Manfred Bischoff, DASA's new chief, is likely to have his reputation for pragmatic management tested this year.
With Jurgen Schrempp moving over to take the helm of industrial giant Daimler-Benz in Stuttgart, the leadership of Daimler-Benz Aerospace (DASA) has now passed to former finance chief Manfred Bischoff.
Bischoff, a doctor of economics, has been with DASA since 1989, developing a reputation as a pragmatic, calculating manager. His first year as company president and chief executive looks set to be a challenging one.
High on the agenda is the effect which the low value of the dollar continues to have on DASA's performance. Bischoff predicted in April that the company could return to profit this year if the dollar maintained an average value of DM1.6.
It has hovered close to DM1.4 for about six months now, condemning the company - despite the implementation of a radical restructuring plan - to another year in the red to the tune of several hundred million deutschmarks.
Bischoff argues that, in this situation, the German Government is not doing all it could to help an industry it recognises to be of importance as a technology driver, affecting Germany's international standing.
"The Government has become more and more aware of the strategic importance of our industry, but the results, in relation to [the support that] our competitors have received, are still unsatisfactory," he says.
The trade agreement between Europe and the USA on Government support for programmes for aircraft with 120 or more seats allows indirect support of 4% for an individual company and 3% for the industry overall. European support does not come close: in 1994, DASA received DM16 million support from Bonn when the agreement would allow it to receive DM400 million.
The German Government announced in 1994 a DM600 million support package for civil-aerospace research and development, to be paid out for specific programmes over four years, on the condition that industry matches this. Bischoff describes this as "a first step, but by far not sufficient", especially compared to the USA, where indirect support mechanisms are well-established and the Government is not shy of throwing its political weight behind international deals.
"Our feeling is that, especially in the last two years, the Government support which our US competitors have received in trade were beyond what we have ever seen before. The USA is using its unique position as more or less the only superpower to turn that into trade advantages," says Bischoff.
In the face of such competition, no European company can hope to compete standing alone. The need for efficiency and access to larger markets is driving companies towards specialised joint ventures - as yet falling short of complete mergers, which would be hampered by individual states' desire to maintain a national role, particularly in military programmes. DASA is establishing joint ventures with shared industrial leadership, such as the well-established Eurocopter, and the planned European Missile Systems and European Satellite Industries ventures - all of which are partnerships with France's Aerospatiale, which is DASA's main partner in Airbus.
Bischoff sees Airbus as "the centrepiece of the European aviation industry", but believes that it is time to turn the grouping of economic interests into a real company. At the moment, Airbus activities are limited to co-ordination, marketing, sales and product support, and the partners are restricted in their placement of production work by obligations to the governments which have helped finance the venture.
"Airbus has been a political initiative to avoid the threat of a monopoly, much more than an industrial, initiative, because private industrial initiatives would not have been able to carry the risk involved in such an endeavour," says Bischoff. Redefining Airbus as a real company, with control over everything, from research, through production to after-sales support, will allow the entire operation to be run more efficiently.
Bischoff believes that Europe's regional-aircraft capacity could also end up being linked to Airbus. Although DASA has not been included in the European regional-aircraft joint venture, the ATR/British Aerospace-owned Aero International Regional, Bischoff is sure that this is nowhere near the end of the story.
"The acquisition of Fokker by DASA was the first step towards European regional-jet integration, and there is now a second step with ATR and BAe coming together," he says. The next step for DASA could be drawing other European companies into a joint Euro-Asian regional-jet programme . The German company and its Dutch subsidiary are now involved in a feasibility study on a new 120-seat regional jet with Aviation Industries of China (AVIC) and Korea's Samsung.
Bischoff envisages a programme yielding two aircraft versions - one Asian and one European, each catering for its own market. DASA aircraft group president Hartmut Mehdorn says that this idea has found favour with AVIC, which would lead the Asian side of the programme. Other potential European participants have yet to be convinced, although Mehdorn remains optimistic that they will become accustomed to the idea.
