When Finmeccanica recently restructured internally, re-grouping its defence electronics companies under one co-general manager, for many in the company the move was overdue.
The group has consolidated its electronics businesses once before, merging the avionics interests of Aeritalia, Alelco, Cetev, FIAR, Meteor, and SMA with those of Officina Galileo to create Galileo Avionica in 2001.
But alongside Galileo Avionica, there are the companies spun off from the 2003 Marconi acquisition: Marconi Selenia Communications and AMS, a 50:50 joint venture with BAE Systems. The Finmeccanica family now also includes OTE, Seicos, SNI and Elsag.
Last month the group finalised a deal that could see it, within two years, control all of the avionics division of its Eurosystems joint venture with BAE. Eurosystems was previously planned to be three-pronged, with avionics, communications and system- integrations businesses. But the companies have agreed, unexpectedly, to restructure the partnership and bring 75% of the avionics business, including the former GEC Marconi sites in Edinburgh and Rochester, under the control of Finmeccanica.
In another change, the Italian company now has an option of acquiring BAE's remaining 25% stake in the avionics business after 25 months. Remo Pertica, Finmeccanica's newly appointed co-director general for defence electronics, says: "In my experience of such options, they are usually exercised, so I could foresee Finmeccanica owning 100% of both companies' avionics businesses by the end of 2006."
Finmeccanica will also acquire 100% of BAE's secure communications business, and will now compete with the UK company in the network-enabled systems market, as the AMS joint venture is to be split into two separate entities. All air traffic management activities of the UK division will be transferred to the Italian AMS. This could lead BAE becoming a systems integrator rather than a system supplier, predicts Pertica.
Finmeccanica is sensitive to any feeling in the UK that a strategic asset may be lost to foreign interests, especially following so soon after the AgustaWestland buy-out earlier this year, and is mounting a campaign to deepen its involvement there. This is also commercially driven, as the UK Ministry of Defence is the group's second largest customer for defence electronics, with Marconi equipment onboard the Panavia Tornado, BAE Nimrod MRA4, AgustaWestland EH101 Merlin and Eurofighter Typhoon.
Within the restructured Finmeccanica Pertica's main task is to define the different missions of each defence electronics company and identify overlap.
A single co-ordination committee will be formed, but any merger of today's business units is off the agenda, he says. Pertica, also chief executive of Marconi Selenia, will head the new coordination committee, along with the general managers of Galileo Avionica and AMS.
Previously companies reported directly to the board and many have been pursuing similar interests. "It's crazy to invest in the same technology, like nanotechnology for example, in four different companies," says Pertica.
Marconi Selenia covers some of the same communications, navigations and identification (CNI) equipment territory as Galileo, and the mid-term objective is to integrate all Finmeccanica's CNI systems. Lorenzo Fiori, general manager of Galileo, says his company's interests in airborne radars will be dropped in favour of ground-based radars, to avoid duplication with other Finmeccanica companies.
Pertica aims to conclude a review of the defence electronics group by the end of the year before proposing measures to streamline operations. The group will likely form joint bid teams for competitions, an acknowledged weakness compared to rivals such as Thales and Elbit. "Up until now it has been difficult to offer a complete electronics package, but now we will go with one point of contact and offer all products," says Pertica.
In future, one of the three main companies will act as prime contractor, drawing on products from others in the group. The defence electronics group is actively eyeing the acquisition of companies in the USA to broaden its portfolio, says Pertica.
Finmeccanica has already started integrating its companies, with the creation of "communities" sharing technology. So far communities have been established in the areas of radar, materials, design methodology and security, along with a working group on unmanned vehicles.
JUSTIN WASTNAGE/ROME
Source: Flight International
