Berlin and auto giant DaimlerChrysler have drawn up a proposal to keep a delicate balance of national power within the European Aeronautic Defense and Space Company (EADS), without the German state having to intervene directly, according to government sources quotes in the business weekly WirtschaftsWoche.

The power struggle at EADS, which is trying to solve a crisis at its main subsidiary, Airbus, centers on a large chunk of shares currently held by DaimlerChrysler.

The carmaker holds a stake of 22.5 percent in EADS, but has signaled its intention to reduce that stake to 15 percent next year.

Berlin is adamant that the 7.5-percent stake being put for sale should remain in German hands and must not be allowed to fall into French or Russian hands.

France is presently represented via a 30-percent interest shared by the state holding company Sogeade and media group Lagardere.

Russia and Spain also have share in the aerospace group -- Russian through state-owned bank Vneshtorgbank, which bought a 5.02-percent stake in September, and Spain via a holding group, Sepi, which owns 5.48 percent.

The German government has so far been undecided about how to shore up German interests when DaimlerChrysler reduces its stake. It has been reluctant for the state to acquire the stake directly, preferring instead a private-sector solution.

Complex deal

WirtschaftsWoche noted that DaimlerChrysler does not hold the stake directly, but via a non-operative subsidiary, DASA. DASA's share capital is held by DaimlerChrysler, the city state authorities of Hamburg, the Dornier family and the Messerschmitt Foundation.

Under the complex deal, DASA would issue a convertible bond with a value of up to 49 percent of its enterprise value.

The bond, which would be convertible into the EADS shares, would be bought by a privately led investor consortium that included a number of public-sector regional state banks and the state-owned KfW redevelopment bank, WirtschaftsWoche reported.

DASA would use the money from the bond issue to reimburse its shareholders, enabling DaimlerChrysler to pocket more money than it would raise from the sale of its shares via the open stock market, the magazine said.

At the same time, DaimlerChrysler would hold on to its EADS voting rights until the bond came up for redemption. Such a construction would also help to fend off potential predators, the magazine said.

Chancellor Angela Merkel was scheduled to talk over the solution with the French and German EADS co-chairmen, Louis Gallois and Thomas Enders, at a meeting in Berlin in the next few days, WirtschaftsWoche added.