As Mauro Moretti puts it, 2015 marked “the end of an era” at Finmeccanica, and so a new age begins, appropriately, with a new identity. The fact Italy’s resurgent national aerospace champion will adopt the name of one of the country's greatest sons – no less than Leonardo, as in Da Vinci – naturally brings to mind the word “renaissance”.
Clearly this French word is not used by Finmeccanica but, though hackneyed, it is safe enough in this context. For a company known all too well in recent years for financial turmoil, allegations of misconduct and a dose of the political machinations that come with state control, the achievement reflected in Finmeccanica’s 2015 financial performance does indeed mark a rebirth, if not a Risorgimento (for those unfamiliar with Italian history, the political and cultural movement which drove the formation of the country).
Moretti, detailing Finmeccanica’s 2015 results to analysts and journalists in Milan, could boast of three great achievements. One was the return to profit, for the first time since 2010, and the reduction of a once-alarming group net debt to a level that will see it fall below €3 billion ($3.36 billion) this year. A second was the essential completion of a turnaround restructuring strategy, put in motion by his predecessor-but-one, Giuseppi Orsi, following a disastrous 2011 that saw a net loss of more than €2.3 billion on heavy losses in its power, road and rail businesses plus a €750 million write-down against defects in fuselage sections and horizontal stabilisers supplied to the Boeing 787.
That turnaround strategy called for the group to be consolidated around aerospace (AgustaWestland helicopters, the Alenia and Aermacchi aircraft and aerostructures businesses, and space joint ventures including Telespazio and Thales Alenia Space), and defence and security electronics (the Selex companies in Europe and DRS in the United States). Another key plank of Orsi’s plan was to tighten up lines of management control while pushing responsibility for financial performance down to division and business level.
Orsi also spelled out a consolidation around programmes where Finmeccanica was a leader, or where it could bundle its expertise into joint ventures that would be market leaders. Regional turboprop maker ATR, a 50-50 joint venture with Airbus Group, is a good example of a Finmeccanica winner. This theme is a Moretti favourite; he describes today’s Finmeccanica as being “much more selective” in taking orders; the eschewing of non-profitable business, combined with a drive to reduce costs – including the closure of some Italian factories – has made for a “more focused and stronger” group with a clear “perimeter” around its core areas of business.
Critically, Moretti can say Finmeccanica today is focused within that perimeter of helicopters, aircraft, space and defence and security electronics. With the final completion of divestments of transport – bus and rail – and energy generation companies, Finmeccanica is, finally, the company Orsi set out to make it.
But there is a third achievment, and Moretti deserves much credit for shaping the character of the group. Formally, from 1 January 2016, Finmeccanica is “one company”. By that, Moretti means what was once a financial holding company is now a “great integrated industry” focused on four activity sectors. This aspect of restructuring, he says, is “the turning point” and 2016 will see the transformation completed.
Up until now, says Moretti: “Our customers don’t know the range of our ability, just one small piece. But we can offer incredible solutions.”
For 2016, a difficult market environment has Moretti and his team forecasting modest growth but much consolidation, especially building on what he describes as good progress in 2015 to improve operating efficiency.
This turnaround was no small feat. After the 2011 results cast their harsh financial light on the group’s deep troubles, things got worse with allegations the flagship AgustaWestland unit bribed its way to a lucrative VVIP helicopter sale to India. Those allegations were ultimately laid to rest in 2014, but in the interim had put the group under much strain and cost Orsi his job, though he was ultimately exonerated.
It might reasonably be argued the combination of financial and ethical turmoil laid the foundation for the focused, and apparently solid, Finmeccanica of 2016. Orsi, a former head of AgustaWestland who was both chairman and chief executive, was replaced in the latter role by his finance director, Alessandro Pansa, and in the former by Gianni De Gennaro – a former chief of police, with a long and distinguished career in government, fighting organised crime – who remains chairman today. Certainly, it did no harm to a company beset by financial and legal troubles to have a former banker with a clear strategic vision and an anti-corruption champion in charge.
Moretti, at that time head of Italy’s state railways, was put in the hot seat in mid-2014, when newly-elected Italian prime minister Matteo Renzi shook up management at a raft of state-controlled businesses.
To further appreciate the revolution that has happened, it is worth recalling the group – its name is a contraction of “Finanziaria Meccanica” – was formed in 1948 by a war-torn Italy to oversee the reconstruction of its engineering industries. Though the state still owns 30%, the transformation from a bloated hold-all for government assets to a sharp, modern business is profound.
Hence Moretti’s decision to drop the name Finmeccanica. Leonardo, he says, is easy to remember and brings to mind Italian technology while giving the group – by which he means its people – “a symbol of our legacy”.
That legacy, though, will not be swept away by a rebranding. “Our huge brand heritage is a treasure,” says Moretti. Brands like AgustaWestland – “worth more than its weight in gold” and Aermacchi are firmly placed in Finmeccanica’s new era.
Source: FlightGlobal.com
