Daimler-Benz Aerospace AG (DASA), though existing for just under a decade, played a pivotal role in transforming Germany’s aviation sector into a powerhouse within the European aerospace industry. As an affiliate of the renowned German automotive giant Daimler-Benz, DASA became a leading force in designing and manufacturing a diverse range of aircraft, from military jets and missiles to helicopters, spacecraft, and commercial airliners. Notably, DASA’s subsidiary, Deutsche Airbus, held a significant 37.9 percent stake in the pan-European Airbus consortium, highlighting its central position in collaborative aerospace ventures. Under the leadership of Group President Hartmut Mehdorn in the mid-1990s, DASA navigated the complexities of achieving consistent profitability in a dynamic and demanding industry. Formed in May 1989 through the strategic merger of Messerschmitt-Bölkow-Blohm (MBB), Dornier GmbH, Motorenund Turbinen Union (MTU), and Telefunken System Technik (TST), DASA quickly established itself as a major player, acquiring a controlling 80 percent interest in Deutsche Airbus by December of the same year.
The Historical Roots of German Aerospace and DASA’s Emergence
The story of Daimler-Benz Aerospace is deeply intertwined with the evolution of the German aerospace industry in the aftermath of World War II. Germany held a position of influence in aircraft manufacturing before World War I, demonstrating significant innovation. Even after the war, despite restrictions on military development, German companies continued to contribute to both civilian and military aviation advancements. The period leading up to World War II further showcased Germany’s advanced technical and production capabilities in the field.
However, the aftermath of World War II severely hampered German aerospace companies. As noted by David Weldon Thornton in Airbus Industrie, post-Third Reich Germany faced prohibitions on developing its own aviation capabilities. While the Cold War period offered some revival, particularly in West Germany, the numerous German aerospace firms lagged behind their counterparts in Great Britain and France for much of the mid-20th century.
Internal competition and a lack of consolidation within the German aviation industry hindered its ability to compete on a larger scale. Unlike the United States, Britain, and France, Germany was slower to consolidate its aerospace sector, with significant mergers only beginning in the mid-1960s. The West German parliament’s declaration in 1968 to incentivize mergers through subsidies aimed to create larger, more competitive entities, but by then, American giants like Boeing, McDonnell Douglas, and Lockheed had already established dominance in the global commercial aircraft market.
To counter this, and to compete more effectively, the governments and aerospace companies of France, Great Britain, and Germany began exploring collaborative approaches. These discussions culminated in the formation of G.I.E. Airbus Industrie in December 1970, a consortium based in France. Founding members included France’s Aerospatiale and Deutsche Airbus GmbH, a German joint venture comprising Messerschmitt, Dornier, Blohm-Hamburger Flugzebau (HFB), Vereinigte Flugtechnische Werke (VFW), and Siebel. Each held a 20 percent stake in the Airbus venture, initially formed in 1967.
MBB, a future component of DASA, was created through the merger of Messerschmitt and Bölkow, which had previously merged with Blohm-Hamburger Flugzebau (HFB) in 1968. By the late 1980s, MBB and VFW were the remaining German stakeholders in Deutsche Airbus. Dornier, another key aircraft manufacturer that would later join DASA, was known for its independent stance, as highlighted in Thornton’s 1995 analysis. Throughout the 1970s, German firms participated in various European collaborations, but their smaller size often relegated them to secondary roles, requiring them to make significant compromises.
DASA’s Formation in the Late 1980s: A Strategic Move by Mercedes-Benz
In 1987, Daimler-Benz, the parent company of Mercedes-Benz, initiated a strategic move to acquire and consolidate the major players in the German aerospace industry. Edzard Reuter, then-leader of Daimler-Benz, envisioned DASA as a means to diversify the company beyond its core automotive business of luxury cars and heavy-duty trucks. He also believed that the aerospace sector could offer valuable technological and engineering synergies with the automotive division, fostering innovation across both domains, potentially influencing future Mercedes-Benz vehicle designs and technologies. Crucially, the consolidation was aimed at restoring Germany’s aerospace industry to its former prominence on the global stage, echoing Mercedes-Benz’s own ambition for global leadership in automotive engineering.
