The weak US dollar and problems at Airbus have had hit the French aviation sector hard. It’s time to support the suppliers, Dassault Aviation chairman Charles Edelstenne tells Liz Moscrop.
France has long been one of the world’s greatest aeronautical centres of excellence, producing cutting-edge aircraft and technologies. And at the heart of this success lies a sophisticated network of suppliers.
But the weak US dollar, the emergence of low cost manufacturers, and delays in the A380 programme have all taken their toll on that supply chain. Charles Edelstenne is seeing this impact from many angles. As well as his day job of chairman and CEO of Dassault Aviation, he is president of GIFAS (Groupement des Industries Francaises Aeronautiques et Spatiales) and as president of the Aerospace and Defence Industries Association of Europe.
Advantages
Edelstenne says it is important not to decry offshoring, which he believes some suppliers can use to their advantage. “We cannot demonise outsourcing abroad because of the issue of currency parity. There is no other solution besides looking for lower prices to bring down overall production costs. This is still the best way to produce jobs in France. So far we have pushed up productivity gains using product life cycle processes. Now the dollar is 1.35 to the euro and might even go up to 1.5, we will no longer be able to succeed just with productivity gains.”
He believes the policy that some primes have adopted of using clusters and lead suppliers could fragment and weaken the industry. “European clusters want to share the effect of dollar. Existing subcontractors want to reduce costs and put some production abroad. They want to diversify their sources. By doing that they can reduce their costs by something like 10%, because of the discrepancy between the Euro and the dollar.” He adds that some suppliers benefit from buying in dollars.
He warns that the industry must act now to secure a strong future: “President Sarkozy has said he wants to maintain an excellent aeronautics industry in France.” However, he says, there is great pressure on the supply chain to reduce costs. “The impact of the low dollar on our competitiveness is already creating financial problems and losses of know-how at certain links in our supply chain.”
According to Edelstenne, the 2006 national defence equipment budget was equal to that of 1990 – €15bn with 15% inflation in that time. Government budgets have dropped by 30% since 1990 and 50% in defence since 2000.
Source: Flight Daily News
