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On the Record With
PIERFRANCESCO GUARGUAGLINI, CEO, FINMECCANICA
The metamorphosis of Finmeccanica (Hall 3, Stand E7-8) into a global powerhouse continues unabated. Hamstrung by joint ventures, the Italian aerospace and defense giant is twisting and turning , wheeling, dealing and buying its way toward the critical mass that will set it on the stage with other world players.
The conglomerate is on a growth target that will boost its revenues to 10 billion euros by 2006 from this year's 6.2 billion. Driving it is chairman and CEO Pierfrancesco Guarguaglini, known as an astute strategist and tough negotiator.
"We have achieved excellence in markets like helicopters, training aircraft and defense electronics, and we are adopting an increasingly global outlook," he told ShowNews, referring to Finmeccanica's recent acquisitions of its partners' stakes in Aermacchi and AgustaWestland and the formation with BAE Systems of Eurosystems, Europe's second-largest European defense electronics and secure communications company. Most recently, trading assets and responsibilities between the two, it formed with Alcatel Europe's biggest space operator.
But "the 50-50 joint ventures that have held sway until now do not allow us to get the most out of the assets involved, either operationally or in terms of profitability," Guarguaglini explained. "We have therefore decided to take a different approach with BAE Systems and Alcatel: In these joint ventures, one or the other of the partners takes command, and where we are not in control, we have insisted on protecting our technology assets and management interests.
"We need our partners to give us clear governance rights and a role for our companies that matches their technological expertise and competitive position. In this strategic industry, we need to preserve the capacity to develop leading-edge technologies if we want to be a major player rather than part of the supporting cast."
New opportunities for further consolidation in the future could emerge in sectors requiring less investment for development, such as land defense systems, he added.
"We now have to integrate all our new acquisitions, and after that we will look at how to proceed further," Guarguaglini said. "For some time now we have been interested in acquiring medium-sized, high-tech defense electronics companies operating on the U.S. market. We'll see. If we spot any good opportunities, we may decide to expand further."
In the meantime, Finmeccanica's new muscle has made it more of an equal with its European peers, increasing its clout at the negotiating table.
"Becoming more competitive has certainly given us more bargaining power with the big movers in the aerospace and defense sectors—EADS included," said Guarguaglini. "We work with EADS in several programs and compete with it in others. This is often the case in our business. We talk a lot and know each other well. We may soon cooperate in sectors like UCAVs and commercial transport aircraft, but I would not rule out further cooperation in other sectors in the future. We have a stronger hand than we did in the past."
On transatlantic cooperation, Guarguaglini feels it is up to the U.S. industry to show it is really interested in a true partnership with Italian and European companies.
"The size and growth prospects of the U.S. market offer many possibilities. Finmeccanica already offers products that meet the exact requirements of the U.S. market, including the US101 helicopter, C-27J transport, and AB139 and A109 helicopters. There are opportunities in secure communications for Marconi Selenia Communications, in satellite payloads for Galileo Avionica and in naval guns for OTO Melara.
"But the U.S. needs to be more open, and taking into account the current
procurement threshold on U.S.-manufactured goods, needs to give
European systems a level playing field on which to compete. The
relationship between the U.S. and Europe cannot continue to be a
one-way street."
—John Morris
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