A new start for the Defence industry

A new start for the Defence industry
The privatisation of Thomson SA
Merging Aérospatiale and Dassault
Ship-building (DCN)
GIAT Industries

A new start for the Defence industry

"The future equipment of our Armed Forces can only be ensured at the price of an adaptation

of our industrial armament policy"

Jacques CHIRAC, 23rd February 1996

The Government has decided to reinforce our industrial structures in the fields of high technology and to rationalise the whole armament sector. This decision was necessary in the face of increasing international competition. Restructurations on a national and on a European scale are absolutely essential for the maintenance and development of our industry.

In the first instance, these measures concern the aeronautic and electronic industries. France holds major assets in these two fields. These industries were capable of taking up the challenges of post-war reconstruction and the great programmes launched by General de GAULLE. Our place is among the best, both in Europe and throughout the world, in the fields of civil (Airbus, ATR) and military (Rafale) aeronautics, helicopters, missiles (Ariane, strategic systems, tactical missiles), data and communication systems, equipment, etc.

Our companies are to have the best cards to hand in order to consolidate this position and to be capable of creating even more activities, which in turn will generate employment. It is essential for them to come together in all the fields where an economic and industrial interest is at stake, for they must increase in size and competivity.

The Government has the strong intention of bringing this project to a successful conclusion. It has the means of succeeding whether through its participation in the companies concerned (Aérospatiale, Thomson SA, Dassault Aviation) or within the framework of the decisions and options in terms of investments to be made within the coming military programming bill. It is intent on implementing these means.

Two decisions have just been made : the privatisation of Thomson SA and the reunion of Aérospatiale and Dassault Aviation. In both cases the objectives are clear : to preserve the integrity of industrial, technological and human capital whilst developing essential synergies ; to preserve the interests of National Defence ; to open new development perspectives ; to pursue and reinforce the policy of alliances, reunions or fusions which have already taken place on a European level, as is the case between Aérospatiale and the German group DASA.

In the ship-building field, a work-group is heading a study on the future of DCN industrial service. It has just made a diagnostic which brings to light the strengths and weaknesses of industrial service and ten shipyards around which a phase of active discussion is presently underway.

As far as land armaments are concerned, the Chairman of GIAT Industries has just carried out, at the Government's request, a full examination of the company's financial situation. A phase of discussion is underway in order to draw up a development plan in terms of possible European alliances.

The present environment, the difficulties encountered by certain companies in the armament, aeronautic and space sectors are not to engender withdrawal symptoms. France must have a determined and dynamic view in these fields of excellence and our Nation is up to it indeed. This is the project the Government is setting up. It will, in particular, comprise the maintenance and development of the innovative abilities of our high technology small and medium-sized companies and industries. Such is the condition for a healthy industry in the future.

Finally, the General Armament Delegation (DGA), founded by General de GAULLE in order to endow France with a nuclear deterrence force, must now re-establish its missions and methods within a renewed procurement system in order to be better suited to a tighter budget and a more structured industrial situation than at the beginning of the 1960s.

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Privatisation of Thomson SA

The Government has just undertaken the privatisation of Thomson SA. Its objective is to privatise the Thomson group by the end of 1996.

This will enable the group to recuperate strategic scope to manoeuvre comparable to that of its competitors, thereby ensuring its industrial potential.

This move underlines the Government's determination to allow the Thomson group to become, in the highly strategic sector of electronics, a major pole capable of participating in the restructurations and reunions required on a European level in order to preserve our industrial competivity in the face of American competition.

No privatisation plan has been decided upon. The task of the new Chairman of Thomson is to examine all the options and to submit his proposals to the Government. These proposals will be studied in close collaboration with the State within the time-limits allowed by the end of 1996 objective.

The examination of the various means of privatisation will be carried out openly. The State will strictly ensure, whatever solution is chosen, that the essential interests of National Defence are preserved. It will also ensure that Thomson CSF and Thomson Multimedia are able, throughout the privatisation period, to pursue their national and international activities in the best possible conditions.

