There was a HUGE shocker/ bomb-shell ($1.35 for the witty pun) dropped today relating to the defense industry. EADS, the aviation company based in the Netherlands that makes Airbus jets and Eurocopters was in merger talks with BAE Systems (British Areospace), which is based in London, and is involved in F-35 production, the Eurofighter Typhoon, as well as the Bradley IFV. The resulting company would have been the largest defense company in the world. (US Lockheed-Martin is currently the largest) I think generally, anyone who was following this story took it for granted that the merger would happen. However, it was announced today that the entire proposal collapsed, and it looks like it was mostly due to German nationalism(!) By itself, the idea of German nationalism is interesting to ponder in 2012. The merger fell apart because Germany was unwilling to cede any governmental control over the newly merged company. To be fair, part of that was simple culture shock. British BAE is a shareholder/traded company, while EADS is more of a governmental/nationalized company, but the larger issue was that the German government wanted to keep control. Some interesting points emerged from the process. Weapons sales alone account for a whopping 95% of BAE systems total business (for comparison, arms development accounts for 75-78% of Lockheed's total). Also, and perhaps more importantly, half of all of BAE's sales go to the US military. Now, the talk is that BAE Systems is looking to merge with a US company, of which Boeing would be a good fit. If BAE merged with Boeing Defense, then it would become the world's largest defense company. The downside for the EU is that the the newly merged company would have accounted for 250,000 defense jobs across Europe, but at least any potential jobs under a US-BAE merger would be split between England and the US.