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PARIS — Sofradir, a French maker of infrared detectors, is pushing to pool technology research efforts with competitors AIM of Germany and Selex Galileo in Britain.
Combining efforts would help the firms deal with shrinking defense budgets and compete with U.S. industrial giants, said Sofradir Chief Executive Philippe Bensussan.
“We’re working at it,” he said. “It needs two to form a merger.”
A sharing of research personnel and funds would avoid duplication in three countries in a narrow European market for infrared detectors and create a gradual interdependence in a critical military technology.
Selex Galileo is a subsidiary of Finmeccanica of Italy. AIM is a joint venture, owned by Diehl BGT Defence and Rheinmetall Defence Electronics. Sofradir, a joint venture of Safran and Thales, makes cooled IR detectors and uncooled products through its ULIS subsidiary, using an amorphous silicon technology.
AIM has distanced itself from the French proposal, with a company spokesman describing it as a unilateral approach that had not been agreed upon. Selex was unavailable for comment.
If the three companies merge their research activities in IR detectors, and assuming each brought a conservative industry estimate of 3 million euros ($4 million) in government funding, the potential pool of money would be 9 million euros.
Moves in U.S.
IR detectors are used in thermal-imaging cameras, night-vision goggles, aircraft gimbal turrets and missile launch detectors.
U.S. rivals such as FLIR Systems, Lockheed Martin and Raytheon are likely to look to European sales as the domestic market shrinks.
A planned loosening of the U.S. International Traffic in Arms Regulations to help boost exports also is expected to raise the level of competition for European companies.
“The only solution is to team,” Bensussan said.
An “upfront” consolidation of European manufacturing was too much to consider, but cooperation in technology research might be feasible, Bensussan said.
“An upfront industrial rationalization is not a prerequisite for a merger,” he said.
A working group of chief technology officers is exploring cooperation areas and preparing the ground for a possible close-held meeting in April in Baltimore, at the SPIE defense and security optronics trade show.
For years, the view among European manufacturers has been that there’s no need for cooperation. Company executives prided themselves on being leaders in their field and did not see the need to cooperate with outsiders or competitors.
There may be a fear or a corporate takeover by Sofradir, which has a larger business in cooled IR detectors for military and space applications than the two other companies. Sofradir also is the only European manufacturer to offer uncooled IR detectors through ULIS.
A pooling of European research activities is highly unlikely, a consultant said.
“Technology is a differentiator, innovation is a differentiating factor,” said François Chopard, a partner of Delta, a unit of consulting firm Oliver Wyman.
‘National Eyes Only’
Companies could share commercial networks or sell complementary products that extend their ranges, but research and technology should be the last things to be put in common, Chopard said.
IR detectors are viewed as areas of military sovereignty, with a “national eyes only” badge, he said.
European missile maker MBDA, for example, is consolidating certain company functions into a common cross-border organization under the One MBDA plan, with the backing of the British and French governments. MBDA is a consortium comprising BAE Systems, EADS and Finmecannica.
But even in MBDA, much of the research and technology are still national eyes only, Chopard said.
The Direction Générale de l’Armement (DGA), the French government’s arms procurement office, is understood to support the efforts by Sofradir to forge a cooperation deal with its British and German counterparts.
But that is expected — DGA wants to spend less money and obtain more results, Chopard said.
The chances of cooperation between a French and British company are generally better than between French and German, as there is often tension in aerospace and defense, he said.
AIM, based in Heilbronn, Germany, supplies IR detectors for a missile-launch warning system on Europe’s A400M military transport plane, a program seen as giving the company a level of business comfort and pushing off any perceived need for cooperation.
The German government also funds IR research through the Fraunhofer organization. The German authorities are understood to view IR technology as a strategic sector.
Selex Galileo, based in Southampton, England, receives co-funding on research and development from the U.K. Ministry of Defence for the Albion technology used in cameras on Chinook transport helicopters. A perceived concern is what happens when the Albion government research money ends.
What happens after the government ends that funding is seen as a source of concern.
One potential funding source is the matched pool of 50 million pounds ($78.5 million) of research money agreed in the 2010 Lancaster House bilateral defense cooperation treaty between London and Paris. France signed up for 50 million euros of research funding.
If Selex could secure some of that money, that would augur well for a cooperation deal with Sofradir.
And if Selex and Sofradir were to strike a deal, that could bring in AIM, which is unlikely to want to be left out in the cold.
Based on industry estimates, AIM ships under 1,000 cooled detectors a year, Selex delivers 400 to 700 cooled detectors, Sofradir more than 5,000 cooled, and its ULIS unit 50,000 uncooled detectors.
Staff writer Albrecht Müller in Bonn contributed to this report.
