Thursday, December 27, 2012

Dassault Aviation chief steps back from controls

At Istres on France’s south coast last week Dassault Aviation carried out the first public flight of its prototype unmanned fighter jet, the Neuron.

As a crowd of company workers and military officials watched the 10-minute display, a first for a European combat drone, a team of engineers piloted the aircraft from a remote location.

The question for some of those present was whether Charles Edelstenne, Dassault’s departing chief executive, intends to take a similar remote-control approach to keeping his hands on the company he has headed since 2000.

Mr Edelstenne, the long-serving right hand man of family patriarch Serge Dassault, has been forced to stand down because of a company rule that forbids anyone continuing as chief executive once they reach 75.

The 87-year-old Mr Dassault handed the reins to Mr Edelstenne 12 years ago to comply with the same rule.

But just as Mr Dassault has continued to pull the strings in his role as head of Groupe Industriel Marcel Dassault, the family holding company, many expect Mr Edelstenne to do the same. When he steps down from the aerospace group in January, he will retain a board seat and will join Mr Dassault at the helm of the holding company, located on the Champs-Elysées in Paris.

A profile of Mr Edelstenne in Le Figaro newspaper, owned by the Dassault family, said: “Nobody imagines he will be inactive nor far from Dassault Aviation.”

The outgoing chief executive himself insists that 52-year-old Éric Trappier, his incoming successor and another Dassault lifer, will be left in charge entirely.

It was revealing, nonetheless, that when asked at the Neuron event about the prospects for a grand consolidation of the French aerospace and defence industry, Mr Trappier quickly passed the question on to Mr Edelstenne.

“I know this idea has come from somewhere,” Mr Edelstenne said in response to the question. “I have a piece of advice for you: forget it.”

As well as showing Mr Edelstenne with his hand still firmly on the tiller, the response was revealing for those wondering whether the change at the top of Dassault could break the logjam in French industry consolidation.

First and foremost, his answer was the rebuttal of an idea expounded by Laurent Dassault, one of Serge’s sons, who had spoken in October about the possible creation of a “France Aerospace” through a tie-up between Dassault, Thales, Safran and maybe Zodiac Aerospace.

But it was equally a rejection of the speculation about possible interest from Safran in merging with Thales, the defence electronics company controlled by Dassault.

Thales, which is 26 per cent owned by Dassault and 27 percent by the French state, embarked on its own change of leadership last week by ousting Luc Vigneron as CEO and replacing him with Jean-Bernard Lévy, who was forced to step down from the same role at media group Vivendi in June.

While some industry executives and defence officials hope the change at Thales could make it more open to tie-ups, people closer to the situation think larger deals will be difficult while Mr Edelstenne and Mr Dassault remain in the background.

The collapse in October of the proposed merger of EADS, the Franco-German group, with Britain’s BAE Systems, has prompted talk about other areas of possible defence consolidation in Europe. For many, France looks most ripe for deals as it still has a patchwork of defence interests shared by Dassault, Thales, Safran and EADS.

In the meantime, both Mr Trappier and Mr Lévy have a tricky few months ahead. Mr Trappier needs to secure the final sale of 126 Rafale fighter jets to India, on which Dassault’s future success depends, while trying to keep a leading role in the development of Europe’s future unmanned combat jet.

For Mr Lévy, he will need to prove that he is more than just a compromise candidate, hired because the French state and Dassault could not agree on an internal successor.

“He has good international experience from Vivendi, so this will help Thales be more aggressive commercially,” said a senior French defence official. “But we also have to end the blockage at the company from its internal battles.”

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