JULIANMOXON / PARIS
As he looks back on just over seven years as chairman and chief executive of French propulsion and equipment company Snecma, Jean-Paul Béchat admits to a feeling of "some pride" in his achievements as the state-owned company approaches privatisation in February 2004. Then, modesty takes over: "It wasn't me alone - 40,000 people work at Snecma and they're all as dedicated to success as I am."
During his tenure, Snecma has absorbed some of France's great aerospace names: Hispano-Suiza, Hurel-Dubois, Messier-Bugatti, Messier-Dowty and Labinal, the latter bringing with it small engines manufacturer Turbomeca. The company has doubled in size during the period and developed an aerospace equipment business that has become one of the world's largest suppliers, accounting for €2.2 billion ($2.5 billion) of last year's €6.5 billion overall consolidated sales.
Béchat leaves no doubt, however, that Snecma operates in an industry facing its worst crisis in 10 years, with no sign of an upturn. As a major supplier of engines and equipment to Airbus, Boeing, Dassault, Eurocopter and regional jets, it covers all segments of the civil and military market and as such feels the chill more than many others. "Globally, there's a crisis. Everyone knows that. But if I compare this one with the one at the time of the first Gulf war, this is already worse." The last crisis ended not long after the war finished. "This time I don't see anything round the corner. After 11 September we had the war and the SARS virus. There always seems to be another disaster waiting for us."
Despite his gloomy outlook, Béchat insists that Snecma is weathering the storm and looks to be heading for a small increase in sales over 2002 - in which there was a 6% slippage compared with the previous year, the direct result of 11 September. He attributes the improvement to "careful management, a diversified range of products covering both civil and military and strong growth in our services sector". In the first half of this year, Snecma Services increased its share of total sales to 36% - up 1% on 2002.
Military business accounts for 20% of total sales, of which 10% comes from government orders. Béchat says the sector looks "quite promising", and points to the agreement this year to go ahead with the Airbus Military A400M transport, on which Snecma partners ITP, MTU and Rolls-Royce and on the TP400-D6 turboprop. The 2003 French defence budget preserved spending on the Rafale engines programme. "That was a good message for us, especially when we note the difficulties with Eurofighter." He adds that the Rafale situation is not perfect, however, with the clear implication that doubts remain over funding of future versions of the multirole fighter.
Snecma is one of only three companies remaining to be privatised of the list of 21 companies listed for sale by the government in 1993. The only other aerospace concern, Air France, is looking to merge with KLM, which would by definition reduce the government's stake to below 50%.
The Snecma story is a good example of how a former state-owned behemoth dependent mainly on its domestic market has achieved a genuine transformation to a market-dominated, fully transparent, mainly export-oriented company. The revolution in its services business is particularly notable, attributed by B‚chat to the relationship with General Electric and the change of culture that went with it.
Privatisation "will not make a lot of difference to the way we run things", says Béchat. "Snecma has been operated like a private company for years and is showing consistent profits. We have total transparency, corporate governance, a strategy committee and we present our results to the public. We also export 90% of what we make, so we are extremely visible."
The French government holds just over 97% of the company and speculation continues as to how much of it will be released to the market.
Béchat says that as far as he is concerned "life will go on as before" after privatisation, although he admits that there will be one significant change in day-to-day life: "I will be obliged to turn on the television and look at the share price every day to find out what happened yesterday." He adds that for a company like Snecma the share price has little to do with the way the business is run. "It takes five years to design and produce a new product that will remain in service for at least 20 years."
February 2004 is the "natural time" for the government to make the privatisation move, says Béchat, "because that's when we reveal our 2003 results". As to the longer-term future, he considers the possibility of a privatised Snecma being broken up and its constituent parts sold off is unlikely. "I don't believe the idea of dismantling would be supported by shareholders. My hope is that we'll find shareholders who will understand the very strong synergies within Snecma. We use know-how that has been developed globally within the same industry."
He points to the successful penetration of the market for carbon brakes from materials developed in Snecma's space business. "Our synergies have given us access to some of the best materials technologies in the world."
Béchat has managed to blend several distinct corporate identities into the Snecma culture so that today the company is a single entity. He explains the achievement by the fact that there is a "natural respect between engineers in similar domains".
The year to date has seen several significant milestones, including selection in April of the SM146 engine, a joint venture between Snecma and NPO Saturn, to power the 60- to 95-seat Russian Regional Jet to be developed by Boeing, Ilyushin and Sukhoi. The propulsion system, selected over the Pratt & Whitney PW800, is billed as the first truly international programme for Russia's aircraft engine industry, and if projected orders materialise, will give Snecma a significant foothold in a potentially huge market.
Source: Flight International
