDATE: Aerospace Sector Will Be Hurt By Financial Crisis
Friday October 10th, 2008 / 18h22
(Adds detail, CEO quotes) PARIS -(Dow Jones)- Aerospace companies won't escape the effects of the ongoing credit crisis, even though the industry entered it in a robust condition, European executives said Friday. The crisis and global economic slowdown that's likely to result "will have a serious, serious impact on our industry," Cobham PLC (COB.LN) Chief Executive Allan Cook told a group of journalists. Speaking after the annual congress of the Aerospace and Defense Industries Association of Europe, Charles Edelstenne, chairman of French military and business jet builder Dassault Aviation (12172.FR), said the credit squeeze and the slower economic activity will rub off on all sectors of the aerospace industry. Suppliers of military equipment will suffer as governments divert defense spending to support other parts of their economies, he said, and demand from end-users such as airlines and aircraft leasers may dwindle if they can't obtain credit, he added. Cook, who Friday took over the presidency of the Aerospace and Defense Industries Association of Europe, or ASD, said the mood at the conference "wasn't one of despair," although the sector "clearly won't be immune from the impact of the financial turmoil." The industry has large order backlogs that will keep its factories busy for years, he said, and companies today "are in excellent shape." Cook said he doesn't believe the rarity of credit will cause the ongoing consolidation in the industry to grind to a halt. Alliances will still happen if they make good business sense, he added. Edelstenne said, however, he doubts the management of a strong company whose share price has been halved would be interested in selling at the currently depressed valuations. Cook said the uncertainty over the financial crisis is draining morale in the industry. "It's a distraction. People can't focus on programs when they're worried about their mortgages, their pensions and their investments," he said. Separately, credit insurance company Euler Hermes said Friday that airframe builders are unlikely to feel the full effect of the financial turmoil until 2010, thanks to large order backlogs that will keep production lines moving. A downturn is likely thereafter, however, the company said, while aerospace suppliers are likely to be affected this year. -By David Pearson, Dow Jones Newswires; +331 4017 1740, david.pearson@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=pz0rU6jVsz%2FDfuqi3KLR1g%3D%3D. You can use this link on the day this article is published and the following day.
