What’s new in COAST? Newsletters N°1 November 2004 Online : www.bpseurope.org

For COAST consortium, Editoring service: BPSEurope

Contents Leader - Regional development and ASD industry : What kind of cooperations between the territories and the industrial groups The figure – 25, The new EU with 25 countries, The ASD industry in the newly member states Portrait of an iniative – Mérignac Bordeaux, the first pépinière specialised in ASD Pictures - Visit of Alain Rousset, President of Conseil Régional d’Aquitaine, On the COAST stand in Farnborough Exhibition 2004 - March 2004 COAST Meeting In Wales Readings - Diplomatie Magazine,Interesting analyse of European institutions in defence The Word - Industrial grasp, A concept which can be ambiguous Legal - If you want to access to public French markets,You have to be aware of new rules Next Events - Congress and exhibition, In Bilbao and in Toulouse

Leader Regional development and ASD industry : What kind of cooperations between the territories and the industrial groups ?

The industrial development experiences in Wales and in Basque Country The regional experiences in Wales, Basque Country and in North West England are demonstrating the importance of the real implication of big groups in the regional development strategies. It’s a success condition. These groups have played a crucial role in the set-up of regional strategies in industrial sectors. In Basque Country, two groups have assumed this position: GAMESA et ITP. In Wales, the industrial network is structured around different groups such as AIRBUS UK. Another very interesting example is provided by NWAA (North West Aeronautics Alliance) which has been supported by BAE. They have developed the notion of “grappe” (group): the development of a high-level know-how pole in valorising the power of a main order. The industrial development strategies can be of different types: Ø The Basque Country government has developed different clusters in its different industrial sectors. Between its industrial sectors, the government has established closed coordination’s. These ones are integrated to a global regional strategy, Ø Other regions have developed global approaches based on flows optimisation at entire « value chains » level.

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In parallel of the big group’s efforts, one observes that public institutions have developed an important effort in order to support the industrial diversification of the sub-contractors. The regional policies have to contribute to the SME’s capacity to afford the risk sharing strategies imposed by the main and prime orders. In conclusion, the experiences in these European regions have demonstrated that a regional development model for industrial sectors deployment has to be defined in straight conjunction with the definition of a global strategy. This one (strategy) has to be based on an optimal equilibrium between: Ø The main orders involvement in order that these ones bring their powerful capacity to the regional industrial network ; Ø The diversification et the alliances of the sub-contractors Ø The involvement of the public institutions.

The figure

25 The new EU with 25 countries The ASD industry in the newly members states 2004 is a very important year for the EU with some crucial events, the new member states adhesion, the Constitution, the Turkey issue. In particular, for ASD industry, the Eastern and Central countries new membership can represent new business opportunities. We have summarized some informations about that issue. On bpseurope.org, you can find more general analyses concerning business models with these new countries. Poland, Czech Republic and Romania are the countries which have developed a significant industry and aeronautical tradition, among the newly EU member states from Eastern and Central Europe. In the early 90’s, this industry has lost its traditional export outlets. But, thanks to its recognised knowhow and diversified competences, this industry has been saved by the foreign investments flows. In this context, the investments of the European aircraft industry started in 2000. The investors originating in the United States seem to have neglected Romania. Business opportunities still exists due to delays in the programs of privatization and failures of foreign investments projects. As in Asia and South America, emergent areas of the aircraft industry, the challenges of the sector in the newly EU member countries are related to the size of the actors, the privatization process implying acquisitions realised by large European or American actors, as well as to the capacity of these countries to propose qualitative and competitive subcontracting services. The aircraft industry of the area did not succeed in forming great national, or even regional, groups. The industrial structure is constituted of small entities (with fragile financial health for some) dealing with domestic markets of modest size. The machines recently developed in the area (for example L159 or SW-4) could be the last ones of a long serie started in the years 1920. Three axes of development may however contribute to the survival of the aeronautical activity in these countries:

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- regional competences in the field of aviation light and extra-light, which raise a hope of success for certain productions, in a field where the American manufacturers (CESSNA, PIPER, MOONEY…) have not known to modernize their ranges for several decades; - Capacity of the local subcontractors to propose to the ASD big groups services of quality at a competitive price; - the necessary modernization of the fleets of the air forces and the airline companies of the area, which can be accompanied by consequent programs of compensations. The Polish aircraft industry absorbs 70% of the compensations of the defence sector. As for example, the acquisition by the Polish army of 8 EADS CASA C-295 of transport has permitted EADS PZL to win the substructures assembly business (wings, doors…) and the purchase of F-16 hunters has been decided on the basis of American promises of important compensations. (...)

