Italian Prime Minister Matteo Renzi, third from right, speaks with Chinese Premier Li Keqiang, while Finmeccanica CEO Mauro Moretti, seated, signs a document. Second from left is Alibaba CEO Jack Ma shaking hands with an unidentified woman during a signing ceremony at the Great Hall of the People in Beijing on June 11. (Wang Zhao / Getty Images)
ROME — Finmeccanica finds itself €228 million (US $308.7 million) out of pocket on a canceled helicopter deal in India just as the firm’s new CEO signs his first deal — to build helicopters in China.
India has reportedly cashed in the money held as bank guarantees for Finmeccanica’s canceled sale of AW101 helos to the country. The deal was scrapped by India in January after former Finmeccanica CEO Giuseppe Orsi was put on trial in Italy on charges of taking part in a bid to bribe Indian officials to win the €560 million contract.
India demanded the €306 million payment that Finmeccanica made to a group of banks at the outset of the contract as a returnable guarantee to the Indian government.
In January, the Indian government was able to obtain a portion of the money — €27 million — which was held by an Indian bank.
An Italian court initially blocked India from obtaining the rest of the money, about €278 million, which was held by European banks, but in May a judge ruled India could have the money. On June 11, Reuters reported India had obtained €228 million, taking into account the three helicopters that had been delivered.
The payout will affect Finmeccanica’s bottom line just as its struggles with a tough restructuring campaign, said an Italy-based analyst who declined to be named.
“The firm has forecast arriving at year end with €4 billion in debt, but that did not take the ruling into account and we can now add €228 million to the total,” he said.
A second analyst said arbitration on the deal was still underway. “We will only know the final result when that is over,” he said.
Orsi, standing trial on corruption charges linked to the deal, could discover his fate this autumn. Witness statements in the trial have concluded, to be followed on July 1 by statements in court from Orsi and Bruno Spagnolini, the former head of Finmeccanica helicopter unit AgustaWestland, who is also on trial.
The prosecuting magistrate and defense lawyers will then give their summations before the long summer recess allowed by the Italian justice system. When the court meets again on Sept. 30, final statements will be allowed before sentencing.
Former Indian Air Force head Shashi Tyagi, whom the prosecution views as the planned recipient of payments to ensure the AW101’s selection, was called as a witness, but said that he was under investigation in India and thus not allowed to travel to Italy.
Former UK Defence Minister Geoff Hoon appeared in court as a witness but his appearance was called off when a suitable translator could not be found.
The ruling on the Indian bank guarantee is a first test for new Finmeccanica CEO Mauro Moretti, who took over the firm in April from Alessandro Pansa. While he has yet to detail his plans to push Finmeccanica back to profitability, sources knowledgeable of the firm said the former state railway manager is taking a hard line on perceived underperformers and is prepared to make far-reaching changes.
“Moretti is proving to be a tough manager and is reportedly pushing for profit at all cost,” the analyst said. This year, Pansa initiated measures to hand more power to its headquarters and reduce the autonomy of its units, which include AgustaWestland, Selex ES and Alenia Aermacchi.
The move was designed to create savings by unifying finance, commercial, strategy and audit planning among the units.
Now, Moretti would likely pick up where Pansa left off, the first analyst said.
“The independence and lack of accountability of the units will likely be further whittled away,” he said.
On June 13, Italian daily Corriere della Sera suggested Moretti might consider selling Finmeccanica’s US unit, DRS.
Meanwhile, Moretti struck his first deals as CEO in China on June 11 while accompanying a visit by Prime Minister Matteo Renzi.
Moretti signed a deal between Finmeccanica’s railway signaling arm, Ansaldo STS, and a Chinese firm for work on Chinese railway lines. A memorandum of understanding also was adopted between AgustaWestland and Beijing Automotive Industrial Corp. for a marketing, maintenance and training deal under which AgustaWestland would sell 50 helicopters for public use over five years, the firm said.
For 2013, Finmeccanica said AgustaWestland’s revenues dropped 3.9 percent to just over €4 billion, citing the interruption of the India AW101 deal. But new orders rose thanks to the sale of 16 AW101 helicopters to the Norwegian Air Force for search-and-rescue missions worth €1.5 billion, and eight AW159 Lynx Wildcat helicopters purchased by the South Korean Navy. ■