Finmeccanica S.p.A.

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Finmeccanica S.p.A.

Piazza Monte Grappa 4
Telephone: (39 06) 324731
Fax: (39 06) 3208621
Web site:

Public Company
Incorporated: 1948
Employees: 56,603
Sales: EUR 11.4 billion ($14 billion) (2005)
Stock Exchanges: Milan
Ticker Symbol: FNC
NAIC: 336411 Aircraft Manufacturing; 336414 Guided Missile and Space Vehicle Manufacturing; 336415 Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing; 551112 Offices of Other Holding Companies

Finmeccanica S.p.A. has transformed itself from a sprawling, diversified industrial conglomerate into one of the world's leading defense and aerospace companies. Finmeccanica operates as a holding company with five primary divisions. Aeronautics includes the companies Alenia Aeronautica, Officine Aeronavali, Aermacchi, and the French-Italian ATR joint venture, and generates 18 percent of Finmeccanica's total revenues, which topped EUR 11 billion ($14 billion) in 2005. The Helicopters division is represented by AgustaWestland and produces 15 percent of company revenues. Finmeccanica's Defense Electronics division, which produced 21 percent of the group's revenues, is also one of the world leaders in this area, and includes the Selex Sensors and Airborne Systems joint venture with the United Kingdom's BAE Systems, as well as Galileo Avionics, Selex Communications, OTE, and Elsag. The company's Defense Systems division, including OtoMelara and WASS, along with Finmeccanica's share of the MBDA missile joint venture, is one of the world's leading developers of torpedoes, as well as naval artillery and wheeled combat vehicles. This division represents 12 percent of the group's turnover. The last of the group's major divisions is its Space Division, which includes companies Alenia Spazio and Telespazio, and, through a joint venture with France's Alcatel, is the largest European developer of satellite and related space-bound systems. Since 2005, Finmeccanica also has been developing its Aerospace Engines, launched through the acquisition of a 30 percent stake in Avio.

Together, Finmeccanica's aerospace and defense operations account for more than 80 percent of group sales; the remainder of the group's business is focused mostly on its legacy rail and transportation businesses. Finmeccanica was established by Italy's Istituto per la Ricostruzione Industriale (IRI) and remained owned and operated until its privatization in 2000. The Italian government nonetheless retains a 30 percent stake in the company, including a veto-empowered Golden Share. The company is led by CEO Pier Francesco Guarguaglini and is listed on the Milan Stock Exchange.


Finmeccanica was established in 1948 as part of the efforts by Italy's government-controlled industrial holding company IRI to restructure the country's devastated industrial and engineering sector. Finmeccanica became the vehicle for many of the IRI's most troubled companies in the automotive, aerospace, and shipbuilding industries, such as Ansaldo, Alfa Romeo, Odero-Terni-Orlanda (OTO), San Giorgio Soc. Industriale, Filatecnica Salmoiraghi, Arsenale Tiestino, Fabbrica Machinne, Industria Meccanica Napoletana, and Navalmeccanica, among others. Making matters more difficult for Finmeccanica was that for the most part the companies placed under its control had converted their production entirely to the support of the Italian war effort. With the end of the war, Italian defense spending had collapsed completely. Especially hard hit was the group's shipbuilding operations, which represented some 70 percent of Finmeccanica's operations. Yet with no orders coming in, Finmeccanica remained responsible for a workforce numbering more than 100,000. Any restructuring of Finmeccanica's business would of necessity have dramatic socialand politicalconsequences for the country.

Finmeccanica adopted a strategy of focusing on a limited number of only the most promising sectors. By the early 1950s, the company had decided to place its efforts into its shipbuilding operations, the motor vehicle market, including Alfa Romeo's automobile unit, railroads, and industrial equipment manufacturing. At the same time, Finmeccanica decided to enter a new market, adding its first electronics operations during the decade. As part of its new strategy, the company also launched a rationalization of its manufacturing capacity, combining the many facilities inherited from its original companies into a smaller number of larger and more competitive factories. The restructuring of the group's shipbuilding operations, which had been buoyed by new government spending policies during the decade, proved the most dramatic of all. By the end of the decade, the company had cut the payroll of this division in half.

At the same time, however, Finmeccanica had reduced its reliance on the shipbuilding division's turnover, and by the beginning of the 1960s, these operations accounted for only half of Finmeccanica's total. By then, the IRI had begun the process of separating the shipbuilding business from Finmeccanica, regrouping that division into a new company, Fincantieri, in 1960. By 1967, Finmeccanica had completely exited the shipbuilding sector.