Portrait of an initiative Mérignac Bordeaux : The first “pépinière” specialised in ASD

Bordeaux Technowest, a COAST associate partner in Bordeaux, has launched an interesting initiative in the matter of new businesses creation in ASD sector. Maybe other COAST partner can have some interest to establish contacts with this new infrastructure or to observe how this experience is led. The following informations have collected in newspapers and packaged by BPSEurope. A "seedbed" of companies specialised in aeronautics, space and defense industry (ASD) has been launched in Mérignac on October 1. The structure, in the course of installation, takes seat on 650 square meters in the building James Watt, located in Watt Allée, in Mérignac Chemin Long area. The project, coordinated by the director of Bordeaux-Technowest, François Baffou, had started from a report: "Although the whole of the clients (EADS, Dassault, Sogerma, Snecma, Avionic Thales...) maybe on this territory, there existed not accompanying structure for new aeronautics businesses in the Bordeaux agglomeration, neither in Aquitaine, nor in France. The "incubator" which constitutes a high level environment for developing projects has to be considered also as a resources center. In this context, it bring a very efficient solution to the lack of accompanying structures in "concentrating competences in a single site". This new infrastructure will support "the creation of companies starting from the technologies developed by the industrial partners".

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Pictures Visit of Alain Rousset President of Conseil regional d’Aquitaine On the COAST stand in Farnborough Exhibition 2004

From left to right around Alain Rousset, President of Conseil Régional d’Aquitaine: Elias Agouri, Adviser of the President at Adour Compétitivité association in Pau, Emeric d’Arcimoles, Turbomeca President, John Whalley, Director of AerospaceWales Forum ltd in Cardiff, COAST partner, Paul Lindsay, Project Manager in AerospaceWales Forum Ltd in Cardiff, COAST partner, José Juez, Managing Director of HEGAN in Bilbao, COAST partner.

On 21 July, Alain, President of the Conseil Régional d’Aquitaine, has visited the Farnborough exhibition. After receiving Alain Rousset on its stand, the COAST consortium has organised a lunch for key decision makers from Aquitaine, Basque Coutry and Wales. The participants were: Ruth Whitacker, Airbus General Director, Alain Rousset, Conseil Région d’Aquitaine President, Emeric d’Arcimoles, Turbomeca President, John Waley, AerospaceWales Forum Ltd Director, José Luez, HEGAN Association Director, Elias Agouri, Adviser of Adour Compétitivité President, Jean-Marie Virepinte, President of the GIFAS Association SMEs group, and a representative from GAMESA. The discussion theme was the implication of industrials and public institutions in the development of aeronautical and space industrial networks, Exhibitor’s restaurant, Farnborough, 12 H 00 – 13 H 30. The lunch objective was to evaluate the local/regional initiatives and to start a benchmarking work between the regions in order to improve the efficiency of the actions.

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March 2004 COAST Meeting, In Wales,

The participants to the Welsh industry visit in March 2004 On bpseurope.org, see the list of participants, meetings programs between companies from Basque Country, Aquitaine and Wales and company visits in Welsh ASD industrial sites

Readings Diplomatie Magasine : Interesting analyse of European institutions in defense The “Diplomacy” magazine, in its edition June-July 2004, has published a very interesting insight about the Europe of the Armament, “Europe of the Armament - Intentions and Diversités”, pages 51 to 65. This analysis is particularly interesting because it recalls the whole of the institutions and the tools which were installed at the European level. It also tackles the problems of the transatlantic relations in this field. Interventions of personalities occupying high level responsibilities give particularly instructive lightings about all the challenges of Europe of the Armament and its future prospects.

