Businessweek Archives

How Long Can Dassault Keep Flying Solo?


International Business

HOW LONG CAN DASSAULT KEEP FLYING SOLO?

For most of the postwar era, Dassault Aviation has been the proud emblem of French defense prowess. Its Mirage fighters have patrolled the skies from Argentina to Iraq--and once made France the world's third-biggest arms exporter. But arms markets are shrinking, and so is Dassault. It hasn't made an export sale in six years.

Now, the French government is mulling plans to keep this feisty, family-run company aloft--but in ways that may not please Dassault. For starters, the government is likely to let the company sell $10 billion worth of Mirages to Taiwan, a customer France and the West have avoided, fearing a backlash from Beijing. In exchange, observers think Paris may pressure Dassault to accept a longtime government goal: merger with Aerospatiale, the state-owned builder of missiles, helicopters, and Airbus airliners. That would shore up the French defense industry as it passes through a brutal global shakeout.

EURO-FIGHTER. Moreover, the government may drag go-it-alone Dassault into a pan-European project to replace the "European fighter aircraft" that Britain, Germany, Italy, and Spain began developing in 1985. Dassault has stubbornly refused to join, preferring to concentrate on developing the Mirage's successor, the Rafale fighter. But Germany, believing the Euro-fighter too costly, wants France to join in a cheaper project. Worried about defense costs, France might go for a scaled-down Euro-Rafale.

All this could keep Dassault's factories humming. But it would be a very different company from the maverick outfit that founder Marcel Dassault saw nationalized twice and each time rebuilt from scratch. Since Marcel's 1986 death, his son, Serge, has run the company with equal crustiness. Merging Dassault with Aerospatiale "makes a lot of sense," says Aerospatiale's new chairman, Louis Gallois. The drawback, he says: "Serge Dassault doesn't want to."

Dassault, 67, may have little choice. His company is surviving on a trickle of French Air Force orders that can't carry it until Rafale deliveries start, in 1997 or later. It's still in the black, but profits fell 53% last year, to $20 million on sales of $2.8 billion, and analysts expect red ink next year.

Some observers blame Serge Dassault for the company's fall. Since 1986, country after country has picked U.S. fighters over the Mirage. A former Dassault executive claims the company hasn't paid enough attention to sales. Serge Dassault declined to be interviewed.

In theory, the government already controls Dassault. It owns 45% of the company's stock plus 55% of the voting rights. Still, Serge Dassault has managed to guide company policy. One ace up his sleeve is Pierre Guillain de Benouville, a close friend of Mitterrand and a Dassault director.

But the June appointment of Gallois to head Aerospatiale is a bad omen for Serge Dassault, many feel. Gallois successfully restructured SNECMA, the state-owned aircraft-engine builder. He is close to another key French defense executive, Chairman Alain Gomez of Thomson. Together, they may try to restructure the French defense industry. Chances are that Dassault will once again lose its independence. But this time, it may be permanent.Stewart Toy in Paris, with John Templeman in Bonn


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus