Finmeccanica, Italy's aerospace, defence and transport conglomerate, will see annual sales shrink by close to 20 per cent over the next two years and could ditch its 70-year-old name as part of new business plan devised by its government-appointed chief executive.
Mauro Moretti, appointed in May to restructure the 30 per cent state-owned group, says at least 3,000 of its 54,000 jobs will go over the next two years, partly through disposals, as Finmeccanica focuses on high-tech areas in aerospace and defence. Once that is done, he adds, the group will return to growth, while profit margins are expected to rise from 7 per cent in 2014 to 9.5 per cent in 2016.
"None of our peers is running the same number of businesses," he says in his first interview since unveiling a five-year plan aimed at improving earnings and cutting the €4.1bn of net debt which has cost Finmeccanica its investment-grade status. "We will shrink the business but enlarge every one that remains. In a few years we can return to the equivalent size - and more."
The task is pressing. Finmeccanica was in 2013 relegated to junk status by the main credit rating agencies. Given that the group is regarded as a government-related issuer by some agencies, Finmeccanica's rating - on negative outlook - has become a matter of intense concern in Rome.
Mr Moretti, a close ally of Italy's prime minister Matteo Renzi, who chose the former state railway boss for the Finmeccanica job, is even ready to challenge a few totems to signal that the group is changing. "When I can present the first robust balance sheet, based on strong figures, then I can change the brand."
Abandoning the Finmeccanica name - with its origins in the postwar merger of Italy's industrial companies - might prove as contentious as the job cuts. But a name change could help to restore the image of one of Europe's leading aerospace and defence groups, which has been dogged by allegations of corruption in recent years.
The summary of investigations affecting Finmeccanica stretched to almost 12 pages in last year's accounts. The group's helicopter subsidiary, AgustaWestland, is still barred from bidding in India even though Finmeccanica and its former chief executive, Giuseppe Orsi, were last year cleared of corruption in a contract dating from 2010.
Mr Moretti acknowledges that the shadow of these tumultuous times still lingers. However, he says this has not affected Finmeccanica's ability to win helicopter tenders in other markets, or even to sell different military equipment to India. "Our helicopters business is increasing - in volume, revenue and margins," he says.
The Finmeccanica boss believes the business plan will help to dispel suspicions over governance by increasing head office's hold over subsidiaries. More importantly, he says, it will enable him to deliver better returns from a group which until now has been a collection of autonomous operations.
"Finmeccanica was one holding [company], without real control of the subsidiaries," he says. Not only did this make common governance procedures difficult, it meant there was little coherence in strategy or the €1bn research and development budget, he argues.
"There was a lot of waste, and a lot of overlap. By concentrating our resources . . . we can amplify the effect," he says.
Mr Moretti has some experience of turnrounds at industrial companies. For eight years, he led Italian State Railways, where he took the workforce from 110,000 to 70,000 and transformed annual losses of €2.2bn into profits within two years. A former union official, he is confident that the government will not hinder his attempts to shrink its industrial champion.
"In Italy, as in other countries, the independence of the company depends on the quality of management," he says. "If a manager has a good reputation, he is also autonomous."
However, his confidence is not matched by rating agency Fitch. In a note last week, Fitch cast doubt on Finmeccanica's ability to implement its restructuring plan. "Fitch believes that the outlined cost-reduction measures may prove difficult to achieve in the stated timeframe," the agency said, noting that disposals were crucial to relieving pressure on the credit rating.
The first test is imminent, with Finmeccanica expected soon to conclude the sale of its train-making business, AnsaldoBreda, to Hitachi of Japan. That sale will launch the disposal process in earnest, with Finmeccanica's stake in European missiles company MBDA potentially up for sale, or parts of its US defence electronic subsidiary, DRS. It was the $5.2bn acquisition of DRS, and the subsequent collapse of the US defence market, that created the debt load Finmeccanica now needs to address.
Mr Moretti, ever the optimist, says that Finmeccanica will deliver. Within two years, the 61-year-old executive says he will be running a new company. When that is proven beyond doubt, he says, "then I can retire".
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