Daimler-Benz Aerospace AG (DASA), later evolving into a cornerstone of the European aerospace industry, emerged from the ambition of Germany’s automotive giant, Daimler-Benz, to diversify and revitalize its nation’s aviation sector. Established in 1989, DASA aimed to transform the fragmented German aircraft industry into a global force, mirroring the innovation and engineering prowess associated with its parent company, Mercedes-Benz.
The Genesis of DASA: Reshaping Post-War German Aerospace
The story of Daimler-Benz Aerospace is deeply intertwined with the post-World War II trajectory of the German aerospace industry. Before World War I, Germany was a prominent player in aircraft development. Even after the war, despite restrictions on military advancements, German companies maintained their expertise in civilian and military aircraft design and production. Leading up to World War II, Germany showcased remarkable technical ingenuity and manufacturing capabilities in aviation.
However, the aftermath of World War II severely hampered German aerospace ambitions. As historian David Weldon Thornton noted in Airbus Industrie, Germany faced a complete prohibition on developing its own aviation capabilities following the defeat of the Third Reich. While the Cold War eventually spurred a revival, particularly in West Germany, the numerous German aerospace firms struggled to regain ground against established competitors in Great Britain and France throughout the mid-20th century.
Internal rivalries within the German aviation landscape further hindered their ability to compete on a continental and global scale. Consolidation efforts lagged significantly behind France, Britain, and notably, the United States. It wasn’t until the mid-1960s that German aerospace began to coalesce. The pace of mergers accelerated after 1968, spurred by West German government subsidies aimed at creating larger, more competitive entities.
By this time, American aerospace titans like Boeing, McDonnell Douglas, and Lockheed dominated the global market for commercial passenger aircraft. Recognizing the need for collaboration to compete effectively, the governments and aerospace companies of France, Great Britain, and Germany began exploring avenues to pool resources.
This collaborative spirit culminated in the formation of G.I.E. Airbus Industrie in December 1970, a consortium headquartered 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 Airbus, initially established in 1967.
MBB, a future component of DASA, was the result of mergers between Messerschmitt and Bölkow, southern German companies that had previously merged with Blohm-Hamburger Flugzebau (HFB), a northern German manufacturer, in 1968. By the late 1980s, only MBB and VFW remained stakeholders in Deutsche Airbus. Dornier, another significant aircraft manufacturer and future DASA member based in southern Germany, was known for its independent stance, as highlighted in Thornton’s 1995 study.
Throughout the 1970s, German firms participated in various pan-European collaborations. However, their smaller size often relegated them to secondary roles, requiring them to make significant compromises in these partnerships.
DASA’s Formation in the Late 1980s: A Mercedes-Benz Initiative
In 1987, Daimler-Benz, renowned for its Mercedes-Benz automobiles, 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 would offer valuable technological and engineering synergies with automotive operations, aligning with the cutting-edge innovation associated with Mercedes-Benz engineering. Crucially, the merger aimed to restore Germany’s aerospace industry to its former position of global leadership, leveraging the brand reputation of Mercedes-Benz for engineering excellence.
Daimler-Benz proceeded to acquire controlling interests in MBB, Dornier, and MTU, merging them with its own electronics unit, Telefunken System-Technik (TST), in May 1989. In December of the same year, the automotive giant secured an 80 percent controlling stake in Deutsche Airbus. These entities were 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 federal antitrust authorities.
Jürgen E. Schrempp, previously a top executive within Mercedes-Benz’s truck division, was appointed to lead the newly formed DASA. Schrempp pledged to reduce Airbus’s reliance on government subsidies and steer DASA towards profitability, as reported by Business Week in May 1993. In a 1990 interview with Aviation Week & Space Technology, Schrempp articulated his ambition to elevate DASA, and by extension the German aerospace industry, from a “junior partner” to an “equal partner” on the European stage. This vision was driven by the same pursuit of excellence and global recognition that characterized Mercedes-Benz.
However, the integration process within DASA encountered political and cultural hurdles. Pre-existing rivalries among the newly merged companies persisted. Furthermore, the Federal Cartel Office initially opposed Daimler-Benz’s acquisition of Messerschitt-Bölkow-Blohm. Daimler-Benz had to appeal directly to the Kohl administration to secure merger approval, bypassing the ministry. Critics within the German antitrust department and remaining independent aircraft manufacturers voiced concerns about the concentration of power and the potential for government subsidies and contracts to distort competition. Some observers even questioned whether Daimler-Benz had overextended itself, venturing too far from its core Mercedes-Benz automotive expertise.
