Finmeccanica is determined to become one of the world’s leading aerospace and weapons producers. The company, publicly traded but controlled by the Italian government, has spent the past decade forming a complicated web of alliances with Europe’s other players in this field, and now it has its sights set on the huge U.S. military market. It already got a foothold when one of its helicopters was chosen to become the new Marine One used by the U.S. President. In May 2008 it took a more direct step by agreeing to pay more than $5 billion to acquire DRS Technologies, a rising star in defence electronics (the deal is awaiting regulatory approval).
Finmeccanica (the name is derived from Società Finanziaria Meccanica) was created in 1948 by the Italian government’s IRI industrial holding company to serve as a vehicle for the recovery and restructuring of the country’s engineering and shipbuilding industries. Among the operations put under Finmeccanica’s control were the energy company Ansaldo, carmaker Alfa Romeo and shipbuilders such as Cantieri Navali dell'Adriatico.
By the mid-1960s the shipbuilding operations were put under the auspices of a new entity called Fincantieri, but Finmeccanica was moving into a new sector: aerospace. In 1969 it joined with Fiat to form a joint venture in that field called Aeritalia, which focused on products for the military. Finmeccanica later took complete control.
During the 1980s Finmeccanica sold off Alfa Romeo as well as a number of other businesses, leaving Aeritalia and Ansaldo as its core holdings. Bu then it obtained a slew of new companies, some through acquisitions and several—including electronics operations Selenia, Elsag and SGS—that were put back under its control by IRI. In 1990 Aeritalia and Selenia were merged to form Alenia, bringing together the operations of the activities of the two companies fields such as aeronautics, defense electronics, missile systems and air traffic control.
In 1992 Finmeccanica became a publicly traded company with an initial offering of its stock on the Milan exchange, though IRI retained a 13 percent stake. The following year the Italian government gave Finmeccanica control of the defense and aerospace holdings of an ailing state holding company called EFIM. These included the Agusta helicopter operations and weapons maker Oto Melara. In 1996 Finmeccanica bought the Breda railcar businesses and merged it into Ansaldo. In 1998 Finmeccanica put Alenia in a joint venture with GEC-Marconi. That same year it put Agusta in a joint venture with Britain’s GKN Westland, creating helicopter giant Agusta Westland (which Finmeccanica later took over completely in 2004).
In 2000 IRI sold its remaining shares, but the Italian government retained effective control through a so-called “golden share.” Pier Francesco Guarguaglini, who became chief executive in 2002, set out to make Finmeccanica one of the world’s leading defense and aerospace companies. He did this in part through a series of alliances. These included forming a defense electronics joint venture with BAE Systems, putting his missile business into the MBDA joint venture with EADS and BAE Systems, and forming a joint venture with U.S. private equity firm Carlyle Group to purchase Fiat’s aerospace division, FiatAvio.
Finmeccanica got a boost in 2005 when the Pentagon awarded a prestigious contract to produce the next generation helicopter used by the U.S. President to Lockheed Martin, which planned to use a design from Finmeccanica’s Agusta Westland. That year Finmeccanica also merged its space operations with those of Alcatel to form Alcatel Alenia Space (Thales later purchased Alcatel’s interest) and formed a partnership with L-3 Communications (and later Boeing as well) to market the C-27J tactical transport plane to the Pentagon.
Having become a major player in the UK military business through its alliances and acquisitions, Finmeccanica may be seeking a similar role in the United States. In May 2008 it announced plans to acquire DRS Technologies—a fast-growing electronics contractor serving the U.S. military—for more than $5 billion. That deal is awaiting regulatory approval.
Finmeccanica operates in seven sectors:
Aeronautics – “Finmeccanica manufactures state of the art complete tactical airlifters, combat aircraft and unmanned air vehicles for both civil and military applications. The Group produces training aircraft complete with related support services. Its aeronautical business also includes aircraft modifications and overhaul on behalf of the world's largest manufacturers. Through its subsidiaries Alenia Aeronautica, Alenia Aermacchi and Alenia Aeronavali, Finmeccanica has won key roles in the latest international aeronautical programmes and include products and services for global players.” Alenia Aeronautics and EADS are partners in regional aircraft manufacturer ATR.
