Finmeccanica envisions Turkey as a strategic partner

Date: Issue 14 - January 2009

Defence Turkey: Could you please assess the position of Finmeccanica in global markets for our readers?

Finmeccanica is Italy?s leading manufacturer in the high technology sector and ranks among the top ten global players in aerospace, defence and security. Thanks to the strategic investments made in recent years, Finmeccanica now has a well-established presence on the international market as an industrial integrated group acknowledged for the technological excellence of its products and focused on global development.

The Group?s business is based on the three strategic pillars of Helicopters, Aeronautics and Defence Electronics and Security, which generate some 66% of revenues and account for around 74% of the workforce. Finmeccanica is also Europe?s leading Defence Systems company, and enjoys a strong presence in the Space sector where it controls satellite services, as well as having substantial expertise and consolidated positions on the Transports and Energy sectors. The technological excellence of its products is the foundation on which Finmeccanica has built its worldwide success. It has become a global competitor and a reliable partner in some of the most important international programmes, establishing a significant and growing presence in Europe and the rest of the world, and most notably, in the world?s two biggest defence markets ? the UK and the US, which has become domestic markets following the acquisitions in the Helicopter and Defence Electronics and Security sectors.

Today Finmeccanica is an industrial holding which operates, in Italy and abroad, through owned companies and joint ventures, with more than 150 locations overseas, of which more than a third are production facilities. The headquarters are in Italy with facilities all over the country; the largest operative sites abroad are in United Kingdom, France and United States. Finmeccanica has main sites and representative offices in Brussels, Moscow, Kuala Lumpur, New Delhi, Singapore and Abu Dhabi, just to mention only the most important.

Geographically speaking, Finmeccanica has gained a well balanced and diversified revenue profile: around 26% of 2008 revenues, which amounted at about 17 billion euro (including pro forma DRS Technologies), came from Italy, while 12% from UK and 22% from the rest of Europe. Outside Europe, North America accounted for 22% of revenues and the rest of world for 18%. Orders in 2008 were at 17.6 billion euro and grant Finmeccanica an international footprint which, in turn, underpin the organic growth of our Group. The geographical origin of the orders is also a significant barometer of the level of internationalisation. In 2004, only 20% of orders originated outside the domestic market, which was then represented solely by Italy. Today, the international orders, excluding Italy and UK, represent 60% of total order intake.

Around 41% of the 73,000 employees are located outside Italy. The most important production locations for the Group abroad are the US with over 12,600 employees, the UK with a staff of about 10,100 and France with over 3,600 employees.

Defence Turkey: What is your strategy to strengthen your position in international markets?

As for our strategy on international markets, we intend to drive further profitable growth of the three strategic pillars, also leveraging DRS Technologies? position in US. To do that we need primarily to integrate at maximum the expertise and tools we acquired over the years in these sectors. A successful integration results in a stronger foothold on the international market as we can present ourselves as a company belonging to the national industrial base of our domestic markets: Italy, UK and, from now on, also the US. The second path on which we will move is that of strategic alliances, both in specific business sectors, where we can exploiting particular niches of excellences and in specific geographic areas, where we follow with interest the emerging and high potential growth markets, such as India, Malaysia, Turkey, the EAU. In these countries we aim to establish solid industrial partnership rather than to simply exploit a potential market.

Defence Turkey: Italian Defence Industry have taken significant steps following the merge under the umbrella of Finmeccanica. Could you please enlighten us the history of establishing Finmeccanica and how it pushed the industry forward?

