Many French suppliers have grown fat on the back of Airbus's success. Now they are having to compete globally as overseas rivals challenge traditional markets
Airbus’s spectacular growth has seen many fortunes made in the small and medium enterprise (SME) communities of France’s aerospace regions in the south-west and Atlantic coast. For decades, Gallic suppliers could rely on the largesse of their national champion for production contracts, with competition largely limited to within French industry.
However, globalisation is changing this. The European airframer’s success, the fluctuating values of the dollar and euro, and the freeing up of trade and competition rules have seen suppliers from around the world converge on Toulouse hoping for a slice of the Airbus procurement cake.
In turn, expertise built developing products and systems for Airbus has allowed France’s lower-tier suppliers to offer their wares on the world market, to Boeing (see box) as well as Bombardier, Embraer and emerging airframers in China and Russia.
Diversification is vital for the French aerospace industry, says Olivier Gorge, secretary general of French industry association Gifas’s SME committee. “SMEs must present themselves towards the whole world. The big companies are already doing this but more and more SMEs are looking to places like China. It’s a trend that involves the whole industrial fabric.”
Although there has been an increase in exports by French equipment manufacturers – Gifas estimates the proportion of revenues from exports has tripled in the last 15 years – the companies still have a way to go, Gorge says. “French equipment manufacturers currently generate around 40% of revenues from international sales – a good figure would be at least 50%.”
Two French regions, Midi-Pyrénées and Aquitaine – home to Airbus’s and Dassault’s main factories in Toulouse and Bordeaux, respectively – have set up what they call Aerospace Valley to showcase the capabilities of the area’s companies and institutions. The two regions already have 1,200 companies employing 94,000 people in aerospace, but the initiative’s aim is to create up to 50,000 more jobs over the next 20 years, partly by helping suppliers find work on the global market.
However, seeking business overseas does not mean neglecting the traditional customer, says Ferdinando Trella, chief executive of Aeroconseil subsidiary ATS International, which supplies maintenance, modification and consultancy services and whose main customer is Airbus.
Single customer
“We don’t want to lose our market niche with Airbus, but we do want to diversify – we want to double our turnover by 2008,” he says.
Parent company Aeroconseil relies on Airbus itself and airlines who operate the manufacturer’s aircraft for 83% of its turnover, which was 69 million in 2004. Two years ago, that figure was 95%. Airbus’s rapid growth has meant that many of its core suppliers have had little opportunity or incentive to look elsewhere for business, Trella says.
But this is changing. ATS has begun to target other aircraft manufacturers for asset management work, in particular Embraer and Bombardier, as well as Airbus’s Toulouse neighbour ATR. “The aim would be to become partners, to manage their assets worldwide,” Trella says.
Toulouse-based Latécoère says the fact that Airbus’s traditional supplier base is increasingly winning work on overseas-based programmes ultimately helps Airbus, which benefits from contractors’ growing expertise. While technology may be protected by the OEMs, “savoir-faire” is passed back and forth across the widening global network, says the company’s vice-president communications Jean-Pierre Robert.
But there are difficulties in globalisation, particularly for smaller businesses. “Companies with 50-100 people are still very dependent on Airbus – we must get them to the point where they can diversify – it’s dangerous to rely on one customer,” says Didier Seiller, head of development for Aerospace Valley.
This is where a key initiatives comes in: central and regional government funds have been earmarked to boost the region’s SMEs by encouraging global industrial partnerships among larger companies, maintaining a hub of suppliers further down the supply chain and anticipating technological developments. It will also encourage them to pool their resources to provide a particular product or requirement to a customer and to recruit and train the right staff.
Latécoère’s main business is making fuselage sections, doors and electrical harnesses and cabling. Although Airbus has been its main customer for decades, it has been widening its scope and last year opened a subsidiary in Brazil close to Embraer’s facility in Sao Jose dos Campos to customise and finish its own French-built fuselage sections for Embraer’s regional jets.
Global footprint
Equipment supplier Zodiac has been more successful than most French companies in expanding its global footprint. Taking advantage of the weaker dollar, it has bought several US companies in recent years, greatly expanding its North American market share. Now two-thirds of its sales come from that market, says Maurice Pinault, chief executive of Zodiac’s airline equipment business.
A similar proportion of its manufacturing facilities is also based in the USA, which helps the company offset the higher costs of purchasing in euros. “It’s important to have a balanced and diversified portfolio of customers – we are certainly not Airbus-centred or Boeing-centred,” Pinault says. “Airbus has never been an overwhelming presence although of course it is a very important customer.”
Other French companies are eyeing opportunities in the east. Toulouse-based equipment supplier Equip’Aero is looking at establishing joint ventures or start-ups in China as well as possible acquisitions in North America, says Bruno Labedens, vice-president commercial development.
Domestic reliance
However, too many French SMEs still rely too heavily on domestic customers, says Liebherr Aerospace Toulouse president Francis Niss. Although Airbus’s growing orderbook has tended to keep these firms busy, the airliner giant’s need to diversify its supply base to reduce its dollar exposure at the revenue end, means it is “more important than ever” for these traditional suppliers to diversity, he says.
Resisting globalisation is not an option, says Jean-Marc Thomas, Airbus France president, and one of two project leaders for Aerospace Valley. Companies who fail to market themselves worldwide will be overtaken by international competitors.
Traditionalists in France fear businesses pursuing overseas work are looking to “delocalise” – in other words, export high-tech, high-value jobs – but Thomas says this is the wrong approach. “We won’t be able to resist the trend towards delocalisation with laws – we will resist it by maintaining a technological head start.”
HELEN MASSY-BERESFORD/TOULOUSE
Source: Flight International