The automobile sector, led by Alfa Romeo, became the company's leading division during the next period, accounting for 50 percent of the group's sales. Yet the late 1960s saw Finmeccanica enter a variety of new sectors: gas distribution, including the operation of service stations; the production of cathode tubes for televisions and semiconductors, through new subsidiary Ates; the creation of Selenia, a specialist in radar systems; and other operations ranging from the production of roller bearings to valves to nuts and bolts.

A new financial crisis in Italy put an end to this phase of Finmeccanica's expansion. Into the mid-1960s, the company adopted a new strategy replacing its highly diversified base with a more focused strategy based on gaining scale in a limited number of industries. As a result, Finmeccanica sold a number of its businesses, including its railway operations, while also transferring its electronics operationsincluding Selenia, as well as Elsag, a specialist in automated production systemsto a new holding company, STET, established by the IRI as its electronics sector holding company.

During this period, also, Finmeccanica's Ansaldo group had been reinventing itself as a major player in the Italian energy sector, adding a number of industrial operations in the thermoelectric and electromechanical sectors, then spearheading the Italian government's push to develop a nuclear power industry. As such, Ansaldo grew into Italy's leading producer of machinery and equipment, as well as turnkey plant systems, for the country's energy sector. Ansaldo also extended its reach into the transport sector, particularly for electrified transport systems.


Maintaining the world leadership in helicopters and training aircraft, reinforcing its role as a primary operator in defence electronics, growing as prime contractor in aerostructures, developing key technologies in the space, military aircraft and defence systems fields: this will be Finmeccanica's major commitment in the next future.


By the end of the 1960s, Finmeccanica had targeted another industry for its future growth, that of the aerospace industry. The company's first entry into the sector came with its participation in the creation of Compagne Italiana Aerospaziale in 1965. In 1969, the company transferred its existing aerospace operations, such as the aircraft engine production formerly held by Alfa Romeo, into a new 50-50 joint venture with industrial rival FIAT. The venture, called Aeritalia, played an important role in Italy's drive to develop its own self-standing aerospace industry on a par with its NATO partners. Aeritalia focused especially on the defense sector, building a workforce of some 9,000 by the end of the 1970s. Yet the company remained quite small by international comparison, and continued to rely heavily on the Italian government's defense budget, which accounted for some 90 percent of Aeritalia's total turnover. By the end of the decade, too, Finmeccanica found itself in sole control of Aeritalia.

The economic crisis of the 1970s, brought on by the Arab oil embargo and the sudden rise in fuel costs, forced Finmeccanica once again to renew its strategic objectives. Although Alfa Romeo had grown strongly over the previous decades, it remained a minor player in an increasingly international market. If before the company had been able to compete on a European scale, the dramatic rise of the Japanese automobile industry had begun to transform the global automotive landscape. Amid the wave of mergers and alliances in the European automotive industry, Finmeccanica recognized that Alfa Romeo was too small to operate on its own. At last, in 1986, Finmeccanica found a partner for Alfa Romeo, transferring its ownership of the iconic carmaker to FIAT that year.


Finmeccanica is created as part of Istituto per la Ricostruzione Industriale's (IRI) restructuring of Italian industrial sectors following World War II.
Finmeccanica forms Fincantiera for its shipbuilding holdings.
The company becomes a founding partner of Compagne Italiana Aerospaziale.
The company spins off Fincantiera and exits shipbuilding.
The company enters into the creation of Aeritalia defense and an aerospace joint venture with FIAT.
Finmeccanica launches an internationalization effort and acquires the Selenia, Elsag, and SGS electronics operations from STET; the company also acquires Bailey Controls and forms the Elsag Bailey process automation subsidiary.
Finmeccanica goes public on the Milan Stock Exchange.
Finmeccanica lists subsidiaries Elsag Bailey and Union Switch & Signal on the New York Stock Exchange; the company acquires defense and aerospace holdings from the bankrupt EFIM.
Finmeccanica acquires Breda Costruzioni Ferroviarie, which merges with the existing Ansaldo railway transport business, becoming one of the world's top ten companies in the sector.
The company sells the Elsag Bailey Process Automation in an effort to drive down debt; the AgustaWestland joint venture is formed with GKN of the United Kingdom.
Finmeccanica is privatized as IRI sells its entire shareholding.
The company spins off its missile operations into the MBDA joint venture with BAE Systems and EADS.
The company acquires full control of AgustaWestland as part of a restructuring to specialize in the defense and aerospace sectors.
The company acquires the BAE Systems defense electronics division and satellite telecommunications group Datamat.
Finmeccanica announces a satellite launcher joint venture with EADS.

