Missile maker MBDA is pushing to expand outside Europe to grab a larger share of the $16 billion world market for guided weapons, but it faces growing uncertainty over domestic defence budgets that underpin its role abroad, said its chief executive.
The world’s second-largest missile manufacturer after U.S. arms maker Raytheon announced a deal on Monday to buy a laser-guided weapons business, Viper Strike, from U.S. contractor Northrop Grumman.
Europe’s first acquisition of a fully fledged U.S. guided weapons project, albeit a relatively small one, reflects persistent efforts by foreign defence companies to expand in the United States, Reuters reports.
MBDA, which marks its 10th anniversary on Dec. 18, groups most missile activities of Britain, France, Germany and Italy. It is owned by Franco-German group EAD, Britain’s BAE Systems and Italy’s Finmeccanica.
Like most Western arms companies in an era of tight domestic spending, MBDA also targets expansion in fast-growing Asia and the Middle East, a bedrock of demand for the global arms trade.
“Today, a third of MBDA’s activity is in exports. We aim to go to around 50 percent in terms of new orders by the end of our planning period in 2015-16, with a more gradual increase in terms of revenue,” CEO Antoine Bouvier said in an interview.
MBDA had 2.8 billion euros in revenues in 2010.
Industry analysts say it will not be easy to duplicate deals like the purchase of Viper Strike, a drone-borne precision bomb used in Iraq and Afghanistan, during the 2012 U.S. election year.
But Bouvier said he expected MBDA, maker of the Scalp/Storm Shadow cruise missile, to be firmly anchored in its main target markets through exports or co-operation in the next decade.
What most worries Bouvier, a former French civil servant and 21-year aerospace industry veteran, is how Europe’s flatlining defence budgets will adapt to the region’s debt crisis in 2012.
“The big uncertainty for the entire industry is 2012 … given that spending on defence equipment and research is or has often been easy to vary during hard budget times,” he said.
MBDA provides missiles for competing European fighter planes and is certain to win business whichever of the two European candidates wins a major competition for Indian combat jets — the Dassault Rafale and Eurofighter Typhoon — in coming weeks.
Overall defence consolidation sped up in Europe in the past two decades but has a “long way to go” to match the unified structure of the complex weapons industry, Bouvier said.
He acknowledged in reply to a question that domestic political uncertainty and budget problems surrounding Europe’s debt crisis represented an “extra difficulty” in securing exports. But he believes technology will help drive overseas sales.
He played down the risk that a severe upset in Anglo-French relations, after last week’s stormy European summit, would damage efforts by Britain and France to boost defence co-operation.
While they cannot agree how to fix the economy, Britain and France are still expected to agree how to work together on arms.
“In missiles, I see very good relations with ambitious objectives and very significant progress,” Bouvier said.
Missile co-operation is part of a package of measures due to be agreed in an Anglo-French defence summit early next year.
He also expressed interest in resuming talks with Thales (TCFP.PA) and Safran (SAF.PA), two state-controlled French firms, in 2012 over a possible integration of their missile assets. Talks began in 2010 but were sidelined by a dispute between the same two companies over a separate asset swap.
Bouvier has followed the classical path of France’s elite, with double diplomas from the elite engineering and civil service schools, but differs from many business leaders in displaying an aversion to costly outside consultants.
In charge of the Astrium space division until 2007, he is tipped by some French newspapers for another top role at EADS, such as the Eurocopter helicopter division, in the event of a reorganization triggered by board changes due in mid-2012.
But the bespectacled 52-year-old dismisses such talk. “I have no ambitions,” he states flatly, asked about his next move.
MBDA and its predecessor organizations have been a breeding ground for French managers who went on to top positions within EADS, from former co-chief executive Noel Forgeard to current strategy chief Marwan Lahoud and Airbus No. 2 Fabrice Bregier.
Bouvier said he expected a contract to re-arm French Mirage 2000 warplanes in India in coming weeks, while MBDA is also negotiating the co-development of air defences there.
Raytheon, Lockheed and MBDA together control about three-quarters of the global missile market, with the rest shared between niche players from Europe to Israel, Russia and China.