Daimler-Benz successfully acquired controlling interests in MBB, Dornier, and MTU, merging them with its electronics unit, Telefunken System-Technik (TST), in May 1989. That December, the company further solidified its aerospace ambitions by purchasing a controlling 80 percent stake in Deutsche Airbus. These entities were then organized under Daimler-Benz Luftund Raumfahrt Holding (Daimler-Benz Aerospace Holding), with Daimler-Benz holding an 85 percent share and state and local governments owning the remainder. An attempt to incorporate shipbuilding interests was blocked by antitrust authorities.
Jürgen E. Schrempp, previously a leading executive in Mercedes-Benz’s truck division, was appointed to lead the newly formed DASA. Schrempp declared his objectives to reduce Airbus’s reliance on government subsidies and to transform DASA into a profitable, bottom-line-focused company, mirroring the efficiency and profitability standards of Mercedes-Benz. In a 1990 interview with Aviation Week & Space Technology, Schrempp expressed his ambition to elevate DASA, and by extension the German aerospace industry, from a supporting role to an equal partnership in the European aerospace landscape.
However, the integration of these diverse companies into DASA faced political and cultural challenges. Pre-existing rivalries among the merged entities persisted. Furthermore, the Federal Cartel Office initially opposed Daimler-Benz’s acquisition of Messerschmitt-Bölkow-Blohm, requiring Daimler-Benz to seek direct approval from the Kohl administration. Concerns about the concentration of power, government subsidies, and contracts were raised by antitrust officials and other German aircraft manufacturers. Some observers even questioned whether Daimler-Benz had overextended itself, taking on too much too quickly.
DASA’s first year as a fully consolidated corporation was 1990, but complete integration took until 1993. Despite Airbus Industrie achieving its first-ever profit in 1993, losses at Deutsche Airbus contributed to DASA’s DM135 million deficit on DM12.5 million in revenue. A profit from Deutsche Airbus in 1991 had briefly boosted DASA to a net income of DM50 million (US$31.25 million), but sustained profitability remained elusive.
Several factors converged to challenge the German aerospace industry in the early 1990s. European economic unification reshaped the continental market. The end of the Cold War and German reunification led to reduced military budgets and shifts in government subsidies towards rebuilding East German infrastructure. Military procurement in Germany declined sharply, by 60 percent in the early 1990s, and the commercial aviation market also weakened as airlines struggled with profitability. These market pressures necessitated further consolidation and intensified competition within the industry.
In response to these challenges, Schrempp pursued strategies focused on risk and cost sharing through joint ventures, particularly for developing new aircraft. The European Fighter Aircraft (EFA) project, involving British, Italian, Spanish, and German manufacturers, exemplified this approach. Despite the German government’s 33 percent stake and initial commitment, there were threats to withdraw and a reduction in aircraft orders in 1992. Defense Minister Rune even announced Germany’s withdrawal, but quickly retracted the statement. While Schrempp aimed to reduce DASA’s reliance on military contracts, he insisted on Germany’s continued participation in EFA, emphasizing the potential loss of jobs and technological expertise, as he conveyed to Interavia/ Aerospace World. DASA and Germany remained involved when the EFA conducted its first test flight in 1994.
Company Vision
“Because we are a company active in the field of high technology, the way we see the future determines our entrepreneurial activity. Decisions that we take today will affect every aspect of our lives in the 21st century. At Daimler-Benz Aerospace we are committed to securing the wellbeing of mankind in the world of tomorrow.”
Beyond the EFA project, Schrempp aimed to decrease DASA’s dependence on the shrinking defense market from 45 percent to 25 percent of sales by 1997. To achieve this, he strategically increased DASA’s presence in civilian aircraft through the US$393 million acquisition of a controlling interest in the Dutch aircraft manufacturer Fokker in 1992. This acquisition, following lengthy negotiations, provided DASA with enhanced access to the American market via Fokker’s strength in regional aircraft (80- to 100-seat). Despite the capital infusion, Fokker faced a US$77 million loss in 1993, leading to the resignation of Chairman Jan Nederkoorn. In 1994, Fokker initiated its third major reorganization in as many years, cutting production and reducing its workforce significantly.
These trends were industry-wide. DASA reduced its workforce from 83,605 in 1991 to 81,872 in 1993, with further planned reductions and plant closures. Despite these efforts, DASA incurred substantial losses in 1992 and 1993, exceeding DM1 billion (US$620 million), despite revenue growth. These losses fueled speculation about Daimler-Benz’s long-term commitment to its aerospace division. Analysts in the United States and Europe, as noted by Anthony Velocci Jr. in Aviation Week & Space Technology, questioned Daimler’s dedication, with some German observers predicting a potential sale of the aerospace business. However, a sale did not materialize.
