A French Jet Maker Is Approaching a Crossroad
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Version 0 of 1. SAINT-CLOUD, FRANCE — As Jérôme Camps, an engineer at Dassault Aviation’s main design center, showed off a ghostlike 3-D model of one of the company’s small jets here recently, his hand passed through the plane’s skin to reveal an intricate web of support structures as well as a jumble of multicolored cables and pneumatic tubes, rendered in vivid detail. “This is a living tool,” Mr. Camps said, as an assistant rotated the projected image with a few keystrokes. “This is it. There are no blueprints.” Dassault Aviation, the French maker of the Falcon series of business jets as well as the Rafale military fighter, first started to dispense with traditional paper drawings and physical scale mock-ups a decade ago, migrating to an all-digital design system that has since been adopted globally by the aerospace industry, as well as by automakers and other manufacturers. It is an innovation that the company — still controlled by the heirs of Marcel Dassault, a pioneer of France’s modern aerospace industry — is fiercely proud. Despite its broader influence, Dassault, while respectably profitable, is fighting to maintain its footing after the financial crisis eroded demand for flashy business jets, coupled with deep, austerity-driven cuts in European defense budgets. In this environment, some industry analysts wonder how much longer the company can continue to go it alone in an increasingly competitive global market. “France, and especially Dassault, are unique in the world of aerospace,” said Richard Aboulafia, an analyst at the Teal Group in Fairfax, Va. “They don’t outsource much outside of France.” Dassault is dealing with a confluence of issues. Of Dassault’s 11,600 employees worldwide, more than two-thirds are based in France, where hourly manufacturing pay is 20 percent higher than in the United States in dollar terms and labor laws are notoriously inflexible. High-tech manufacturers face added political pressure to resist moving coveted skilled jobs to less costly markets. While the company’s roots are in military aircraft, private jets have been its mainstay for decades, generating 70 percent of its 3.9 billion euros, or $5.1 billion, in revenue last year. Demand plunged with the global financial crisis that hit in late 2008, diminishing the global jet set as bank credit tightened and private planes became a symbol of excess. Dassault says new orders have begun to recover, but Éric Trappier, Dassault’s chief executive, still describes the market as “convalescent.” The company wants to deliver 70 Falcon jets this year, up from 66 in 2012. Dassault’s Rafale order book has been almost entirely dependent on the French government, which has so far ordered about 200 fighters — of which a little more than half have been delivered, at a rate of around 10 a year. Last month, however, the government of François Hollande slashed its commitment to the Rafale, capping France’s total projected fleet at 225, down from 286. The cuts are part of an austerity budget that aims to limit overall French military spending. As such, Dassault faces intense pressure to find export customers for the Rafale. It won a critical victory in early 2012 after India selected it as the preferred bidder for a $10 billion order of 126 planes, beating out Eurofighter as well as its American rivals Boeing and Lockheed Martin. But talks to complete the deal drag on. Analysts say Dassault’s prospects in other international fighter contests — in Brazil, Kuwait, the United Arab Emirates and elsewhere — look grim. “I don’t have too many doubts that Dassault can continue to flourish in business jets,” said Sash Tusa, an aerospace analyst at Echelon Research and Advisory in London. “But I don’t think it has got the ability to maintain its combat jet capability without French government commitment and French government funding.” This raises the question, analysts said, of whether Dassault can — or should — remain an independent player in European military projects over the longer term. France’s Rafale orders should keep factories humming through about 2022, while a contract from India might further extend production. But even then, an independent Dassault risks becoming a niche player in an era where shrinking budgets are raising pressure on military companies — and governments — to consider pooling their resources for future programs. “There will not be another manned fighter development by a single nation-state,” Howard Wheeldon, an independent strategist and fellow of the British Royal Aeronautical Society, predicted. “Those days are gone, even for the French.” Another company in a situation similar to Dassault’s might seek to spin off its military business and sell it to a larger European player, analysts said. But in addition to a fierce sense of identity, the ownership structure at Dassault significantly complicates matters. A family holding — Groupe Industriel Marcel Dassault — owns a little more than 50 percent of the company, while European Aeronautic Defense and Space, the parent company of Airbus, holds a weighty 46 percent minority stake. “If the freely floated part of Dassault was in the driver’s seat, a sale or merger of the defense business would be the economically rational outcome,” said Mr. Aboulafia of the Teal Group. “If you need capital to grow and achieve critical mass, that is the sensible strategy.” But it is a strategy that, for now, remains anathema to the Dassault family and to management. “Merging for merging’s sake has no interest for us,” Mr. Trappier said. “That’s not our philosophy. It’s not our concept.” Dassault’s innovations have served the company well in recent years. Its all-digital design system has enabled the company to compress the development times for new jets by allowing its more than 1,500 engineers and contractors at a half-dozen locations to collaborate in real time. “These tools are a big help in terms of developing high-quality new products,” Mr. Trappier said. “But they are also critical for us to be competitive” against Dassault’s main competitors, Gulfstream of the United States and Bombardier of Canada. And Dassault recognizes that its future lies, if not in consolidation, then in deeper cooperation with its European peers, Mr. Trappier said. In that respect, Dassault feels its digital design and collaborative development methods will guarantee the company a seat at the European defense table. Last December, a consortium led by Dassault celebrated the first flight of the nEUROn, an armed drone demonstrator that was conceived, designed and built by a half-dozen European companies using the same 3-D platform used to develop the Falcon 7X and the Rafale. The total price tag for the six-year project came to 400 million euros. “It is the French who were in charge” of the nEUROn, Mr. Trappier said. While no European government has so far committed to an unmanned fighter program, he says he believes the project “paves the way for the future” of combat jet development. “I am convinced that the next fighters will be developed in cooperation,” Mr. Trappier said. “We will find the partners we need,” he added. “We don’t need to merge to cooperate.” |