Gilbert Sedbon/PARIS

FRENCH DEFENCE-electronics company Thomson-CSF is to be re-organised, with the creation of a series of new subsidiaries. The move is part of a plan to improve competitiveness as a prelude to possible privatisation of the state-owned concern.

Company chairman Alain Gomez says that the re-organisation should get under way by the end of this year. It is hoped that the move will accelerate plans for cross-border mergers with European rivals.

The subsidiaries will employ 32,000 people across six new divisions - radars and electronic countermeasures; missile systems; communication command and control; missile subsystems; computers; and space.

The re-organisation of the company was announced just before the signing of an agreement in Madrid on 12 July to buy a 25% stake in Indra, Spain's largest defence-electronics manufacturer.

Indra was formed by a merger in 1994 between Inisel, the state-owned electronics company, and its private-sector rival, Ceselsa. Now Indra is 63% owned by Instituto Nacional de Industria, Spain's state holding company, and 25% by Thomson-CSF, with the rest held by Banco Bilbao Vizcaya and Spanish electronics company Abengoa Sainco.

Thomson-CSF will pay Ptas3 billion ($25 million) for the holding. Indra has annual sales of Ptas60 billion.

Gomez, who is also chairman and chief executive of parent company Thomson SA, says that any privatisation of Thomson-CSF should be preceded by restructuring of the French defence industry as a whole. In addition, he estimates, the group needs a Fr10 billion ($2 billion) capital injection before privatisation.

Gomez warned a French Senate finance committee that entry of private capital in Thomson-CSF could pose problems for national defence, asserting that the Thomson group is under-capitalised, with Fr20 billion in debts, accrued mainly by its consumer-electronics activities.

It is not clear whether the Thomson SA group - which includes substantial television and video manufacturing capabilities - would be privatised as a single unit, or if Thomson-CSF would be divided up for separate privatisation.

Gomez admits that the decision for Thomson to take a stake in the capital of the financially devastated state-owned Credit Lyonnais bank several years ago was a mistake on his part. Thomson has contributed Fr20 billion to shoring up the bank, inflicting considerable damage to its own finances.

Source: Flight International