Q: Snecma is a manufacturer of aerospace equipment - from landing gear to engines. Sagem is known more for its mobile phones and consumer electronics. The cultures, the customers and the products are very different. What is the logic behind the merger?
A: We do come from different backgrounds. Sagem was traditionally a family company which went through a leveraged management buyout (LMBO) but still had the culture of a family company.
Snemca has been an industrial company, with a background of state ownership, although it was operating as an industrial company with Pratt & Whitney as a shareholder, and working with big partners in industrial partnerships.
There was a difference between our technologies - Snecma comes from a mechanical background, Sagem from an electronic one. Our challenge is to find the synergies in terms of technology, markets and customers.
Q: You are keeping essentially the old Sagem and Snecma businesses units, with four divisions: Propulsion and Equipment (formerly Snecma) and Communications and Defence Security (formerly Sagem). Why has there not been a wider reorganisation?
A: It was important that each business unit was not disturbed by the event. The merger is mainly at HQ level. The brands are well-known in their markets. There was no reason to abandon them.
Q: Can you give us some examples of the synergies and cost savings that you expect to kick in?
A: For a start, there is purchasing. The purchasing team has been put in a network. There are 40 families of products that we buy and we can benefit from the best prices. In terms of technology, there are already examples of where we are working together, using our expertise in industrial technology with Sagem's experience of electronics.
We have been chosen for the landing system on the A400M, where we will be designing electronic controls and electrical systems that were hydraulic before. On this programme, we have a common team. On the Boeing 787, we are designing electrical brakes for the first time to replace hydraulic equipment. All our mechanical products are becoming closer and closer to being controlled by electronic boxes.
Q: What about the way you will now approach the market. Are there parts of the world where one of the companies is stronger?
A: The biggest advantage it gives us is an inroad to the US for Sagem. When we announced the project to (one of Snecma's biggest customers) Boeing, they congratulated us and told us there were big opportunities. Sagem was producing equipment for the A380, consolidating data from 30 different electronic boxes. They won these positions. But the Sagem turnover with Boeing is zero.
We think we can convince Boeing to give us their confidence because they know that we can deliver what we say we will. Sagem is very strong in China, where it is one of the big three suppliers of mobiles in China. This might be of some help when it comes to selling engines, but we will be looking more for technical input rather than a marketing advantage.
But also don't forget that Sagem is a big supplier to the US homeland security market and has a very interesting relationship with a lot of police departments, including the Federal Bureau of Investigation (FBI). It is also the world number one for biometric applications."
Q: Snecma was majority-owned by the French state, even though it had been slowly moving towards privatisation. The merger means its share drops to just over 30%. What difference does it make having the government shareholding and do you think the recent French 'no' vote to the European Union constitution - seen as a rejection in part of so-called Anglo Saxon economics - will halt the privatisation process?
A: The fact that the French state is still a shareholder is not a problem. It hasn't stopped us doing business with Boeing for years (Snecma and General Electric are partners in the CFM International venture that has been making the CFM56 engine for the 737 for more than two decades). But I do not have an answer on behalf of the French government. I don't know what their agenda is. Maybe one day they will sell their share as they have with Air France, Renault and France Telecom."
Q: A lot of people were surprised when Snemca decided not to join the General Electric GEnx next-generation engine for the Boeing 787 as a risk-sharing partner. What was the reason behind that?
A: We have a venture with GE up to 50,000lb thrust. Above that thrust we have no Snecma offer. Yes, we have the technologies. An engine is an engine. We participate on others' engines as a second-line player, but obviously there is not the same profitability as there is as a first-line player. So we consider programme by programme what we should invest in.
This competition (for the 787 engine supplier) has been very tense, with only one or two winners and a loser which has to get out. We didn't think it would be profitable enough to invest in, so we decided to pass without any problem to our GE partner. But our life in big engines is not finished."
Q: Before the Sagem merger was announced, there was speculation that you might combine with your fellow French company Thales. Then there was talk of Thales and EADS getting together. Now the hot money is on a Thales-Finmeccanica tie-up. Do you think there is more to come with European consolidation?
A: I don't know what will happen, but the most important priority is for European governments to take joint defence procurement more seriously. The combined European budget is a third of the US budget and we want to keep our armed forces equipped with the best equipment. We (the European industry) have made progress with Eurofighter, A400M, NH90 and Meteor.
This sort of joint approach has started and it will accelerate. Europe has not got the resources to fuel a lot of competitors for the same product. Even in the US, we've seen Lockheed Martin and Boeing merge their family of launchers. Even there, the market is not big enough to support more than one player.
With EADS, Thales, Finmeccanica and BAE and now Safran, we are ahead of the governments. We are now waiting for the governments to get their act together.
Source: Flight Daily News
