WinnCad Elements Blog: EADS Cuts Funding Request to Germany, France, Spain for Drone

Monday, March 28, 2011

EADS Cuts Funding Request to Germany, France, Spain for Drone

European Aeronautic, Defence & Space Co. is asking Germany, France and Spain for a combined 300 million euros ($423 million) over three years to help it develop the Talarion unmanned aerial vehicle, the chief of EADS’s defense unit said.

EADS said in January 2010 it needed 1.5 billion euros in total from the three governments to continue developing Talarion, which is intended to perform reconnaissance and surveillance missions. EADS trimmed its request, recognizing the countries’ severe budget constraints, said Stefan Zoller, chief executive officer of the defense unit, Cassidian, said today at a briefing in Munich.

Government money is critical for a program that would help keep Europe’s defense industry competitive with U.S. rivals, which benefit extensively from state-funded research contracts, said Zoller.

“We don’t want to lose a competitive edge, so we’ve already started financing it on our own,” said Zoller. “Today all the teams are still going full speed on development, pre- financed with our own money, but we still lack financing from the three nations.”

EADS Chief Executive Louis Gallois said last July his company might pull the plug on Talarion research unless the governments pledged funds by the following quarter. It kept spending even after the countries failed to commit, however. EADS has spent 500 million euros to 600 million euros developing technologies in recent years for unmanned aerial vehicles, or UAVS, Zoller said, declining to break out a specific figure for Talarion.

Cassidian, based in Munich, has self-financed 4 percent of research costs in recent years, with the rest coming from governments, Zoller said. The figure earlier was 2.5 percent to 3 percent, he said.

Dassault Project

Dassault Aviation SA (AM), a French company that is 46 percent- owned by EADS, has been working on a drone program called the Neuron. It has built a demonstration model, representing the first stage of development of unmanned combat aerial vehicles, fighter planes that could be controlled by people outside the aircraft, either in the ground or in other aircraft behind.

Dassault recently agreed to work together with the U.K.’s BAE Systems Plc (BA/) on the project. Cassidian has no involvement in the Dassault program, even though the companies share an investor in parent EADS, and Zoller said he considered the Talarion project to be far more advanced than Neuron.

Turkey wants to join the Talarion development program, and if any of the three western European nations fail to commit, EADS will ask the other two if they would accept Turkey as a partner, he said. That would require Turkish companies to get a third of the overall share of work on the project, he said.

Orders Fell

Cassidian’s activities include the German and Spanish portions of the Eurofighter combat plane, a project that also involves BAE and Finmeccanica SpA (FNC) of Italy.

Cassidian contributed 5.93 billion euros in revenue in 2010 to EADS’s total of 45.8 billion euros, two-thirds of which came from Airbus SAS, which makes commercial airplanes. The unit won orders of 4.3 billion euros, down from 8 billion euros in 2009.

Zoller is seeking to reshape Cassidian as European defense ministries’ budgets come under pressure. The goal, he said, is to have more than 60 percent of revenue from new markets such as Brazil, India, the United Arab Emirates and Saudi Arabia, in 2020. Zoller said the principal means of breaking into new markets would be through developing joint ventures.

Cassidian said last week it plans to cut 600 jobs, or 10 percent of its workforce of 6,000. Another 5 percent of employees are being redeployed to new jobs in areas where Cassidian wants to grow, such as in cyber security, Zoller said. A reorganization taking effect Aug. 1 will erase boundaries between divisions, he said.

To contact the reporter on this story: Andrea Rothman in Paris at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.