Marwan Lahoud, chief executive of European missile house MBDA, is taking aim at a sacred cow: the principle that each partner country needs to retain every aspect of missile design, development and manufacture within its borders.
MBDA – a merger of the missile champions of France, Italy and the UK in 2001 – wants to restructure the business “within five years” to cut costs by a tenth and develop centres of excellence specialising in different aspects of missile design, development and manufacture, particularly in France and the UK, its two biggest markets and industrial bases.
It is a strategy that EADS – a 37.5% shareholder in what has become the world’s biggest missile manufacturer since last year’s merger with EADS-owned LFK of Germany – has pursued successfully for its multinational space business.
But while politicians tend to be precious about their national space industries, they are doubly so about sensitive defence assets. Lahoud says each of the four nations would retain their own assembly and test facilities – which are seen as symbolically vital. But, under the five-year plan, individual sites would specialise in areas such as radio frequency technology.
BAE Systems of the UK also owns 37.5% of MBDA with Italy’s Finmeccanica holding the remaining 25%. The LFK acquisition – which adds the German “part” of EADS’s missile business to the organisation – does not alter the overall share split.
Speaking in Paris last week, Lahoud said his ultimate aim was to have designers and engineers transferring between countries taking their know-how with them. “We need the ability to move knowledge,” he says. “Today everything is forbidden by default. It would ease my life if everything which did not need to be forbidden was allowed.”
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He says that he is looking forward to “the day we are able to operate with fully international teams. My ambition is to mix teams so there is no distinction between a French guy and a Brit.”
However, even Lahoud admits political barriers will remain. “I would not be so dumb as to appoint a Frenchman to run LFK,” he says.
MBDA has inherited some 12 sites – three each in France, Germany, Italy and the UK – from its predecesor companies, and has its head offices in London and Paris. There is considerable overlap between the facilities and the acquisition of LFK has muddied the waters further, introducing new products which compete with some of MBDA’s portfolio in export markets, such as the LFK/Saab Bofors Dynamics Taurus cruise missile which rivals MBDA’s Storm Shadow.
Lahoud has presided over a financial turnaround at MBDA in the three years he has been in charge, turning a 1.4% return on revenues of €1.8 billion ($22.5 billion) into a 7.3% return on €3.2 billion in 2005. The addition of LFK’s €300 million revenues has seen it nudge ahead of its nearest rival Raytheon in dollar revenues, it claims.
About 25% of its sales come from France, 23% from the UK, 11% from Italy and 11% from its biggest export customer, the United Arab Emirates. Lahoud says the process of acquiring LFK, completed last month, was “long and difficult” – getting four shareholders to agree a value for the formerly loss-making manufacturer was the toughest part – but “it was essential to achieve a German footprint”.
Lahoud says LFK “has made a fantastic recovery from a position of losing money and having no backlog”. The next hurdle in ongoing European consolidation, says Lahoud, is a merger with the other German missile house, Diehl.
Talks with the family-owned business are continuing. “If we find a common ground, we will consolidate,” he says. Sweden’s Saab Dynamics is another candidate. “Why not? We work together and we also compete,” says Lahoud.
But any more significant growth for MBDA in the medium term is unlikely. “For the next three to five years we have reached not the limit but a position that we will manage to sustain. We will not be able to grow in the way we did over the last three years,” says Lahoud.
MURDO MORRISON / LONDON
Source: Flight International
