Little Movement Seen on Nexter Privatization

Nov. 21, 2012 - By PIERRE TRAN Defense News

PARIS — France shows little sign of privatizing state-owned Nexter, seen as essential for consolidating the land weapons industry and lifting the sector to a much-needed critical mass, a senior industry executive told a parliamentary defense committee Nov. 21.

Asked about restructuring in land systems, Christian Mons, speaking for the Conseil des Industries de Défense Françaises, a trade association, said, “We’re advancing in a very limited way.

CIDEF is the umbrella organization for the aerospace, naval and land armaments trade bodies GIFAS, GICAT, GICAN.

“As long as Nexter remains a 100 percent state-owned company, without being privatized, this evolution will continue to be slow, even weak.”

Mons, head of GICAT, was giving testimony with Eric Trappier of GIFAS to the defense committee of the National Assembly, the lower house.

“Today we have just seen a merger between Panhard and Renault Trucks,” Mons said. “It’s a step in the right direction but it’s extremely modest.

“We don’t see a political will to restructure this industry so it can resist the competition to which I have just referred and to achieve the critical mass to survive in the next 20 to 30 years,” Mons said.

Renault Trucks Defense (RTD) Chief Executive Gérard Amiel said Nov. 14 he did not expect the government to consider any consolidation moves concerning Nexter until the end of 2013, after the defense white paper and the new multiyear budget law had been completed.

RTD approached Nexter two years ago about an alliance but the talks folded.

In land systems, companies from Brazil, Israel, South Africa, South Korea and Turkey compete in export markets with products that do not perform as well as French ones, but are half the price, Mons said. Exports make up 35 percent of annual French defense equipment production, and are needed for companies to survive, he said.

The French land sector lacks critical mass.

French companies’ annual sales are in the range of 500 million to 1 billion euros ($641 million to $1.28 billion), he said. That compares with German companies, which generate 2 billion to 4 billion euros in sales, while British and American rivals such as BAE Systems, General Dynamics and Lockheed Martin have annual sales of 8 billion euros in the land sector, he said.

Asked about British or European cooperation in land weapons, Mons said after a long silence, “Nothing. No. At the moment nothing is going on.”

In the Lancaster House Treaty with Britain, there was no new land program in the 40 projects listed, as the CTA 40mm gun joint venture between BAE and Nexter had been started before and inserted into the pact, he said.

There was no cooperation with the Germans. “Totally inexistent,” he said.

“The Defense Ministry and DGA [Direction Générale de l’Armement] are beginning to talk,” he said. “We in industry talk very little. I talk a little with Rheinmetall, very little with Krauss-Maffei,” he said. Nexter has said it has tried to talk with Krauss-Maffei and Rheinmetall, he said.

“What the Germans say to me is — this maybe is politically incorrect — they are 100 percent private sector, they can’t talk to a state-owned company. ‘Our shareholders won’t allow us to do partnerships with a state-owned company.’ It’s too dangerous. It’s too dependent on political decisions,” he said.

Asked what future work is on the schedule, he said, “very little. We await with impatience the launch of the Scorpion program, VBMR and EBRC.”

The Véhicule Blinde Multi-Role troop carrier and Engin Blindé Reconnaissance et Combat are replacement armored vehicles in the French Army’s Scorpion modernization program.

“But we’re waiting. It was announced for June, it’s now been delayed pending budgetary decisions and postponed indefinitely, says the DGA,” Mons said.

The VBMR and EBRC are fundamental to the survival of the land industry for the next 10-15 years, he said. The multirole carrier VBMR represents at least 10,000 jobs for 10 years. The program costs 500 million euros a year, he said.

“It’s fundamental to the survival of our companies, and fundamental for the survival of Nexter,” he said.

Asked about restructuring in the aerospace industry, Trappier said, “The important thing is the product. We need to prepare for the product. We’re convinced within Europe we need to get organized. That can be done by two, three or four, or many,” he said.

“That’s not the problem. It needs to be organized. If it’s at two under Lancaster House, that’s fine. We can put two general staffs together that share a certain number of principles.

Dassault and BAE are working on future plans but London and Paris “must launch programs, new programs,” he said.

“We’re preparing for the future of military aeronautics,” he said. “Dassault is getting close to BAE Systems. Yesterday, I was in London to prepare for this great future. There is a determination of two companies, it is explicit, it is written. We’re preparing the domain for 30 years, we’re preparing in UAVs, we’re preparing in fighter planes.

“But behind that, the governments obviously must launch ad hoc programs, which they’re in the process of considering, within budgetary constraints and the white paper. We’re waiting impatiently for the results of the white paper, to which we are contributing, to be able to see this future.”

In November 2010, Britain and France signed the Lancaster House Treaty, a 50-year bilateral defense cooperation pact, which included joint work on a new generation medium-altitude, long-endurance UAV, an unmanned combat aerial vehicle, and future combat aircraft.

The French government is preparing a defense white paper, now expected in February, and a multiyear defense budget for 2014-2019.

The French defense industry has 17 billion euros in annual sales, and employs 65,000 workers directly and indirectly, CIDEF figures show.

Mons is chief executive of vehicles maker Panhard. Trappier is executive vice president of Dassault Aviation.