The crisis hit Ansaldo as well, as the Italian government's energy spending, which accounted for 80 percent of Ansaldo's turnover, dropped drastically. The company's nuclear power operations were especially hard hit, as the government put its nuclear program on hold. With the domestic market in disarray, Ansaldo stepped up its efforts to establish itself on an international level. At the same time, the company decided to reduce its reliance on the energy sector and instead focus its future growth on the railroad and transport market, as well as the industrial equipment sector. As part of that process, Finmeccanica restructured these operations into two new businesses, Ansaldo Trasporti and Ansaldo Sistemi Industriali. This later led to the breakup of the larger Ansaldo group.

Finmeccanica itself had entered a period of streamlining in the 1980s, selling a large number of its holdings, culminating with the sale of Alfa Romeo. As a result, by the end of the 1980s, Finmeccanica had been reduced to just two core holdings, Ansaldo and Aeritalia.

Finmeccanica's streamlined structure proved only temporary. In 1988, the company developed a new strategy designed to give the company the mass to compete on an international level. The company launched a dizzying acquisition drive, which saw it gain control of some 30 companies in just two years. Among these was the transfer of Selenia, Elsag, and SGS, all three of which had formerly been part of Finmeccanica, from STET in order to give the company expertise in electronicsa field that had become increasingly important in both of the company's core operations. Another notable acquisition was that of Bailey Controls, which, combined with Elsag and another acquisition of this time, Fata, established Finmeccanica as the world leader in the field of process automation. The company's restructuring effort culminated in the merger of Aeritalia and Selenia, creating Alenia, with expertise in air traffic control, defense electronics, aeronautics, and missile systems. By then, too, Finmeccanica had boosted its aerospace division again with the joint purchase of FIAR, part of Ericsson's aerospace and defense electronics division, in partnership with rival Breda, part of another state-owned holding company, EFIM.

The new acquisition drive succeeded in transforming Finmeccanica. By 1990, the company's turnover had tripled, nearing ITL 10,000 billion. Finmeccanica's sales profile also had changed, with exports accounting for approximately 40 percent of its total revenues.


Finmeccanica celebrated the success of its restructuring in 1992 with the launch of its public offering, listing its stock on the Milan Stock Exchange. IRI maintained firm control of the company, however, with 87 percent of its shares.

The group's celebration proved short-lived, however, as a new economic recession caught up with the company. In order to raise funds, the company launched public offerings for two of its subsidiaries, Elsag Bailey Process Automation and Union Switch & Signal, both of which were listed on the New York Stock Exchange.

The difficult economic period, however, was to prove to have a longer-lasting impact on Finmeccanica's profile. By 1993, debt-ridden EFIM neared collapse, and in February of that year the Italian government temporarily transferred EFIM's defense and aerospace holdings, including Breda, the Agusta helicopter division, training and avionic systems divisions, the Galileo electro-optical systems subsidiary, as well as weapons producer Oto Melara and radar specialist Sma. By August of that year, the Italian government made the transfer of the companies permanent. The result raised Finmeccanica's defense and aerospace revenues by one-third and placed Finmeccanica in control of some 70 percent of these markets in Italy. The transfer also became an important part of the future Finmeccanica group.

Through the late 1990s, Finmeccanica continued to build its international presence in its major business areas. In 1996, the company bought Breda Costruzioni Ferroviarie, which was then merged into the group's Ansaldo railway transport business, becoming one of the world's top ten companies in the sector. In another key acquisition, the company's Elsag Bailey group acquired Hartmann & Braun from Germany's Mannesmann, a move that gave Elsag Bailey the second largest share of the global continuous process automation market.

The Italian government then began repositioning Finmeccanica for its full privatization. Yet by then, Finmeccanica's own finances were a messby 1998, the company's debt had risen to EUR 6 billion, while losses for that year had reached record levels, topping EUR 1 billion.

