Aerospatiale's Louis Gallois maps out a future to keep French industry on track.
Julian Moxon/PARIS
LOUIS GALLOIS has missed the train, and it is likely to be a blessing for the French aerospace industry. Only a last-minute change of heart by the French Government saw Gallois remain at Aerospatiale, rather than being appointed to head state-owned railway company SNCF.
Gallois, who will now remain at the core of the restructuring faced by France's aerospace sector, has taken on the air of a man refreshed when issues become clear after a long period of uncertainty.
Gallois, president of Aerospatiale, says that he is "completely optimistic" about the future now that the company has emerged successfully from two years of frequently tough negotiations with Daimler-Benz Aerospace (DASA) on the merger of the companies' satellite and missiles businesses.
While in no doubt about the "marathon" amount of work left to do to tie up the agreement, Gallois says that he expects the final signature "before the end of the summer...there's no question it will go ahead. For me, it's done".
The merger will leave Aerospatiale with a half share in an alliance that will create Europe's largest satellite and missiles operations. "For the satellite business, we expect a combined turnover of around Fr6 billion [$1,240 million], and for the missiles branch about Fr8 billion," says Gallois.
Even though there is pressure as never before to restructure the European aerospace industry, Gallois is clear that Aerospatiale and DASA must first consolidate their alliance before any other mergers are forged. "It's certainly not the end of the story...but we have to deal with a very complex alliance for now," he says. DASA and Aerospatiale have already succeeded, in creating Europe's biggest helicopter company. "But even so, it isn't as easy as it is in the USA," where merging companies are not faced with cross-border problems.
Gallois puts two "conditions" on future alliances: "First, it must not be too complex an organisation. Secondly, we do not want to dilute our capacity to influence it. We want co-decision-making power in any merger...we learned how to do it with DASA, and we do not want to lose that."
He admits that time is running short for Europe to restructure..."I am sure we have to go faster, but the process is extremely slow. It took a year just for the governments to give the green light to our merger". Perhaps surprisingly, Gallois applauds the efforts of British Aerospace and Matra, in their attempt to forge a missiles deal to go with their existing satellites alliance, "...because after that we can see if it is possible, to create an alliance between Matra/BAe and Aerospatiale/DASA".
Meanwhile, he adds that Aerospatiale remains "very open" to, including French satellite payload supplier Alcatel in the alliance.
Gallois is "stricken" by what he calls the new US "aggressiveness". To compete successfully, he says that Europe has to become united and to create "a domestic market with alliances in order to create common industrial interests". He points out that France, Germany and the Netherlands also share the problems posed by the low value of the US dollar, but he sees no easy answer. "I have to explain to my company that we have to adapt". Added to this are the forthcoming reductions in the defence budget which will almost certainly result from the French Government's public-spending cuts.
"Aerospatiale must find ways of saving money. We have to look at our relations with our suppliers to ensure they are sharing the same burden of competitiveness. We must look very carefully at our development costs, and we are very aggressively reducing spending all round - except in marketing activities and research. We are also reducing employment - I have proposed a [workforce] cut of 3,100 for Aerospatiale and the equivalent of 800 for Eurocopter France."
Gallois notes that the UK slashed its workforce by 40% during its reconstruction period. "We have already reduced ours by 15%, and we have to carry out a second step within the next two or three years". He asserts, however, that Aerospatiale's productivity was probably higher than that of both Germany and the UK at the end of the 1980s, adding that, "...at present, we have the same physical level of productivity as Boeing". Wages and social security costs are higher "...and of course we have the US dollar problem".
In common with some other French manufacturers plagued by the US dollar problem, Aerospatiale is thinking about offshore procurement. "I have said frankly to some of our French subcontractors that we are looking for suppliers in the US dollar area," says Gallois.
The question facing the budget cutters is one of finding the right compromise between saving money and preserving the skill base. "When you save money, you have to take into account the jobs you are destroying, and the money you lose as a result. If you want independence, and if you want products completely fitted to your needs, you have to make compromises," he says.
The Airbus Industrie consortium, in which Aerospatiale has the same 37.9% share as DASA, has suffered a bad year following its success in 1994, when it sold more aircraft than Boeing. Gallois puts this down in part to a "different situation" in 1995, when "...we had to face the launch of some new aircraft", which meant manufacturers made price concessions to airlines. He cites ValuJet's launch order for McDonnell Douglas MD-95s, after a competition from which Airbus and Boeing were eliminated at the last minute.
Airbus is hitting back with new versions of narrow and wide-body aircraft, recently launching the A330-200, "...which will be a strong competitor to the Boeing 767", Gallois says. A stretched version of the A340 is on the cards, but awaits a suitable engine.
The consortium must look carefully at a European competitor to the Boeing 747, says Gallois. Such a programme would require, more investment than the A330 and A340 combined and the resulting aircraft, should seat around 500-550 for the basic version, with direct operating costs "definitely" lower, than those of the 747. He declines to reveal any decision date, but adds that "...you could be surprised".
The NH-90 transport helicopter, which has four participating nations, flew for the first time on 18 December, but the potential requirement for 726 machines for France, Germany, Italy and the Netherlands now rests on France's decision as to whether to fund its 42.4% share. "Without French participation, I think there will be no programme," says Gallois. He says that he is "not pessimistic" about the likelihood of the Government backing the NH-90 when it decides on the future defence budget later this year.
Gallois says that the UK decision to buy the Apache attack helicopter instead of the Eurocopter Tiger "...delays the restructuring of the European helicopter industry", because Westland is stronger as a result, and therefore "...is unlikely to be ready for an alliance for several years". He adds that, "...we will see what is possible in the future".
Aerospatiale, Alenia and British Aerospace are jointly competing to win the competition to co-design and produce a 100-seat regional aircraft with China and South Korea. "We're not in a bad position," says Gallois, "but it would be better if Europe was allied. [DASA is offering its own, different package]. If we win, we will immediately invite DASA to join us."
As for the future shape of Aerospatiale, Gallois is adamant that it "...is not going to be a holding company. We will keep the best of our technology and systems to be able to market the different products we are developing. We're not here only to get dividends, but to be hands-on in any activity".
He describes the company as a "hub and spoke" operation. "The hub is a think-tank with very strong technological capability. We will retain our research centres and design offices for big systems. We want to be in a position to play the synergies of the group, which means we must have co-decision power in any of our alliances," he says.
"My main task for 1996 is to deal with recapitalisation of the company," says Gallois. Aerospatiale needs Fr10 billion of recapitalisation funding "...but I am sure that the French Government is not going to give me so much, so we will have to find a good share of this cake outside of our present owner".
On the day of his meeting with Flight International, Gallois was very nearly appointed to head SNCF. It is generally agreed that the Government's last-minute decision that he should continue to direct Aerospatiale's fortunes is good news for an industry that is having to change rapidly.
Source: Flight International
