Interview with JEAN-PAUL HERTEMAN,
Chief Executive Officer of Safran
Jean-Paul Herteman, Chief Executive Officer of Safran | © Frédéric Pitchal
What do you consider the major events for Safran in 2008?
Two developments were especially significant for the Group and for our future. First, the strengthening of our long-standing partnership with General Electric. Our partnership agreement within the equally-owned CFM International was renewed through 2040. This creates an ideal environment for us to look forward to the same success on the next generation of engines, dubbed Leap-X, as we enjoy on the CFM56, the best selling engine in the history of aviation. Furthermore, we signed a similar agreement with GE to jointly conduct nacelle and thrust reverser programs for current and future single-aisle commercial jets.
The other main event last year was our withdrawal from the communications sector. We divested our broadband business in January, and our mobile phone business in December, under economic and social conditions that were satisfactory for all stakeholders, including shareholders, customers and personnel. This move clearly reflects Safran’s strategy of refocusing on our three core businesses, namely aerospace, defense and security.
How do you plan to benefit from this refocus?
We are accelerating our development in security markets. In 2008, we made two highly-targeted acquisitions: SDU-Identification, a Dutch company that is the European leader in production of secure ID documents and passports, with unrivaled expertise in technologies such as the incorporation of polycarbonate pages. This acquisition rounds out Safran’s scope of expertise, and we can now offer integrated end-to-end identification solutions. Our second acquisition was of Motorola’s biometric activities, under the PrinTrak brand, which bolsters our position in the strategic North American market.
Given the current economic environment, what are Safran’s main advantages? First, we have a very solid business model and an excellent outlook because of our installed base. Some 18,600 CFM56 engines have been produced to date, a fleet that will generate growing revenues over the long term through MRO services. One-third of these engines have yet to undergo their first overhaul, which gives us potential sales exceeding $13 billion based on the fact that each engine will be overhauled four or five times during its lifetime. Another major advantage is the security market, which is logging annual growth of 10 to 15 percent. Furthermore, our fundamentals are particularly robust. We enjoy a healthy financial situation, solid technical and commercial positions, dynamic Research & Technology, and the expertise of a motivated, enthusiastic workforce. These are critical factors in our future success.
How do you see Safran in the coming decade?
Now that we have recentered our business on our three areas of excellence, Safran will be able to manage the impact of the global crisis while continuing to take a much longer term view. We have a satisfactory order book, with our propulsion business, for example, holding orders for more than 6,500 CFM56 engines, equivalent to five years of production. We are also ready to capitalize on the profound changes in the aviation sector. Already visible today, these trends will take on critical importance with the next generation of aircraft, in particular the replacement of the current generation of single-aisle jets carrying 100 to 200 passengers, the main part of the civil aviation market, towards 2018-2020. The alliance with our historic partner GE has been consolidated and is bolstering its positions. We also reorganized our Group this year to meet customer demand for more comprehensive, integrated packages of products and services.
In the space sector, the continuation of the Vinci cryogenic engine program will ensure the future of Ariane 5. Highlights in the defense sector include export opportunities for the FELIN system, and the development of our offering in drone systems. At the same time, we have shown that we have the organizational know-how to provide a targeted response to the fast-paced development of security markets.
We will be facing economic challenges in the years ahead, but there will also be a number of opportunities. Safran will be able to seize those opportunities that match and strengthen our corporate strategy.
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