EADS's first decade of activity has advanced its defence activities from being a collection of disparate national capabilities to Europe's "Champions League", but now it must make progress towards becoming a global entity. That is the belief of Stefan Zoller, chief executive of the company's Defence & Security (DS) division.
With 21,000 employees, the unit covers the following business areas: Defence and Communications Systems; Defence Electronics; and Military Air Systems. The latter is dominated by EADS's German and Spanish interests in the Eurofighter programme, which account for 46% of the four-nation consortium. Separately, it also has a 37.5% stake in guided weapons company MBDA.
DS is looking to build on what was a record year for trading in 2009. Revenues were worth €5.4 billion ($6.6 billion), new orders totalled more than €7.9 billion and its orders backlog was valued at €18 billion. "We are the most profitable division of EADS and a strong asset to the global business," says Zoller. "We are outperforming the planning curve: that's the message of the past five years."
Highlights from last year's business activities included the signature of the 112-aircraft Eurofighter Tranche 3A contract by the governments of Germany, Italy, Spain and the UK. Saudi Arabia also provided a fresh sales spike by ordering an armaments package with MBDA for its 72 Eurofighter Typhoons.
Away from its military equipment deals, the unit also made a major security sale with Riyadh, under which its technology will be used to safeguard more than 9,000km (4,860nm) of the nation's borders. This helped to contribute to a strong performance that saw exports account for 40% of all orders.
The DS orders intake value has fluctuated markedly over each of the last several years, rising from around €5.2 billion in 2006 to almost €7.5 billion the following year, before dipping back to less than €5.3 billion in 2008. "It's a cyclical business, but the trend is increasing," Zoller says.
The divestment decision comes against a backdrop of European industry having reached what Zoller sees as - for now at least - an end-game in large-scale tie-ups. "There is no growth in consolidation. The only advantage is in cost synergies."
Indeed, in some instances customers are looking to move the other way, towards a form of "renationalisation". One example is the UK's desire to hold sovereign control over key technologies such as guided weapons and unmanned air vehicles.
Once combined with the budget difficulties now being experienced in many of the continent's leading nations in the fall-out of the recent economic crisis, Zoller says: "We have to assume that Europe won't deliver more than what we've got today. The only reality is that we need to be an international player. We have had national industries become European, now we must reach further."
Along with other major European companies including BAE Systems, Dassault, Finmecannica and Saab, EADS is increasingly looking to move beyond its domestic borders. This requires it to look at potentially making acquisitions to gain a foothold in a new country, and once there, invest further in initiatives to support wider industrialisation.
"Our customers are changing, and we must change with them," Zoller says. "There are no exports any more: you have global presence."
In addition to selling defence hardware, such as in Saudi Arabia, this has also taken the form of providing security for national infrastructure, such as Moroccan ports, and supplying secure radios to Brazil and China.
Its acquisition of this Professional Mobile Radio business has now led to nearly 70 contracts, including in support of the 2008 Olympics in Beijing.
"DS is now the trigger for more business in countries," Zoller says, citing follow-on opportunities to provide everything from helicopters and cars to IT services and security systems.
But while the international market brings great opportunities, it also opens up often significant challenges. For example, EADS is leading a bid to meet the Indian air force's medium multi-role fighter aircraft requirement with a package based on the Typhoon, but along with its five rivals will face a massive test if it is to meet New Delhi's contract stipulations. "There is a 50% direct offset requirement, with an industry that doesn't yet exist," he says.
In support of such potential opportunities, DS has recently upped the value of its internal spending on research and development activities from €150 million to €210 million a year. "Globalisation doesn't come for free," notes Zoller.
Areas of investment include active electronically scanned array radar technologies linked to the Eurofighter - a vital development if the type is to secure continued export orders - and in UAVs.
DS is continuing its efforts to offer the Talarion medium-altitude, long-endurance UAV to France, Germany, Spain and potentially also Turkey, and is to continue self-funding the project while their cash-strapped militaries struggle to balance operating budgets against long-term equipment priorities. The design is also now being promoted to the UK as the "X-UAS", with significant national content.
Zoller hopes to secure a development and production contract for the multirole Talarion from 2011, with a 15-system deal projected as worth around €3 billion. "A product like this is decisive for the future of the military aerospace industry in Europe," he argues. "Otherwise there's nothing coming next."
To date, EADS has spent around €500 million on UAV projects, with this also covering its involvement in the German air force Euro Hawk and NATO Alliance Ground Surveillance projects - both with Northrop Grumman - and the Barracuda technology demonstrator.
Major difficulties have afflicted several of EADS's major multinational projects, such as to develop the Airbus Military A400M transport and produce the Eurofighter, Zoller concedes. "The lessons learned are not too promising, and the mood for large international collaborative programmes is limited. But we have to share somehow."
However, the EADS executive committee member seeks to differentiate his unit's credentials. "All DS programmes are on track. We deliver what we promise on all that we do."
Looking back to its defence business of 10 years ago, Zoller concludes: "It's something that you can't compare. When we started with EADS it was loss-making. Now we are in the Champions League of European industry."