Julian Moxon/PARIS
JEAN-ROBERT MARTIN has a stark message for anyone following the fortunes of the French equipment industry. "If we do not maintain our investment in research and development, we cannot survive," he says.
As president of the 150 French equipment suppliers grouped under the GIFAS banner, Martin, also president of Sextant Avionique, is well placed to understand the difficulties facing an industry suffering the problems of reduced defence spending, increasing competition from the USA and the "continuing undervaluation of the dollar".
Martin says: "Our industry is unique in its research-and-development investment needs." He points out that equipment suppliers have to update their products much more rapidly than airframe manufacturers. "We evolve faster than any other part of the aerospace industry, which means we need proportionately higher research and development expenditure to keep up with the latest technology". Typically, he adds, this amounts to around 25% of annual sales, which, based on the 1994 figure, meant that the industry swallowed more than Fr6 billion ($1.2 billion) just to ensure that it remained competitive.
Yet, with the equipment industry having recorded no overall growth in sales since 1987, and a 15% drop in orders in 1994, to Fr24,503 million the prospects for maintaining the current level of research-and-development spending look bleak. "We're not at a good point - and, if there is a further decrease, we will have to find ways to compensate," says Martin.
Given the French Government's forthcoming defence-budget cuts, and its apparent unwillingness to spend more on fundamental research, the only way of increasing revenue is by increasing exports. This has now become one of the main drivers throughout the equipment industry. "We can't wait for the Government," says Martin. "We have to act now".
He adds that, while GIFAS "...is providing as much help as possible, each company in the end has to find its own way to the future".
Exports now account for around 30% of French equipment-supplier revenues, and Martin says that this is growing. He points to his own company's successes with its recent avionics deals with Bombardier, in which it is prime contractor for the flight-control system for the Global Express, and the complete avionics for the Dash 8-400, but stresses that "many other" French companies are also succeeding in increasing their revenues from non-national business.
While the pressure is clearly on to reshape the industry, Martin points out that 25% of it has merged or undergone some other form of strategic re-organisation in the past ten years. He says that one clear trend "...is that more and more prime aircraft-manufacturers require some sort of risk-sharing partnership with the equipment suppliers, rather than dealing with them on an individual product basis". This means that companies have to know how to propose complex subsystems and, if an individual supplier cannot do it alone, it has little choice but to form an alliance with one or more companies to provide the right package.
Martin insists that there must be an acceleration of the regroupment process. "It is mandatory - if it doesn't happen, there will be problems," he says. US competition is intense, and with the low value of the dollar (and most business is carried out in dollars) "...we have to consider ways of becoming more efficient".
Here, Martin agrees with Intertechnique president Edmond Marchegay, who says that he is considering shifting some of his company's business out of France and into dollar areas. "This is a worldwide business and, for France, one way of dealing with the problem is to buy or make certain products in a country linked to the dollar. It is very serious, but we have to do this or die," he says. This, he adds, will lead to further reductions in employment in the industry, which has already seen a cut of 26% in the past five years, and now employs 26,500 people.
Gaining market share outside France means becoming more aggressive, which does not have to mean reducing prices, says Martin. "We have to be at the market price, but not necessarily at the lowest. The trend for the future is to provide the highest levels of service. This is already the case for the commercial business, but is now becoming the norm for the military side as well."
Martin is convinced that French industry is in good shape in terms of its technological abilities. "When I compare our products with those I see in the USA, I think we're at exactly the right technology level. There's no gap. After all, we are primary suppliers for the Ariane, Airbus and the [Dassault] Mirage - all world-class products."
Innovation is vital, however. "One of our strengths is to be at the top level of innovation, but we can only keep that level if we re-invest in the future," he says.
Source: Flight International
