TRIESTE, Italy ― Giuseppe Bono, 73, is one of the longest serving CEOs in the defense business, having served 16 years at the helm of Italian state shipyard Fincantieri.
The expansion has been swift. He has kept a balance of cruise, ludockxury, offshore and naval vessels, recently booking a huge order for new Italian Navy ships, including so-called PPA multipurpose ships, a logistics vessel and a landing helicopter dock. In 2008, Fincantieri paid $120 million to buy four U.S. yards, including Marinette Marine in Wisconsin, which was picked by Lockheed Martin to build its Freedom-class littoral combat ships for the U.S. Navy.
Working with France’s Naval Group, Fincantieri developed the FREMM class of frigate which has been bought by Italy and France. This month the Navy named the FREMM design as one of five it was interested in for its FFG(X) program and handed Fincantieri a $15 million contract for conceptual designs.
But Bono’s vision is bigger still — to take cooperation with Naval Group as far as a full merger, unifying Europe’s splintered naval industry. He spoke to Defense News recently about the company’s grand plans.
Why should the U.S. pick the FREMM frigate for the FFG(X) program?
It is the only ship in operation. We offer a ship that exists and is well proven while the others offer ships that have yet to be designed.
Just as we have built general purpose versions and anti-submarine versions for Italy, we could offer different versions to the U.S. At our shipyard in the U.S., where we are building the LCS with Lockheed Martin for the U.S. Navy, we are set to build four LCS vessels for Saudi Arabia plus four options, which proves that Fincantieri can be part of the development of a naval vessel for the U.S., which the U.S. can then export around the world.
The LCS program has come under fire for various technical problems suffered by the vessels. How did these problems arise?
It was related to the way the U.S. defined the program. Lockheed Martin was picked as prime contractor although it supplies the electronics, but did not have experience of ship building. Design work was given to Gibbs & Cox so the yard built a ship designed by a firm which did not know the capability of the yard. This created a situation where the government’s contact on the program was not the yard building the ship — which is the case elsewhere in the world, and has been the case in the U.S. on other ships. The yard knows what the day to day problems are what modifications are needed. In my long experience, I have learned that the platform builder needs to be in charge, both in naval and aeronautics.
That said, the LCS is a great ship and we are working well with Lockheed Martin. For the FFG(X) program, Fincantieri America would be prime. We already have a deal for design work with Gibbs and Cox, which would collaborate with us from the start.
These U.S. FREMMs would be built at Marinette?
We are currently building nine LCS vessels at Marinette after delivering five. If LCS construction continues and we build Saudi LCS vessels, as well as FREMMs in the U.S. we would need to acquire a second yard in the U.S. to support Marinette. We are looking, and it would probably outside the Great Lakes region, but it’s too soon to say. It could be an existing yard or a new one to be built.
Additionally, Lockheed Martin is competing on FFG(X) with an upgraded and larger LCS, and if that is selected, we will work on the development and build the vessels at Marinette.
How have you changed Marinette since you bought it in 2008?
When I first visited the thing that struck me was how the temperature dropped well below freezing in winter, and the large outdoor area was a sea of mud and the equipment moved about on tracks. Now it’s all surfaced. At Sturgeon Bay, our other yard in the area, we are building ship sections to supply Marinette, otherwise Marinette would not have been able to hit targets.
Italy’s Leonardo sold its AW101 helicopter and C-27J tactical transport to the U.S., but the first was canceled and the second was cut back. Some believe Leonardo suffered for not being a U.S. firm. Does that worry you as you compete with FREMM?
No. The European naval industry is in the vanguard for technology, while the U.S. already builds helicopters and planes. As we compete, we are not promising to buy a yard in the U.S. We already own one and we are already building ships for the U.S. there and contributing to U.S. technology. U.S. government officials have told me that without Fincantieri it would not have been possible to build the LCS. For the U.S. it will simply be a case of judging the capacity of the new ship. We will also be competitive on cost.
Fincantieri and France’s Naval Group put in a joint bid to sell the FREMM to Canada. The Canadian government asked that bids be submitted directly to local firm Irving, which was designated as prime contractor, but you chose to make an unsolicited proposal directly to the Canadian government and were rejected for that reason. Why did you do that?
Irving had to pick the winner based on technical information about the vessel. We said we were prepared to give the information to the Canadian government but not to a rival company if we didn’t know if we were going to win the bid or not. I don’t know why the Canadians gave Irving the right to pick the winner. Irving has never built a war ship. Canada has not built one for 30 years. It may sound presumptious, but France and Italy are well known as naval ship builders and would have been able to deliver on time and on cost.
Fincantieri and Naval Group are planning to integrate operations, part of your ambition to create a ‘Naval Airbus’ in Europe. Why is that needed?
Closer integration among European Union partners is happening and one of the sectors in which that must happen is defense. That means a totally different approach to the past. Here each state has its own industries and we need to integrate them. Competition from Russia, China and India is coming and we need to be ready. We are shortlisted to sell the FREMM in Australia. If we win we will build it at yard at Adelaide, where Naval Group will build submarines. The two companies will create synergies to perform better there together.
Where do you see the integration in 5-10 years?
I hope the two companies are merged in one firm covering both civil and military activity. Fincantieri already combines civil, military and offshore activity and this has helped it become one of the top yards in the world. Having various sectors helps us ride the cyclical nature of the market, where some sectors are down and others are up. If its a winning method, it would be a shame not to duplicate it.
There are issues to work out. They build nuclear submarines which we don’t, we are stronger in surface vessels. But we can work together to create value.
With this integration being planned, eyebrows were raised in France over Italy’s decision to buy two more U-212 submarines, which Fincantieri will build under license from German firm Thyssen-Krupp Marine Systems.
If we start from the premise that we are building European defense, my question is can Germany be left out of this integration? I say no. There shouldn’t be competition inside Europe anymore. The competition should be with the rest of the world. The French are talking about building a plane with Germany. From the start we have said this naval integration is open to other European countries. It needs to happen step by step.
Many plans have failed because they are based on financial strategies.
We are working on the basis of industrial integration, creating value.
So far you have discussed jointly developing with the French a logistics vessel based on the one already ordered by Italy, and a new frigate. What kind of frigate?
We are building PPA frigates for Italy which are nearly 6,000 tons.
The Italian Navy has decided to reduce the size of the PPA, otherwise it is too close to the FREMM. This change could involve the last three options in a possible 10-vessel order. We would try to create a joint product, with the French, of around 4,500 tons, similar to the French FTA frigate. No European countries will ever have exactly have the same kind of ships. Navies are sailing in the Mediterranean, the Baltic and around the world — different scenarios. Even the submarines we build under license from the Germans are different to theirs because the Mediterranean is deeper than the Baltic.