Owner Carlyle Group seeks to eliminate overlaps in its proposed European portfolio

Italian aero engine manufacturer Avio is focusing on implementing its wide-ranging rationalisation and cost-cutting programme ahead of any potential co-operation with other European manufacturers.

US investment company Carlyle Group acquired a 70% stake in the company - formerly FiatAvio - in July and is thought to be the lead contender bidding for German manufacturer MTU Aero Engines in an attempt to consolidate Europe's second-tier propulsion sector (Flight International, 8-14 July).

Carlyle is understood to want to eliminate any overlaps in its eventual European portfolio, concentrating each manufacturer on specific subsystems. Giorgio Abrate, Avio head of business development, says the company's strategy has not changed after a recent series of meetings between senior management and the new investors, which also include Italian state holding company Finmeccanica.

As part of a wide-reaching business re-evaluation, Avio will focus its civil activities mainly on transmission systems in an effort to reduce costs. MTU specialises in low-pressure turbines and low- and high-pressure compressors for civil projects, and has few products that conflict with those of the Italian company.

Abrate says: "If there were a stronger alliance with MTU, there could be some reorganisation to formalise these specialities."

Avio is completing a €100 million ($112 million) move from its facilities in central Turin to a larger plant outside the city, part of a strategy to reduce manufacturing costs by 20-25%. "By focusing on our customers' priorities rather than trying to compete for every component, we can become as lean as possible," says Abrate.

Carlyle has also approved Avio's recent increase in research and development spending to around 10% of revenues, which brings the company in line with other European engine manufacturers, says Abrate.

Civil engines make up about 40% of Avio's business. Consolidation in the military sector may prove more challenging, with the Italian defence ministry keen to retain turbine expertise in Italy for engines such as the Eurojet EJ200, General Electric F136 and Honeywell F124, on all of which Avio is a partner.

Source: Flight International