Joseph Ackerman, president and chief executive of Israel's Elbit Systems (chalet A332) tells Flight Daily News about his plans for the defence company's future
You keep saying that Elbit is a multi-domestic company. Are you going to strengthen this formula in the coming years?
Ten years ago we analysed the market in which we operate, and concluded that from a geographical standpoint our sales will be divided as follows: 25% to the Israeli market, 30% to the USA, 20% to Europe and the remaining to the rest of the world.
Over the years, we realised that our assumptions and analyses were correct. We discovered that, particularly in the defence industry, governments and armies would rather be equipped with systems manufactured by their local industries. Therefore, most security budgets in the world, especially that of the US Department of Defense (the largest of its kind), acquire mainly from local industries.
This is to protect local industries, and of course to keep sensitive defence-related information from falling into the hands of foreign companies.
Recently, additional operational requirements were added: the immediate supply of systems for the battlefield as well as the reduction of geographic distances between customer and supplier. Nowadays, Elbit Systems has many subsidiaries around the world that operate as local companies: they employ local workers, they work in collaboration with the local authorities and government and they are very well acquainted with local customers' needs.
We recently established a subsidiary in South Korea and an office in Australia, and we will continue our policy of establishing local companies.
What are Elbit's main engines for growth?
Elbit has several: the unmanned air vehicle field in particular and robotic technologies in general, electronic warfare, computers and communications, advanced electro-optical systems and more.
Since we always strive to maintain relevancy, we have added two additional growth engines. One is logistics support services, a field which we identify as one of great demand in Israel and throughout the world. We have experience in many projects in Israel such as maintenance for the Israeli police's helicopters, operating the Israeli air force's flight school as well as its training centre, and more.
Elbit has specialised in acquiring technologies from outside sources. Has that method proved itself?
The main source of Elbit Systems' new technologies is research and self-development, and we invest more than 8% of our sales in R&D, a high investment in comparison with defence companies in the world, which invest on average half of this amount. We believe that the investment in R&D is the key to the company's success in future.
Additional technologies are obtained through acquisitions. One consideration that guided us as to locating companies to acquire is technology. Through locating complementing technologies, we are able to successfully provide customers with suitable solutions, based on a variety of technologies, that create synergy and provide added operational value.
What are Elbit's near-term and long-term goals?
As a publicly traded company we are unable to disclose this information.
But we predict that we will maintain double-digit growth in 2009 as we have in recent years. We will continue to provide customers with advanced solutions for the battlefield, in every area we operate, as well as areas that are the outcome of modern combat doctrines, and especially in fields that demonstrate our special capabilities that are a result of the synergy formed by our diverse areas of activity.
We pay attention to innovative and integrated solutions that are considered "system of systems" and that are able to connect between land, air, naval and space systems, thus enabling them to work in unity. This derives from our assorted technologies, designed in an open architecture. I believe that this unique ability will provide us with new challenges, assist us in breaking into new markets and to accomplish strategic agreements with other manufacturers worldwide.
In the past, Elbit was active in upgrading aircraft. Has this market exhausted Itself? If not, can you tell us about the activity?
Elbit Systems is a leader in aircraft upgrades. We see upgrades as an evolving market with tremendous potential. We predict that the financial crisis will place the upgrades in the centre of activity, as an alternative for new aerial platforms. The fact that a systems upgrade provides low-cost advanced capabilities cannot be overlooked.
In addition, we take into consideration that developing and manufacturing new aircraft is a process that takes years, as opposed to the upgrading of a system, which is a much shorter procedure. The upgrades field in Elbit is dynamic, and the diverse capabilities that we provide for our customers is almost unlimited. We invest much of our resources in this field, for both Western and Eastern platforms, and the markets are spread through all the continents,.
How has the world economic crisis affected your activities and has that brought a basic change in the company's future strategies?
Elbit Systems has placed profitability as a key goal. Efficiency processes are an integral part of our corporate culture and the economic crisis today emphasises their importance. However, there are areas that will not be cut, but continue to be invested in, such as research and development as well as the investment in our employees, who are the true and most important asset. We believe that continued investment in these fields will help us not only to successfully overcome the economic crisis, but to come out of it in a strong position. The economic crisis may also unravel some opportunities for a company like Elbit Systems. We believe that a number of companies all over the world will be for sale, and as always we will try to locate companies that are most suitable for us to acquire
This show takes place in the middle of this crisis. Have you scaled down your presence? What do you expect of the Paris air show in terms of new business?
The Paris air show is a significant and unique meeting point for the international aerospace and defence industries. The show enables clients, suppliers and strategic partners to gather and directly exchange views and ideas in a short time. In addition, the show makes it possible to present new capabilities in a tangible way to high-ranked officials and various decision makers, while creating a good foundation for further co-operation. We intend to meet all our customers and to present our capabilities to them and potential clients.
Elbit has become a very advanced UAV manufacturer. Based on the forecasts about UAV use in the future, do you plan to expand this activity? Will you consider joint ventures or acquisitions as one way of such an expansion?
Elbit Systems is a pioneer in the unmanned vehicle systems arena. For over 10 years our UAVs have been the backbone of UAV operations in the Israeli defence forces.
Two main UAV programmes in the defence forces are based on our systems: one on the Hermes 450 and the other on the Skylark II. Our UAV line is expanding and we continue to develop new generations. Former platforms are also constantly upgraded. For example, we are improving the Hermes 450, a UAV that is the backbone of a number of important global UAV programmes.
We will be presenting a new UAV at the Paris air show, the Hermes 90, a vehicle that benefits from the proven capabilities of the Skylark and Hermes families and is suitable for manoeuvring forces. Our US subsidiary has recently formed a joint venture with General Dynamics to offer the Hermes 90 with additional capabilities for the US market, for the US Marine Corps Small Tactical Unmanned Aircraft System (STUAS)/Tier II programme.
Elbit is the largest Israeli private defence company. If the government decides to sell some of its stake in the three state-owned defence industries, will you bid?
For a long time now, we have stated our opinion that the Israeli government should privatise defence industries in its possession, as is done in most of the modern countries. Government-owned defence industries have remarkable technological and financial achievements, but only if they are privatised will they be able to equally compete against other industries in the world. I say this as an Israeli citizen and as an industry leader of a non-government owned defence industry. As for Elbit Systems' intentions to compete in purchasing the shares of these companies, if privatised. Our long-term policy is to acquire companies with complementary technologies or companies with access to markets in which we are not operating.
In recent years we have acquired El-Op, purchased Elisra and acquired Tadiran Communications and Kinetics, as well as other smaller companies. We do not acquire companies just to create a larger volume of activity. We have expressed our desire to be involved in purchasing activities of government-owned defence industries. The state is well aware of our position.
Has the consolidation of the defence industries, mainly in Europe, proved itself?
Not only in Europe. We have witnessed the development of this process for several years now and we assume it will continue, especially due to the economic crisis. When it comes to the defence industries, size is definitely an important factor. The size and survivability of the company give the customer the sense that he is entrusting sensitive defence-related issues in the hands of the most responsible and skilled.
Only a large and liable company is able to invest in research and development and apply lessons into its systems as well as incorporate feedback received from users. A large company is able to back up clients in terms of services, guarantee and assistance in times of crisis and will be there for the customer far beyond the warranty of the product.
We are proud that all our acquisitions and mergers have been recognised as successful and that we have been able to keep the professional workforce in the acquired companies, as well as the unique knowledge and technologies and we are already enjoying the fruits of these mergers.