Ahead of its upcoming privatization, the company launched a new restructuring, and a new strategy based on a core focus around its defense and aerospace operations. As such, the company sold its Elsag Bailey process automation operations (keeping Elsag's defense business). The sale netted the company more than EUR 1 billion, helping to reduce its debt burden. In 1999, the Italian government transferred its highly profitable and cash-rich electronics subsidiary MEI, a major microelectronics producerwhich Finmeccanica promptly sold as part of its cash-raising efforts. Also during this period, Finmeccanica formed a joint venture with the United Kingdom's GKN, creating the helicopter powerhouse AgustaWestland.

These efforts enabled the Italian government to meet its target of privatizing Finmeccanica by 2000. In that process, IRI placed all of its shares in Finmeccanica on the stock market, while the government, through the Ministry of Finance, retained approximately 30 percent of the companyincluding a veto-empowered "golden share."

The privatization set the stage for Finmeccanica's transformation into a specialized defense leader. For its next phase, the company brought in a new CEO, Pier Francesco Guarguaglini, a veteran of the company who had left to restructure another troubled governmentowned holding company, Fincantieri.

Under Guarguaglini, Finmeccanica rapidly transformed itself into one of the world's top defense and aerospace groups. This was accomplished through a series of major acquisitions. In 2004, for example, the company acquired full control of AgustaWestland. In 2005, the company acquired control of U.K.-based BAE Systems' defense electronics operationsa purchase that gave Finmeccanica 60 percent control of the high-profile Eurofighter Typhoon program. By August of that year, Finmeccanica had bought Italy's Datamat, a satellite telecommunications specialist.

Finmeccanica also showed itself a ready player in the international consolidation of the defense sector, merging its defense electronics operations with that of GEC Marconi, based in the United Kingdom. The combined business then became one of the world leaders in that highly important market. In the meantime, Finmeccanica had spun off its missile business into the international MBDA joint venture, with partners BAE Systems and EADS, creating the world's second largest missile maker in 2001.

By 2006, Finmeccanica had transformed itself into a major player in the global market, with more than 80 percent of its revenues coming from its defense and aerospace operations. The company continued to seek out new acquisitions and partnerships. In September 2006, for example, the company announced a plan to create a satellite launcher joint venture with EADS. The company also was rumored to be in talks regarding a possible merger with French rival Thales, a move that would raise the combined company to the top of the world market.

M. L. Cohen


Aermacchi; AgustaWestland; Alenia Aeronautica; Alenia Spazio; Ansaldo Energia; Ansaldo Signal N.V. (Netherlands); Ansaldo Trasporti Sistemi Ferroviari; AnsaldoBreda; ATR (France); Elsag; Fata; Galileo Avionica; Officine Aeronavali Venezia; Orizzonte; OTE; OTE Mobile Technologies Ltd. (United Kingdom); Seicos; SELEX Communications; SELEX Sensors and Airborne Systems (United Kingdom); SELEX Sistemi Integrati; Telespazio.


Gidromash Joint Stock Co.; Fiat S.p.A.; Boeing Co.; European Aeronautic Defence and Space Company EADS N.V.; Lockheed Martin Corporation; Northrop Grumman Corporation; Airbus S.A.S; Thales S.A.; Mitsubishi Heavy Industries Ltd.; Raytheon Co.; BAE Systems PLC; MAN AG.


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Blitz, James, and Alexander Nicoll, "Finmeccanica Secures Its Future Role," Financial Times, October 21, 1999, p. 32.

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Corvino, Marco, "Finmeccanica's Profitable Privatisation," Interavia Business & Technology, February 2000, p. 9.

"Finmeccanica Agrees to Buy Telecommunications Company," Flight International, August 2, 2005.

"Finmeccanica on Takeover Prowl," Flight International, April 12, 2005.

"Global Goals," Flight International, November 8, 2005.

Hoyle, Craig, "Talking Italian," Flight International, November 2, 200, p. 48.

Jasper, Chris, "Ambitious Italians Eye Expansion," Flight International, February 27, 2001, p. 6.

Kington, Tom, "Finmeccanica Eyes Launcher Joint Venture with EADS," Defense News, September 25, 2006, p. 14.

Morrison, Murdo, "Waking Giant," Flight International, November 2, 2004, p. 30.

Nativi, Andy, "Arrivederci to Avio," Aviation Week & Space Technology, August 14, 2006, p. 32.

Spiegel, Peter, "Rising Star: An Acquisitive Finmecannica Thrusts into Europe's Defence Dogfight," Financial Times, August 24, 2005, p. 13.

Wastnage, Justin, "Finmeccanica Eyes More Takeovers," Flight International, July 27, 2004, p. 37.