Bischoff wants to link the European side of the regional-jet programme to Airbus, most likely as an "add-on" regional-jet company similar to the recently announced formation of Airbus Military, which is to manage the European Future Large Aircraft programme. The aim is to produce the European aircraft with a high level of technical commonality to the Airbus single-aisle family, complementing the lower end of the Airbus range and the upper end of the Fokker JetLine series.
"I think there is a basic understanding, at least between the Airbus partners and Alenia, that we have in the future to find a common European structure for our regional-aircraft activities," asserts Bischoff. Underlining the importance of the booming Asian market - and bearing in mind Boeing's overtures to Far Eastern companies with its New Small Airplane (NSA) study - he adds: "It is obvious that, if the Europeans are not united in their approach to Asia, we will not win against US competition."
As with the regional-jet sector, he believes that a similar Airbus add-on company, or even the same company, could in future handle European turboprop capacities.
European manufacturers are well aware of the need to eliminate overcapacity in the turboprop field, and that their individual programmes are too small to be profitable, but none of them is willing to sacrifice their aircraft for the sake of a joint venture.
"The issue can only basically be resolved with the new generation of aircraft," says Bischoff. "The question then is how long can the prevailing programmes go on and in what kind of form we can sustain them. It might be that one or another could come to an end earlier than some thought it would."
DASA is already believed to be making efforts to co-ordinate its research into next-generation turboprop technology with that of other European companies.
Bischoff says that DASA's loss-making Dornier 328 programme is now "close" to achieving a positive cash flow on each aircraft sold following an extensive cost-cutting drive, and stresses that recently revealed talks with production partner Daewoo on a Korean 328 production line will only bear fruit if such a move would give DASA access to additional markets which it would not otherwise be able to reach. The talks do not signal an attempt to move 328 production out of Germany to a lower cost region, he insists (Flight International, 14-20 June).
Another business field ripe for rationalisation is the military-aircraft sector. DASA's military-aircraft division is periodically the subject of sell-off and merger rumours in the German industry, and Bischoff denies any sales ideas, but concedes that it would make sense to bring it into some kind of European alliance.
"I don't think Europe can or will once more afford to develop three fighter aircraft at the same time [the Eurofighter 2000, the Saab JAS39 Gripen and Dassault's Rafale] for the limited amount of aircraft we need. Secondly, I am convinced that even today's Eurofighter partners are not willing to accept again a structure like that which is now in place. We have a lot of bureaucracy which eats up money instead of concentrating on the development of the aircraft," says Bischoff.
"I think we have to develop closer alliances in the field of fighter aircraft ... [and] the next step has to be creating centres of competence: this can be done by joint ventures or other models - that is open - but I think there is a clear understanding, at least for the time being on the British and German sides, that we have to push in that direction," he adds.
The UK has recently stepped in this direction with its Gripen export joint venture with Saab, "...but further concrete moves towards a European military-aircraft alliance are likely to be a matter of years yet", says Bischoff.
Revived talks between DASA and German rival BMW on forming an engine alliance on the basis of a BMW participation in MTU are "on a good track", insists Bischoff, although "...there might be some issues which can be resolved over time, like conflicting engine interests".
MTU is working together with its strategic US partner Pratt & Whitney on the mid-thrust family engine (MTFE), a direct competitor with BMW R-R's BR700 series. An MTFE demonstrator core had its first test run at the beginning of June, much to BMW R-R's chagrin, and the engine is now on the shortlist - alongside the BR715 - to power Boeing's NSA - should it ever come about.
Bischoff says that he believes a business strategy focused on a single engine - such as BMW R-R's - is "...such a risky procedure, I would never follow it".
"What happens if your engine is a failure? What happens if you don't get the SAS contract, and the next one and the one after that? Then you are sitting there with huge development costs," he argues. He adds, however, that he believes that there are solutions to all the remaining differences between the two engine manufacturers, and stresses that any future partnership with BMW R-R would be careful not to violate obligations to MTU's US partner.
"Both parties take care of their contractual obligations," says Bischoff. "Either they are 100% fulfilled as they are, or we have an agreement with our partners to change them."
Source: Flight International