Schrempp and Reuter believed that increased cooperative ventures were key to DASA’s turnaround. However, Judy Bolinger, an analyst at Goldman Sachs, proposed a three-pronged strategy in a 1993 Aviation Week & Space Technology article: improving MTU’s market position, downsizing to align with smaller markets, and focusing on core competencies to reduce diversification.
Principal Subsidiaries
Daimler-Benz Aerospace Airbus GmbH; Dormer Luftfahrt GmbH (Germany); Eurocopter S.A. (France); Dornier Satellitensysteme GmbH (Germany); LFK-Lenkflugkörpersysteme GmbH; Dornier GmbH; Elekluft GmbH; E.S.T.-Entsorgungsund Sanierungstechnik GmbH; Bayern-Chemie, Gesellschaft fur flugchemische Antriebe mbH; TDA Armements S.A.S. (France); CMS Inc. (U.S.). Daimler-Benz Aerospace also listed subsidiaries in Austria, France, Greece, Spain, Portugal, Italy, Mexico, China, South East Asia, Turkey, the United Arab Emirates, Belgium, Brazil, India, Japan, Korea, South Africa, and the United States, reflecting its extensive global footprint.
Further Reading
Banks, Howard, “Good-Bye to Cost-Pius,” Forbes, November 23, 1992, p. 52.
“Consortiamania,” The Economist, May 23, 1992, pp. 72-73.
Covault, Craig, “German Industry Confronts Crisis,” Aviation Week & Space Technology, January 31, 1994, pp. 44-48.
Davidson, Brian, “Positioning DASA for the Future,” Interavia/Aerospace World, June 1993, pp. 26, 28, 32.
Hill, Leonard, “Fokker/DASA: Finally A Deal,” Air Transport World, June 1993, p. 26.
——, “Nederkoorn’s Downfall,” Air Transpon World, April 1994, p. 58.
McIntyre, Ian, Dogfight: the Transatlantic Battle Over Airbus, London: Praeger, 1992.
Mecham, Michael, “Deutsche Aerospace Wants to Grow Out of Its ‘Junior Partner’ Role,” Aviation Week & Space Technology, June 4, 1990, pp. 21-22.
——, “Deutsche Airbus Moves Into Black; DASA Makes $31 Million as Result,” Aviation Week & Space Technology, June 8,1992, p. 70.
——, “Deutsche Airbus Renamed; DASA Retires MBB Identity,” Aviation Week & Space Technology, October 12, 1992, p. 64.
——, “Germany Weighs Cost of Unification as Deutsche Aerospace Seeks Expansion,” Aviation Week & Space Technology, September 3, 1990, pp. 69, 73.
——, “Market Forcing Regionals to Think ‘Consolidation’,” Aviation Week & Space Technology, September 7, 1992, pp. 69-71.
Moorman, Robert W., “A Finger in Every Pie,” Air Transport World, April 1994, p. 54.
“On the Runway,” The Economist, April 8, 1989, pp. 72, 76.
Reed, Arthur, “Boeing & DASA: Sound, Fury and What?” Air Transport World, February 1993, p. 31.
——, “New Day Dawning in Deutschland,” Air Transport World, March 1993, p. 82.
Sparaco, Pierre, “Facing Tough Times, DASA Looks Long Term,” Aviation Week & Space Technology, May 31, 1993, p. 95.
Sutton, Oliver, “Restructuring DASA’s Aircraft Group,” Interavia Business & Technology, May 1994, p. 31.
Templeman, John, and Patrick Oster, “The Runway is Clear for Deutsche Aerospace,” Business Week, May 10, 1993, pp. 39-40.
Thornton, David Weldon, Airbus Industrie: The Politics of an International Industrial Collaboration, New York: St. Martin’s Press, 1995.
Velocci, Anthony L., Jr., “Daimler Stands By DASA Despite Mounting Losses,” Aviation Week & Space Technology, November 1, 1993, pp. 61-62.
Verchere, Ian, “Can DASA Afford to Quit EFA?” Interavia, June 1992, p. 17.
——, “Germany Tempers Its Ambitions,” Interavia, June 1992, p. 13.
—April Dougal Gasbarre
