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Finmeccanica Reshapes Its Name, Business

March 19, 2016 (Photo Credit: Andreas Solaro/AFP/Getty Images)



MILAN — Finmeccanica’s new motto may be “genius at your service,” CEO Mauro Moretti said on March 17 as he explained why the Italian defense group is changing its name to Leonardo, inspired by 15th century Italian artist Leonardo da Vinci.

Capping Moretti’s shifting of the group to a tighter-knit divisional structure, the name change pays homage to the engineering talents of Leonardo, who may have painted the Mona Lisa and the Last Supper, but also hatched plans for prototype helicopters and tanks that presaged the real things.

“[The name] Finmeccanica is not well known and is hard to pronounce,” said Moretti, as he presented the firm’s healthy 2015 results.

“Nor was its heritage the best,” he added, alluding to kickback allegations that have dogged the firm in recent years.

“We are changing because we are switching from a holding to an operating company, because the new name gives a sense of Italian technology and because it is easy to remember,” he said.

“It’s certainly a memorable name,” said independent UK defense analyst Alexandra Ashbourne. “But to younger generations the association with ‘Leonardo’ is less science and engineering and more Renaissance art and Hollywood. It’s not an obvious link to a modern, high-technology company. It will take some time to get used to,” she said.

"I guess it's still better than Finmeccanica," said analyst Richard Aboulafia. "There are still two problems. One is that it's vulnerable to abbreviation ... 'Let's call them Leo or Nardo' would be obvious pitfalls. The second is that it's kind of in the public domain. 

"Thomson-CSF and company went with Thales because even though it was French and intellectual, it was also obscure. Leonardo, by contrast, is borderline Italian cliche."

Moretti, who was appointed in 2014, confirmed he wanted to keep some of the group’s historic brands as product names, citing Galileo, Aermacchi and Marconi as examples.

“We have a patrimony of great brands — they are part of an important inheritance,” he said.

Moretti also had praise for the firm’s US electronics unit, DRS Technologies, which he once threatened to sell, but which saw revenues grow by 15.1 percent, from $1.59 billion to $1.83 billion in 2015, in a year in which non-core activities were sold.

The Italian manager said he was still in the market for an industrial or financial partner to take a stake in DRS, albeit leaving Finmeccanica, or Leonardo, with overall control.

Answering questions from reporters and analysts in Milan about the firm’s shopping list in Europe, Moretti said he was interested in building his stake in Avio Space, a satellite launcher builder in which Finmeccanica has 15 percent stake, but “only at the right price.”

He said he would be interested in taking a stake in the Hammerhead UAV, built by Italy-based Piaggio, which is owned by Dubai investment fund Mubadala.

The Hammerhead, which is based on the Piaggio P180 business jet, has been acquired by the Italian Air Force and the UAE, and features electronic systems provided by Finmeccanica.

A stake in the program would form a useful basis for Italian involvement in the planned pan-European MALE UAV program, Moretti said.

Finmeccanica’s focus on aerospace, defense and security work was confirmed last year by its deal to sell its stake in transport units Ansaldo STS and Ansaldo Breda to Hitachi, although the deal has hit a snag.

An Italian investigation is now underway following allegations from fellow shareholders in Ansaldo STS that Finmeccanica fixed the unit’s sale price at the low end while overvaluing Ansaldo Breda, an Italy-based rolling stock maker with a history of loss making.

Moretti denied the allegations, claiming “the price was the best to be expected.”

Turning to the streamlining of the firm in divisions, Moretti said his aim was to make all activities profitable.

“In 2013, Ansaldo Breda was a major drag on profitability; we heavily depended on helicopters, while other areas were not adequately profitable,” he said.

Some orders he inherited were “toxic,” he added, citing a deal to sell radars to Panama which the Panamanian government believes was based on kickbacks and has now been canceled.

As streamlining picks up speed, Moretti said 10 percent in engineering costs had been cut from budgets in 2015.

While electronics activity saw a rise in new orders, aeronautics orders were down by 44 percent. CFO Gianpiero Cutillo said one reason was a delay in new, expected orders of the M-346 jet trainer by Italy. The “young” M346 program was also facing “problems” as different international customers sought individual specifications, he added.

The firm is still awaiting a final sign off from Kuwait on a deal to buy 28 Eurofighters.

“We are in the last stage of discussions with counterparts,” said Moretti. “I hope to conclude in the short term.”

On the civil side he said he was hoping for an uptick in the firm’s work on structures for the Boeing 787.

Land, naval and electronics systems orders benefited hugely from the signing of deals last year to work on Italy’s €5.4 billion program to build new multi-urpose vessels and a landing helicopter dock.

“Contracts like that don’t come up every year,” the CEO said.

As he has streamlined, Moretti has released a large number of senior managers, many of whom have moved straight to competitor companies.

Asked about reports that he was due to end the mandate of veteran Antonio Perfetti, the head of Italy’s end of the MBDA joint venture, Moretti implied Perfetti’s time was up.

“We must promote the young,” he said. “It’s depressing to see how the CEOs of other companies are all in their 40s,” he said.


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