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Finmeccanica Rebuilds Leadership Structure

Dec. 16, 2013 - 01:25PM   |  
By TOM KINGTON   |   Comments
Back on Track: Finmeccanica is re-establishing a normal management structure as the trial continues of its former CEO on bribery charges related to the sale of AW101 helicopters to India.
Back on Track: Finmeccanica is re-establishing a normal management structure as the trial continues of its former CEO on bribery charges related to the sale of AW101 helicopters to India. (AgustaWestland)
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ROME — As the corruption trial of its former CEO continues, Italy’s Finmeccanica group has announced a staff shake-up, showing that it wants to put management back on a regular footing.

After running the company single-handedly since he took over in February, CEO Alessandro Pansa appointed Sergio De Luca, 63, as his new chief operating officer (COO). De Luca has been head of Finmeccanica’s railway signaling unit, Ansaldo STS, since 2007, and joined Ansaldo in 1975.

The last person appointed COO at Finmeccanica was Pansa. He held the job alongside CEO Giuseppe Orsi, until Orsi’s February arrest on suspicion of paying bribes to Indian officials to push through a €560 million (US $771.4 million) sale in 2010 of 12 AW101 helicopters to the Indian Air Force.

After being promoted following Orsi’s departure, Pansa is bringing on board a manager he knows and trusts, one analyst said.

“De Luca appears to be a man Pansa trusts, and he will reinforce the group of managers Pansa has built up around him,” said the Italy-based analyst, who declined to be named.

“De Luca has been successful at winning contracts against tough competition at Ansaldo STS and has introduced efficiencies and cut costs,” he added. “Restructuring is already underway at Finmeccanica firms like DRS [Technologies], Selex and Alenia, but maybe he will do some cost-cutting at group level, which spends about €160 million a year.”

The move follows Finmeccanica’s appointment of Giovanni De Gennaro, a former Italian chief of police, as chairman in July.

Pansa, meanwhile, is cutting his teeth on key strategic decisions. Along with the Italian government, which holds a controlling stake in the group, he is weighing the pros and cons of two suitors to partner with Finmeccanica in managing the space activities of Italian company Avio.

Avio’s main propulsion activity was sold to US-based General Electric this year, but its owners, UK investment fund Cinven and Finmeccanica, held on to their respective 86 percent and 14 percent stakes in Avio Space.

Cinven wishes to sell, with Finmeccanica ready to take a controlling share. But it also is looking to bring on board a new industrial partner, with EADS and France’s Safran group in the running.

An Italian source knowledgeable of the talks on Avio Space said that EADS is the front-runner, and that officials could start exclusive talks by year’s end for EADS to take a 49 percent stake.

The logic behind choosing EADS Astrium is that the company’s experience with space launch vehicles would help push development of Avio’s small Vega launcher, as well as reduce competition with Astrium’s Ariane orbital rocket, the source said. An alliance also would mean a future Ariane 6 launch vehicle could take advantage of Avio’s experience in solid propulsion systems for rockets that boost satellites into orbit.

“As a multinational, EADS would be a better fit for Avio than the all-French Safran,” the source said.

Safran, the source added, has less ambition in the orbital launch sector and is more interested in Avio’s solid propulsion work, making it less of a good fit.

But time is pressing. “Cinven is pushing to sell up, and Safran has upped its evaluation of the company from €300 million to over €350 million,” he said.

On the home front, Pansa will take satisfaction from seeing Italian government funding for aerospace research, which was scrap­ped in 2013, potentially restored in 2014. Known as Law 808 funding, the cash flow to companies like Finmeccanica was halted thanks to austerity cuts, but it has reappeared in the 2014 budget law bill.

Traditionally, industry repays the funding, based on sales of products developed using the cash.

Though it has yet to be signed off in parliament, the 2014 bill contains €800 million in funding over 20 years. That funding stream will likely be used to take out bank loans to allow the entire sum to be available up front, minus about 30 percent, which would be spent on repayment interest over the 20 years.

Orsi Trial

As the management changes at Finmeccanica continue, Orsi’s trial in Italy has stepped up its pace, with a prosecutor on Dec. 6 introducing a list allegedly showing monies to be spent on players in the India helicopter bid, who are identified only by acronyms.

The list was found in the possession of Guido Haschke, who was working as a consultant for Finmeccanica helicopter unit AgustaWestland. Haschke was giving evidence after being extradited from Switzerland.

Haschke said the initials on the list stood for Air Force officials, bureaucrats, politicians and family members, and told the court that the figures had been given to him at a meeting in London in 2008 with Christian Michel, who was also working as a consultant to AgustaWestland.

But rather than representing a list of bribes paid out to win the helicopter deal, the list was merely a “budget hypothesis,” said Orsi’s lawyer, Ennio Amodio.

“Nothing that is hypothesized in that note was actually done,” he said in a statement after the Dec. 6 hearing. Orsi has denied all wrongdoing. Haschke is scheduled to be cross-examined by the defense on Jan. 9.

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