Jean-Paul Bechat, Chairman of the Executive Board, Safran
Last month’s merger of Snecma Group and the Sagem telecom company to form the $12 billion high technology giant Safran is an unusual marriage of potential rather than synergy. But it is already showing signs of where future strategy will take it.
“It is not immediately obvious as the products are so different between a cell phone and fighter engine,” Jean-Paul Bechat, chairman of the executive board of Safran, told Show News.
“But Sagem said, ‘Look at us not as a product company, but at our core capability, electronics software.’ Sagem had already won market share with innovative products.”
Bechat said it was apparent that Snecma could use Sagem’s portfolio for its own mechanical products such as engines and brakes that are increasingly controlled by a black box.
SAFRAN – FAST FACTS
Safran, formed by the merger of Snecma Group and Sagem on May 11, is an international high-technology group with four core businesses: aerospace propulsion, communications, aerospace equipment, defense and security.
Revenues: $12 billion.
Employees: 56,000
French government ownership: 31%
Its companies include: Sagem, Snecma, Snecma Services, Turbomeca, Messier-Dowty, Messier-Bugatti, Aircelle (formerly Hurel-Hispano) and Labinal.
Note: Snecma Moteurs has now reverted to plain Snecma, the historical name it assumed in 1945.
“It is mandatory today to have a systems approach, and it is good to have that expertise in-house,” he said. Five years ago Snecma’s Hispano-Suiza teamed with Honeywell to develop the world’s first electronic thrust reverser for the A380; today, as Safran, it could do it alone.
And the first example of doing so has emerged: Messier-Bugatti is partnered with Sagem on the world’s first all-electric brake for a commercial aircraft, on the Boeing 787.
The win is Sagem’s introduction to Boeing and the launch of a strategy to develop its presence in aerospace through association with other Safran companies. While Sagem has about $1.2 million content per aircraft on the 787, its sales to Boeing last year were zero.
Safran, Bechat noted, has won several billion dollars’ worth of business on the 787 with the full landing gear (Messier-Dowty), wheels and brakes (Messier-Bugatti) and responsibility for the electrical wiring system (Labinal).
European Consolidation
Now Safran has ready access to publicly traded stock, it can view mergers in a different light than Snecma could before.
But Bechat is in no hurry to move on the engines front.
“We are always looking for opportunities to buy additions to our existing products, but we have no specific targets right now that would necessitate going to the stock market,” he said.
MTU, which last week went public with an IPO, “is not for us” due to its deep relationships with Pratt & Whitney and Rolls-Royce.
“We already have first-line positions in the engine business and we are not prepared to invest to be second-line,” Bechat pointed out.
Italy’s Avio, with an IPO in the offing, is of passing interest to Safran as Snecma already has close ties with Italy on space activities. “Expanding those ties would depend on many things, including European budgets for space,” he noted.
Investing in Engines
Safran is “fully secure” on the future of the CFM56 airliner engine through its 50/50 partnership with GE in CFM International.
But Snecma declined to invest significantly in the GEnx engine for the Boeing 787 despite its very strong ties with GE. “The return on investment would not have been adequate” given Boeing’s very aggressive stance on pricing and the typically lower margins a supplier must accept as a second-line player to a prime contractor.
“The prices GE has accepted are OK for them. It is a very good program, but not enough for us.”
Some of Safran’s investment is going instead into the SM146 turbofan for the Russian Regional Jet and other applications in the 15,000 pounds thrust range. “We are clearly the project leader,” and the returns will be commensurate, Bechat said. —John Morris