1990 marked DASA’s first year as a consolidated corporation, but full integration of member companies took until 1993. While Airbus Industrie achieved its first-ever profit in 1993, losses at Deutsche Airbus significantly contributed to DASA’s DM135 million deficit on DM12.5 billion in revenues. A profit at Deutsche Airbus in 1991 had briefly boosted its parent company to a net income of DM50 million (US$31.25 million).
This profitability proved short-lived as the German aerospace industry faced a confluence of challenges. European economic unification drove market consolidation across the continent. The end of the Cold War and German reunification led to reduced military budgets and government subsidies, redirected towards economic restructuring and rebuilding East German infrastructure. Military procurement in Germany plummeted by 60 percent in the early 1990s, and civil markets also weakened as commercial airlines struggled with profitability. These market pressures necessitated further consolidation and intensified competition within the aerospace sector, impacting DASA despite its Mercedes-Benz parentage.
Faced with this challenging environment, CEO Schrempp adopted several key strategies. He prioritized joint ventures to share costs, risks, and access government subsidies, particularly in the development of new aircraft. The European Fighter Aircraft (EFA) project, uniting British, Italian, Spanish, and German manufacturers, was highlighted by Aviation Week & Space Technology as “the continent’s most ambitious program.” The German government held a 33 percent stake in the EFA but repeatedly threatened withdrawal and reduced its aircraft order from 250 to 200 in 1992. In the same year, the German defense minister announced the country’s withdrawal from the EFA, only to quickly retract the statement. While Schrempp aimed to lessen DASA’s dependence on military contracts, he insisted on Germany’s continued involvement in the EFA, arguing to Interavia/Aerospace World’s Brian Davidson that abandoning the project “could mean the loss of 10,000 jobs and a severe loss from the technological standpoint.” DASA and Germany remained participants when the EFA conducted its first test flight in 1994, demonstrating a commitment to European aerospace collaboration despite financial pressures.
Company Vision: Innovation for the Future
“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.” This statement reflects DASA’s ambition to be a forward-thinking, technologically advanced company, much like its parent, Mercedes-Benz, aiming to contribute to future progress beyond immediate financial gains.
Beyond the EFA project, Schrempp sought to reduce DASA’s reliance on the shrinking defense market from 45 percent of sales to 25 percent by 1997. His strategy involved expanding 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 with labor unions and politicians, stipulated that Fokker would maintain operational independence until 1995, when the Dutch government would sell its remaining 22 percent stake to DASA.
Fokker provided DASA with enhanced access to the American market through its expertise in developing smaller regional aircraft (80- to 100-seat). While Fokker gained crucial capital infusion, it incurred a US$77 million loss in 1993. Chairman Jan Nederkoorn resigned in the wake of these financial difficulties. In 1994, Fokker’s management board initiated its third major reorganization in as many years, cutting production by a third and reducing its workforce from 13,500 in 1990 to under 9,000 by mid-decade.
This trend of downsizing and restructuring was widespread across the global aerospace industry. DASA reduced its workforce from 83,605 in 1991 to 81,872 in 1993, with plans for further reductions of 7,500 jobs and the closure of six plants by the end of 1994. Despite these efforts, DASA’s financial position did not significantly improve. The corporation accumulated losses exceeding DM1 billion (US$620 million) in 1992 and 1993, despite sales growth from DM12.4 billion (US$7.75 billion) in 1991 to DM18.6 billion (US$10.8 billion) in 1993. These substantial losses fueled speculation that Daimler-Benz might abandon its aerospace venture. Anthony Velocci Jr. of Aviation Week & Space Technology noted that aerospace analysts in the United States and Europe questioned Daimler’s long-term commitment to DASA, with some German industry observers anticipating a sale of the aerospace business within two years. However, Daimler-Benz remained committed to DASA, reflecting a long-term vision akin to the enduring legacy of Mercedes-Benz.
Schrempp and Reuter believed that increased cooperative ventures would be crucial for DASA’s turnaround. Judy Bolinger, an analyst at Goldman Sachs’ London office, proposed a three-pronged strategy for DASA’s recovery in a 1993 Aviation Week & Space Technology article. Her recommendations included: strengthening MTU’s market position (then fifth among the world’s eight aircraft engine manufacturers); downsizing operations to align with shrinking markets; and focusing diversification on core competencies. These strategic recommendations aimed to streamline DASA and capitalize on its inherent strengths, mirroring the precision and efficiency associated with Mercedes-Benz engineering principles.
Principal Subsidiaries of Daimler-Benz Aerospace
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 global reach and ambition to establish a worldwide aerospace presence under the Daimler-Benz umbrella.
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