Helicopters – “Finmeccanica is the world leader in the helicopter market, in the design and development of helicopters and tiltrotors for civil and military use.” Operating in this field through its subsidiary company AgustaWestland, “the company's products range from the innovative 2.5-ton light single-engine A119 Koala to the 15-ton three-engine EH101 helicopter, the benchmark in the medium-lift class of helicopters.”
Space – “Via its agreements with the French company, Alcatel, Finmeccanica has created Europe's leading operator in the space sector in the form of two joint ventures operating in satellite construction and satellite services management. In April 2007, the European Commission approved the transfer to the French company Thales of Alcatel-Lucent's interests in the joint ventures Alcatel Alenia Space and Telespazio. Finmeccanica has a long tradition of excellence in the space arena and has achieved a world-leading position in the design, development and manufacture of positioning, telecommunications, Earth observation and remote sensing satellites for civil and military use.”
Defense Electronics – “Finmeccanica is the second European player in the defence electronics market and the sixth worldwide. This position stems from the recent agreements with BAE Systems that led to a cluster that includes SELEX Sensors and Airborne Systems and Galileo Avionica (operating with the new brand SELEX Galileo), SELEX Communications and SELEX Sistemi Integrati. The three companies are active respectively in avionics, military and secure communications, air traffic control and management. The grouping also includes Elsag Datamat, which designs and produces systems and solutions for automation, security, transports, defence, space and Information Technology and SELEX Service Management, a supplier of integrated communications services for military and civil security.”
Defense Systems – “Finmeccanica is a recognized technology leader in the design, development and production of missile systems, torpedoes, naval artillery and armoured vehicles. Finmeccanica is active in the field both through the MBDA joint venture, the major European missile systems company, and its wholly owned subsidiaries Oto Melara and WASS, each of which is a leader in its field.”
Integrated Defense Systems – “Finmeccanica systems integrate Command and Control capabilities, a wide range of air, land, naval and space platforms, platform systems and weapon systems within a global network-centric infrastructure.”
Energy & Transportation – “Ansaldo Energia is the Finmeccanica specialist in the production of energy. It operates on the international market for customers including governments, independent power producers and industrial users. The company offers a complete and largely proprietary range of products, including single or combined cycle, atomic energy and services. Finmeccanica is active in the railroad business through the design, development and production of rolling stock, signalling gear and complete urban transport systems. ANSALDO STS controls Ansaldo Signal N.V., which operates in the field of railway and urban transport signalling, and Ansaldo Trasporti-Sistemi Ferroviari S.p.A., whose skills lay in the integration of systems and technologies for the supply of turnkey rail and mass transit systems. AnsaldoBreda is the Finmeccanica company that builds rolling stock for mass transit systems.”
In 2005 the Norwegian Government Petroleum Fund following the recommendation of its advisory committee decided to disinvest from Finmeccanica: "The Advisory Council on Ethics for the Government Petroleum Fund recommends that the companies BAE Systems Plc., Boeing Co., Finmeccanica Sp.A., Honeywell International Inc., Northrop Grumman Corp., United Technologies Corp. and Safran SA be excluded from the Petroleum Fund because they are presumed to be involved in production of nuclear weapons."Link to statement
As Finmeccanica has gotten more involved in the U.S. market, it has also found itself linked to controversy over corporate influence in American policymaking. On October 31, 2006 the New York Times published a front page story about then-Rep. Curt Weldon, a Pennsylvania Republican serving on the House Armed Services Committee. The piece focused on Weldon’s enthusiastic advocacy on behalf of Italian weapons companies, especially Finmeccanica and its subsidiaries, suggesting that extensive campaign contributions to Weldon from individuals linked to Finmeccanica had something to do with that enthusiasm. The Finmeccanica tie was only one of several controversies regarding Weldon, who was defeated for reelection in November 2006.
It appears that Weldon is currently being investigated for influence-peddling on behalf of Finmeccanica and other companies. In July 2008 Cecelia Grimes, a close friend of Weldon who was hired as a federal lobbyist by Finmeccanica subsidiary Oto Melara in 2005, pleaded guilty to destroying records soon after the FBI interviewed her about Weldon in 2006.
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