Finmeccanica was born in 1948 to manage all the holdings in the mechanical and shipbuilding industries owned by the Italian Government. At the beginning the portfolio of Finmeccanica was highly diversified (comprising shipbuilding, car manufacturing, railways, industrial machinery). That?s the reason why the management progressively decided to focus on specific key sectors. After the split up of the shipbuilding industry (in a newly-created financial holding, Fincantieri) and the selling of the car manufacturing sector, the Group concentrated on the aerospace and electronic systems business, through the creation of Alenia and, in the meantime, regrouped all the in-plant, energy and railways activities in the Ansaldo group. In 1992 Finmeccanica made its entry on the stock market and soon after acquired a number of companies operating in the helicopters, defence and avionics sector, creating a ?defence pole? which gathered over 70% of Italian aerospace and defence industrial capacity. In the Nineties the Group established some joint venture with major European players operating in radar systems, helicopters, missiles and regional aircraft. In 2002 Finmeccanica started the transformation from a financial holding company into an integrated industrial group and launched an expansion policy in the aerospace, defence and security sectors, by the acquisition of the 100% of AgustaWestland and of some important British assets in avionics and defence communications. Meanwhile Finmeccanica agreed with Thales to form the Space Alliance, started collaborations with Boeing and Airbus on specific projects and established a partnership with Russian company Sukhoi for regional aircraft. Lastly, in 2008 acquired the US company DRS Technologies, active in defence and security systems, gaining a strong foothold on the US market. These strategic decisions shaped the Finmeccanica of today, a group solidly based in Italy but with a high profile on the world stage and a well-established presence on the international market.

Defence Turkey: Finmeccanica companies have participated to some of the defence projects in Turkey in recent years. What can you say about the Italian Defence company?s achievements taken in these projects?

Italian Defence companies have been working with the Turkish counterparts for a long period, establishing strong partnerships in the defence sector, particularly in the helicopter sector, with about 200 AgustaWestland helicopters supplied and in the training sector, through Alenia Aermacchi in the past. These results have been achieved with the collaboration of the Turkish Aircraft Industries. Alenia Aeronautica and TAI have also teamed together to provide 10 ATR 72ASW, opening the way to other cooperation such as the recently concluded deal for 50 firm and 41 optional T129 attack and reconnaissance helicopters (ATAK programme). Moreover Finmeccanica?s companies have supplied air traffic management systems, military radar, communications systems and naval guns. Lastly, in the missile sector the Turkish Rocketsan cooperates with MBDA on some international programmes. The main achievement for our companies is that they have established long-term strategic industrial partnerships with the local industry to address domestic market needs and to jointly exploit export opportunities, paving the way for an enduring and structured cooperation between Italian and Turkish industry from which both countries will mostly benefit. This has been achieved also thanks to the opening of representative and operational offices of AgustaWestland and Alenia Aeronautica, as well as the creation of SELEX Komunikasyon company (controlled by SELEX Communications) which supplies military telecommunications.

Defence Turkey: What are your views and comments on the Turkish Defence Industry?

Turkey has a very high level industrial system, mostly in the framework of the Turkish Armed Forces Foundation. These companies are well-acknowledged in national and international field and can rely on a highly skilled workforce. That?s why Finmeccanica has chosen to work with Turkish counterparts to expand its business, through a long-lasting collaboration on domestic and international programmes, laying the foundation for a valuable exchange of know how and a joint development in leading edge technologies and, in the same time, involving local resources and workforce.

Defence Turkey: What is your strategy and short and long term plans for coming years to strengthen the cooperation between Italian and Turkish Defence Industry?

The excellent relationships between Turkey and Italy at political and industrial level and the results achieved within a long term collaboration encourage Finmeccanica to look for new opportunities. Finmeccanica is ready to contribute to future Turkish Armed Forces? programmes and to establish strategic alliances with Turkish Defence Industries, with particular focus on the companies of the Turkish Armed Forces Foundation. I think there are plenty of opportunities for a cooperation in industrial and commercial sectors both at national and international level through specific MoUs in the field of common interest. Here we are thinking of Havelsan, TAI, Haselsan and Rocketsan, to name just a few. Our objective is to develop new technologies, platforms and systems with these companies, both for the domestic and export market.

Defence Turkey: What kind of events and visits have been realized to strengthen the relationship between two parties? What kind of activities are you planning for the coming period?

Many steps have already been made to tie the relationships between Turkish industry and us. I refer in particular to the participation at joint tenders, to direct investments in Turkey, to the opening of the representative offices of our companies. Moreover two years ago Finmeccanica held an ?Industry Day? in Ankara fully dedicated to the presentation of the Group, its companies and their capabilities and activities in the country. The Industry Day was organized thanks to the support of the Undersecretaries for Turkish Defence Industries as a follow up of the latest bilateral meeting between Italian e Turkish National Armaments Directors with the presence of major Turkish Defence Companies. We are thinking to make another initiative of this kind in the next future, as well as to carry out some projects in the framework of the Italian-Turkish Friendship Association.