Advertisement

You will be redirected to the page you want to view in  seconds.

Finmeccanica Seeks More Centralized Control

Mar. 9, 2014 - 03:45AM   |  
By TOM KINGTON   |   Comments
Alessandro Pansa (Finmeccanica)
  • Filed Under

ROME — In a bid to scramble back into profit, Italy’s Finmeccanica group wants to emulate its European neighbor Airbus and hand more power to its headquarters, cutting back the autonomy of its units.

The plan, announced March 6, could one day lead to Finmeccanica-controlled companies becoming mere divisions, a source close to the company said.

Created by CEO Alessandro Pansa, the so-called New Group Organizational and Operating Model will grant Finmeccanica’s head office here greater control over the finance, personnel, external relations, commercial, strategy, legal and audit operations, part of a savings and efficiency campaign that Pansa has waged since arriving at the group’s helm in February 2013.

A process that might prove easy at other companies is tougher at Finmeccanica, where units such as Alenia Aermacchi, AgustaWestland, Oto Melara and Selex ES were born as private firms — later incorporated into state-controlled Finmeccanica — and still have tight links to unions and local politics in their home regions of Italy.

“I am positive about this initiative,” an Italian financial analyst said.

“Pansa has previously said he was unable to cut capital investment at the firm. It took him two years to shave €100 million [US $138 million] from €1 billion in capital investment, whereas [Italian car company] Fiat did a similar thing in a month.”

The source close to the company said that despite the “verticalization” set to occur, Finmeccanica’s units would still be able to form joint ventures and partnerships, along the lines of Finmeccanica’s space partnership with France’s Thales.

Pansa cited the likelihood of pending European industry consolidation in an address to the Italian Senate last year.

The plan does not include Finmeccanica’s US company, DRS Technologies, nor its railway unit, Ansaldo Breda, which lost €300 million in the first nine months of 2013. Pansa is urging the Italian government to let him sell the railway unit.

In its statement announcing the new plan, Finmeccanica referred to the “expected deconsolidation” of its civil transport activity. That will depend on the new Italian government formed last month by center-left leader Matteo Renzi, which must decide in May whether to renew Pansa’s mandate.

The influence of Italian politics on Finmeccanica’s management was illustrated March 4 at the trial here of former CEO Giuseppe Orsi. He is accused of overseeing the offering of bribes to Indian officials for the €560 million sale by AgustaWestland of 12 AW101 helicopters in 2010. Orsi denies wrongdoing.

Lorenzo Borgogni, the former Finmeccanica official who first told investigators about the alleged bribes, told the court how Orsi’s appointment as CEO of Finmeccanica had been backed by the Northern League political party and the Catholic group Communione e Liberazione, which is influential in business circles in Italy.

The trial, which has prompted India to halt the delivery of the helicopters and launch its own probe, is expected to end in May. But a second, civil trial is underway in Milan concerning the €306 million payment that Finmeccanica made to a group of banks at the outset of the AW101 contract, as a form of returnable guarantee to the Indian government.

In January, the Indian government announced it planned to claim the sum, since the contract was canceled. It was able to obtain €27 million that was held by an Indian bank. Finmeccanica then asked an Italian court to stop India from claiming the remainder.

“It seems odd that the decision could be made on the guarantee payment when the main criminal trial is still ongoing,” a second Italian analyst said. “Surely, you need a verdict in that trial before you can establish whether India gets the €306 million.”

Vivek Raghuvanshi in New Delhi contributed to this report.

More In World News

Start your day with a roundup of top defense news.

Subscribe!

Subscribe!

Login to This Week's Digital Edition

Subscribe for Print or Digital delivery today!

Exclusive Events Coverage

In-depth news and multimedia coverage of industry trade shows and conferences.

TRADE SHOWS:

CONFERENCES:

Defensenews TV

  • Sign-up to receive weekly email updates about Vago's guests and the topics they will discuss.