The Word Industrial “grappe” (group): A concept which can be ambiguous For a long time, the companies are choosing to be established closed to other companies which produce related products or to institutions such universities. These relations which are of “competition/cooperation” type are generating increases of productivity and competitiveness, for companies themselves, and more largely for the region. Noting that the increase in the variation observed since two decades of the interior product gross Canadian (GDP) compared to the American GDP would result from the low level of productivity of Canada, the Board Conference of Canada decided to push the analysis on the subject of companies 5

grouping into a local excellence pole, what can be called in French “grappe”. This study is a part of a vast research project, “The Canada Project” which aims at the growth of the Canadian standard of living and the improvement of the position of Canada in the world. Thanks to the collection of eleven international survey and polls among 171 managers of Canadian information technologies companies (1) as well as biotechnologies, the Board Conference tried to answer two key questions: “Do the companies grouping into a local pole contribute to the growth of the regional economy?” and “What is the role of the government? ”. Relatively to the first question, the Board Conference affirms that, indeed, the “grappe” would influence the regional development but their influence depends on three factors: 1) the cycle of life of the “grappe”; 2) the business cycle and; 3) the degree of maturity of technologies common to the regrouped companies in the pole. Let us note that four cycles of life of the “grappe”, or stages, are as follows: 1) early-stage; 2) growthstage; 3) mature-stage and 4) renewal or decline stage. In addition to being able to contribute to the economic growth of the areas, by the creation of jobs for example, the local poles can also contribute to the growth of the regional knowledge. Flows of information, businesses and technological (circulating in the pole, coming as well from the interior as from the outside of the companies group) come to enrich the total knowledge of the area and to create the ideal conditions for the innovation and the creation of value. Concerning the second question, the Board Conference concludes that indeed the government has a role to play in the development of such local/regional poles. In fact, its role would be to set up all the conditions necessary to their growth (education and training, infrastructures, investments, etc). Especially, the government has to resist to the temptation of building a pole on the basis of… nothing! Rather than to become an “initiator”, the government has to be efficient in its role of “stimulator”. Lastly, with the advantages also come the disadvantages. Let us note that the principal dangers that the grouping must cope with are lying in their lack of efficiency in information communication between the “grappe” actors, their dependence relatively to the business cycles, the technologies and their cycle of life, as well as the temptation to monopolize the whole regional or local economy. Source: The Board Conference of Canada, Clusters off Opportunity, Clusters off Risk, The Canada Project, Carryforward by Trefor Munn-Venn and Roger Voyer, August 2004, 25 p. http://www.conferenceboard.ca/boardwiseii/signin.asp. Translation in English realised by BPSEurope.

Our comment On a conceptual level, the “grappe” concept constitutes a coherent and tempting industrial approach. Indeed, it aims at developing a pole of high level know-how exploiting the advantages of a big group presence. The concentration of the subcontractors in the direct environment of their client leads to reinforce very integrated co-operations and to lower the production costs on the whole industrial chain. These groupings would also constitute poles of competences, since research centres would be associated to it. In this vision, the “grappe” is not only an industrial pole but, also, a expertise and know-how centre of excellence. However, in the context of a permanently restructuring market (due to the pressure of the large company requirements), this model raises a central question concerning the ASD sub-contractors survival: Doesn't there exist a risk of total dependence of the subcontractors relatively to the centre of the pole? In a globalized economy, in order to maintain its activity level, the “grappe” must ensure its competitiveness on a world level. This implies tighter constraints: to increase continuously competences and costs reductions. But, this is more and more difficult to realize for the subcontractors. At the end of this spiral process, the sub-contractor can be faced to a dilemma: to 6

dead or to loose completely its independence in order to survive. It poses the question of real industrial decision capacity at regional level and, in consequence, the survival of regional industrial networks. In order to guarantee a real regional decision capacity, and then the long term existence of regional sub-contractors networks, the model of the “grappe” must also be based on the development diversification strategies and alliances between the subcontractors themselves, inside and outside the pole.

Legal If you want to access to public French markets, You have to be aware of new rules The French legislator has adopted new rules for public markets. If you want to have informations about it contact our legal advisory service, Régis Pouyfaucon [email protected]

Next events Congress and exhibition, In Bilbao and in Toulouse Our partner HEGAN in Bilbao organises a congress on 8 and 9 November, AEROTRENDS. www.hegan.com/aerotrends2004 COAST will be actively present in AEROMART in Toulouse on 4 and 5 December, www.aeromart.tm.fr

COAST Leader,Adour Compétitivité Jean-Michel Capdeboscq Hélioparc Avenue Pierre Angeot F-64000 PAU Tel : 33 (0)5 59 84 56 90 Fax : 33 (0)5 59 84 88 88 Email : [email protected] Web : www.adour.org

Editing service BPSEurope 238ter, rue Peydavant F-33400 Talence Tel : 33 (0)5 57 96 80 56 Fax : 33 (0)5 57 96 80 56 Email : [email protected] Web : www.bpseurope.org

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