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Merging Aérospatiale and Dassault

> Why ?

The Government has just decided to constitute a major French civil and military, aeronautic and space group, capable of playing a federating role within Europe and of rivalling with American competitors.

France has considerable assets at its disposal in this field ; these industries have proved capable of taking up the challenges of post-war reconstruction and the great programmes launched by General de GAULLE. Our place is among the leaders, both in Europe and throughout the world. Our companies are to have the best cards to hand in order to consolidate this position and to be capable of creating even more activities, which in turn will create new jobs.

The objectives are clear : the preservation of the integrity of industrial, technological and human capital whilst developing essential synergies ; the preservation of the interests of National Defence ; the opening of new development perspectives ; the pursuit and reinforcement of the policy of alliances, associating or merging which have already taken place on a European level, as is the case between Aérospatiale and the German group DASA.

> When?

A steering committee has been set up for this operation. It is seated by directors from both companies. It is to put forward on 30th June 1996 the concrete terms of the operation. The objective is to constitute a unique group in the two years to come.

> How ?

The project is to proceed from a true industrial project and is consequently to enable the merging of both research departments and production units. The rationalisation of industrial means, purchasing and sub-contracting policies and commercial strategies of the two French aeronautical manufacturers is essential in conferring the French aeronautic industry with a sufficient technological, industrial and commercial strength in the face of the power and the aggressiveness of American competitors.

This merging should enable both Dassault Aviation and the Aérospatiale group, of which the unity is in no way questioned, to pursue their development in the field of rival civil and military contracts which is the only way of compensating the inevitable reduction in public military orders.

The merging is to go beyond a simple exchange of capitalistic participation which would not enable essential industrial rationalisation. However, no financial scenario has been decided upon at this stage. The conditions in which the operation is to be carried out must, at all events, enable the new industrial group to dispose of a particularly strong financial structure. The group must be in a position of facing up to the investments which will be required for its development on cyclic markets.

The aeronautic and space industries are, for the Government, an essential sector of our high technology industry. In extension to the decisions made by General de GAULLE in favour of this sector, the Government intends, through the merging of Aérospatiale and Dassault Aviation, to constitute a true industrial pole federating this sector within Europe in order to better face international competition.

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Ship-building (DCN)

On February 13, 1996, the work-group studying the future of DCN submitted a preliminary report concerning the situation of this Organisation, thus completing the first phase of clarification.

After analysis, the work-group has noted that the separation, which took place in 1992 between the contractorship activities carried out by the State section of DCN and those carried out by the industrial service, is to be strengthened. It considers that the various industrial service subgroups are truly complementary. It notes that DCN's industrial service disposes of significant assets for becoming the reference industry in the European military ship-building sector. However, several constraints weigh on DCN's industrial service impeding the full expression of its assets and result in a level of productivity which needs to be improved.

The Minister of Defence has requested immediate discussions with staff and trade unions. This discussion is based on two objectives : to take cognisance of the diagnosis and any remarks made and to find solutions.

The work-group will gradually analyse the suggestions made and will carry out further analyses in order to present their proposals to the Minister of Defence on 15th April.

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GIAT Industries

Following the financial diagnostic missions requested by the Minister of Defence and the new Chairman of GIAT Industries, the particularly worrying financial situation of the company has been confirmed.

Within the context of major and continuous reductions in the Army's orders and the reinforcement of international competition, this situation requires in-depth action so that the company can rapidly recover stability in terms of European alliances.

Over the past few months, preliminary measures have been taken. A simplification in the company's Organisation has just been set up. These actions are the prelude to an essential adaptation which has been the subject of broad discussions with the group's staff and management, representative authorities, local politicians and the ministries concerned.

A preliminary examination, by the Economic Commission of the Company's Central Works Council, of the general structure of the viability plan for GIAT Industries is set for the end of February. The Chairman of GIAT Industries will expose this plan to the Company's Central Works Committee at the end of March 1996 and will then expose it in detail to the Company's Board of Directors one month later.

At all events, these restructurations will be carried out without resorting to direct dismissal of workers.