Béchat says Snecma and Sagem merger is about sharing technologies and markets, despite what sceptics think
Hours after the merger between Sagem and Snecma was completed, workmen were erecting the group’s new name – Safran (French for rudder) – above Snecma’s Parisian headquarters. At a corporate level, the new management team wasted no time in stamping a new identity on a union between the aeroengine and equipment giant and telecommunications and electronics company that raised eyebrows when announced late last year because the businesses appeared to have so little in common.
Two months on from the merger, which created a French industrial powerhouse with sales of €10.4 billion ($13.2 billion), former Snecma chief executive Jean-Paul Béchat is working overtime to convince a sceptical financial community that – beneath the façade – the whole is greater than the sum of the parts.
At first sight, little appears to have changed. Béchat has taken on chief executive role at the new company and is based in his old office overlooking the Seine. Safran now comprises four divisions. Two – propulsion and equipment – are the former Snecma aerospace operations, and two – communication and defence security – belonged to Sagem. With some tweaks, brand names have been kept. The engine business is continuing to trade as Snecma (rather than Snecma Moteurs), alongside the other former Snecma companies such as Labinal, Messier-Bugatti, Messier-Dowty and Turbomeca. The Sagem name stays for the telecommunications and defence electronics businesses.
Béchat, who has spent most of his working life with Snecma after joining as a graduate engineer in 1965, says the merger will not dramatically change the way the two companies are run at an operational level. “It was important that each business unit was not disturbed by the event,” he says. “The merger was mainly at HQ level.” However, benefits will be felt in several other ways, including the ability to exploit new markets, make cost savings and jointly develop and package combined products, he insists.
Snecma’s strength with Boeing – it has been supplying the 737’s CFM International CFM56 engine since the early 1970s with General Electric and subsidiary Messier-Dowty recently won a landmark deal for the landing gear on the 787 – gives the Sagem businesses its first “in-road to the US”, says Béchat. “When we announced the project to Boeing, they congratulated us and told us there were big opportunities with them,” he says.
“Sagem has had great success with Airbus, consolidating the data from 30 different electronic boxes on the A380, for instance. But their turnover with Boeing is zero. We believe we can change this because we have a record of delivering what we say we will.”
The US homeland security and defence market is another target. Snecma has had some success supplying US primes on military contracts, but Sagem has “a very interesting relationship with a lot of police departments, including the FBI”, says Béchat. The company is the world number one in biometric applications.
Béchat believes a second related, key advantage from the merger will be the ability to share technologies and bundle products for customers. The company has already set up a “common team” to design the 787’s electric brakes, comprising specialists from Sagem and its Messier-Bugatti unit. “All our mechanical products are controlled more and more by electronic boxes,” he says.
A third driver for the merger was economies of scale. Béchat has extended Snecma’s network of purchasing teams across the whole company. “There are 40 families of products that we buy as a group. It means we can benefit from the best prices,” he says.
There are cultural challenges in melding two companies from different backgrounds – one an industrial concern with a history of state-ownership and working with international partners; the other a formerly family enterprise with an entrepreneurial flair for developing products for a largely domestic market. But this can be overstated, says Béchat. “In my day to day work, I am not faced with problems of culture. I am faced with difficult customers and tough competitors,” he says.
One of the effects of the merger was that the government, which had been trying to privatise Snecma since the commercial airline market downturn after 2001, has become a minority stakeholder in Safran. It owns 31%, with 39% traded on the stock market and 19% held by employees (institutions and other shareholders have the remaining 11%). We spoke to Béchat just after the French voted no to the European constitution in a referendum. Many felt the vote would put the brakes on further sell-offs of French state stakes in industry. Although Béchat says he does not know what the government’s agenda is, he believes state-ownership has had little effect on Snecma. “It is not a problem,” he says. “It has not prevented us from doing business with US companies such as Boeing for years.”
Before the merger was announced, Thales was seen as Snecma’s most logical suitor. Béchat is emphatic that Snecma did not shun its most suitable marriage partner. “People have their own ideas, but for sure we have chosen our path and only the future will tell if we were right. For us it has been a good thing,” he says. Although he believes further consolidation in the European aerospace and defence market is inevitable, he says industry has made faster strides than governments, and that joint procurement is the only way to sustain a European defence industrial and technological capability.
“Europe spends a third of the US defence budget,” he says. “[Industry] has made progress with Eurofighter, A400M, NH90 and Meteor. We are ahead of the governments. We are waiting for them to get their act together.”
Source: Flight International