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Despite Better Numbers, Rome Is Silent on Finmeccanica CEO’s Fate

Nov. 10, 2012 - 01:44PM   |  
By TOM KINGTON   |   Comments
  • Filed Under

ROME — Weakened by a corruption probe, Finmeccanica CEO Giuseppe Orsi has gained valuable breathing space by announcing healthy third-quarter results that reveal the impact of his restructuring drive at the Italian defense giant.

But despite reports that Italian Prime Minister Mario Monti had imminent plans to back or sack Orsi, the Italian government — despite its controlling share in Finmeccanica — reamined silent on Osri’s fate in the wake of the investigations, leaving an air of uncertainty over CEO’s future.

When challenged to take a position on Nov. 6, Treasury Minister Vittorio Grilli declined to support Orsi, saying that whatever decision was made, “the timing would not be dictated by the media.”

Top Italian newspapers have called on the government to quickly endorse or replace Orsi to protect Finmeccanica’s reputation from further harm.

In the meantime, Orsi began to reap the benefits of an efficiency drive he accelerated at Finmeccanica when he took over last year from former CEO Pierfrancesco Guarguaglini. Net profit rose from 50 million euros ($64 million) in the third quarter of 2011 to 75 million euros this year, as revenue rose 8 percent to 4.1 billion euros, helped by healthy helicopter sales and despite dipping defense spending in the U.S. and Italy.

Confirming Finmeccanica’s year-end revenue forecast of 16.9 billion to 17.3 billion euros, Orsi said the company’s “restructuring and efficiency plan is progressing as planned.”

Orsi is being investigated by an Italian magistrate on suspicion of organizing a kickback to ensure the sale of AW101 helicopters to India in 2010, when he was head of Finmeccanica unit AgustaWestland. Orsi denies all wrongdoing.

The allegations have been made by a former Finmeccanica manager who was sacked by Orsi for alleged ethical violations.

A former commercial director at the company, Paolo Pozzessere, also has been arrested on suspicion that a deal to sell helicopters, security systems and satellite services to Panama involved kickbacks.

On Nov. 8, news agency Reuters quoted an Indian Ministry of Defence source who said the delivery of the AW101s to India is proceeding, and that the MoD considered the contract “regular and without discrepancies.”

In Italy, leaked transcripts of wiretapped conversations during the probes have kept the investigation on the front pages, even though no one has been formally charged. And one conversation involving Orsi has embarrassed the CEO, for reasons unrelated to the probe.

In the conversation, recorded on May 23, Orsi appears to suggest that Finmeccanica had been paying “useless” consulting fees to the former wife of Vittorio Grilli, who as treasury minister officially controls Italy’s stake in Finmeccanica. Grilli has said that no such consulting work was offered, but one Italian industrial source said the episode had nevertheless created tension between Orsi and Grilli.

In the same conversation, Orsi appears to denigrate Finmeccanica’s chief operating officer, Alessandro Pansa. The two men reportedly battled for power at the company after the departure of Guarguaglini.

Guarguaglini stepped down from Finmeccanica last year amid a previous corruption probe involving him and his wife, Marina Grossi, who ran Finmeccanica unit Selex Sistemi Integrati.

But the prosecutor who placed Guarguaglini under investigation for fraudulent accounting has requested that the probe be dropped, Guarguaglini’s lawyer, Vittorio Virga, told Defense News.

Italian media has reported the request to drop the probe, and Guarguaglini has also stated the prosecutor has made that request.

“We still don’t know what the exact allegation was, and the case is now closed,” Virga said. The accusation of fraudulent accounting leveled at Grossi was still valid, he said, adding that a pretrial hearing started last week.

The office of the Rome magistrate investigating the cases did not respond to calls by presstime.

Cutting Costs, Debt

The allegations against Orsi this year amid resistance to his plans to sell off Finmeccanica’s stake in energy unit Ansaldo Energia to Germany’s Siemens group, part of a pledge to the financial markets to raise 1 billion euros by year’s end to pay off some of Finmeccanica’s debt.

An alternative solution being floated for a consortium of Italian businesses from Brescia, in northern Italy, to team with Italy’s strategic investment fund to buy just under 30 percent of Ansaldo Energia.

Speaking to analysts on Nov. 8, Pansa said “very important progress had been made” regarding the chance to wrap up the selloff by the end of the year, but declined to give details.

Finmeccanica is meanwhile planning to unite its three Selex units under one roof by Jan. 1 as part of a cost-cutting program. According to a union official involved in talks on the restructuring, the new unit will be split into three divisions: Airborne & Space Systems, Land & Naval Systems and Security & Smart Systems, with the former to be run by U.K. official Norman Bone.

Separately, Finmeccanica unit Alenia Aermacchi said it has struck a deal with L-3 Communications, its U.S. partner on the C-27J tactical transport program, to offer the twin-engine cargo plane to international customers through the Pentagon’s Foreign Military Sales program.

Hitherto, L-3 handled FMS, while Alenia managed commercial sales. Since signing to sell the aircraft to Australia in May, Alenia has recently sold two of the planes to an unnamed African nation, a unit spokesman said.

A stake in Finmeccanica held by the Libyan Investment Authority was meanwhile unfrozen by a Rome court last week. The assets held by the Libyan sovereign fund were seized last year by the International Criminal Court on the grounds that they were indirectly controlled by former Libyan leader Moammar Gadhafi.

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