MBDA, a European Company at the Heart of Major European Projects

"MBDA, a European company aiming to be at the heart of major European projects as well as Europe’s technological driving force in the guided weapons sector". Interview with Marwan Lahoud, Chief Executive Officer of MBDA, certainly the largest but also the most successful of integrated European companies within aeronautics and defense sector. "MBDA is above all a defence company, therefore its prime value is collective security and world security." This article, first published in "Défense" review [1] issue n°125 dated 5^th February 2007, is reproduced here with its author's permission (© Défense.

Marwan Lahoud, CEO of MBDA : « we need to remain very vigilant to maintain a technological lead »

• Défense: In a few words can you introduce MBDA, without going into figures?

MBDA inherited a very rich history when it was created through the merger of Europe’s leading companies in the missile industry, these included Aerospatiale Missiles of France, Matra BAe Dynamics of France and the United Kingdom, LFK of Germany and the missiles part of Finmeccanica in Italy. As a result, MBDA now possesses state-of-the-art technologies, first-class know-how and products known throughout the world. These attributes make it the world leader in its sector, ahead of American manufacturers. MBDA was the first and is now the most successful of integrated European companies in the aeronautics and defence sector.

• Défense: Last year you announced a drop in sales of the order of 10%, what is the situation now?

Although the year is not yet finished, I can announce that MBDA's sales will be comparable to last year’s, which were about € 3.5 billion. No doubt the figure this year will be slightly lower, but not nearly as low as expected only two years ago. This is thanks to the commendable efforts made by our production and export teams to help us to deliver on time and prepare for future contracts.

• Défense: What events enabled this stabilization and turnaround?

I wouldn’t talk about a turnaround because the results obtained this year do nothing to change the structural reasons for the shrinkage in the world market for missiles and missile systems. I think the conclusion is rather that the contraction phase in our sector will happen slightly later than we expected, and I am delighted with this development. Our sales have kept strong as the result of work that we have been carrying out on several fronts at the same time; supporting the French government and respecting commitments are two key elements, and the domestic market also played its role.  Export successes are another point that I would like to emphasize.

• Défense: What conclusions can you draw after nearly four years of leading MBDA?

In terms of results, sales have increased strongly from €1.8 to 3.2 billion between the end of 2002 and the end of 2005 (before the integration of the German subsidiary LFK). Operating profits have increased by a factor of more than five, from slightly more than 1% to more than 7% of sales over the same period. The order book dropped slightly from €13.2 to 12.4 billion, but still represents four years’ activity so that MBDA can face the future with optimism.

I don't want to talk about the financial results any more, I am more concerned with the Group’s industrial and human achievements. Industrially, MBDA has carried out a great deal of work and therefore has made a lot of progress on the four fronts that I earmarked on becoming CEO of the company. These were to improve product quality, to set up a sound cost basis, to create a genuine business development structure, and finally to meet deadlines.

Marwan Lahoud with Werner Kaltenegger (LFK now MBDA Germany)

This approach was initiated four years ago and is now bearing fruit.  In human terms, MBDA has succeeded in genuinely integrating the three founding entities, Matra Bae Dynamics, the missiles part of Finmeccanica and Aerospatiale Missiles, including their executives and personnel to become a well integrated company. This experience will help us to integrate LFK, now MBDA Deutschland, with equal success. I am sure that we will achieve this. MBDA is now organized around a genuine international management team leading all the Group's employees, regardless of their nationality. In my opinion, this is one of MBDA's greatest successes and one that will enable us to face tomorrow's challenges with the best means at our disposal.

• Défense: How does this very good industrial balance inspire you personally, what have you learnt from it?

My personal case is not very important, my Company's success is much more important than my own. My duty is to serve MBDA,always keeping the future of the Company in mind, particularly because managers come and go while companies remain.

Having said this, I have learnt a great deal, and will mention two things. Firstly, I am more convinced than ever that we will never succeed alone and that the prime responsibility of a company manager is to build up a team around him, not only accepting but taking advantage of all the differences and the range of skills. Secondly, when change is necessary, it is always possible for the company to adapt and even reorganize itself, and success will be assured if we remain open to dialogue and show respect to others.

Successful launch of an Aster-30 SAMP/T Missile on November 14, 2006 [6]

• Défense: What about the future of MBDA?  What will MBDA’s position be in major European defense projects?

Due to its inherent nature MBDA is a European company, therefore its aim is to be at the heart of major European projects in the missile and missile system domain and as a consequence in the equipment of future European platforms. The Company’s aim is also to be a driving force in the technological independence of Europe in the guided weapons sector.

Armament for future platforms has already begun with the FREMM multi-mission frigate project in which France and Italy are now cooperating. This involves 27 ships and as thus is the biggest cooperative naval programme ever carried out.  MBDA is the military core of the FREMM because all the ship’s weapons are being developed and produced by MBDA. MBDA has been participating in the design of the ship in terms of weapon systems since the very beginning.

MBDA at Euronaval 2006

The new Defense Industrial Strategy (DIS) in the United Kingdom offers the best example of the role that MBDA can and must play towards achieving the technological independence of Europe, and guaranteeing that the European Defense Technological and Industrial Base (DTIB) remains strong in the long term. 

Therefore, the objective in Europe is to be clearly at the center of defence issues starting at the early study stages and to be perceived as an essential player in the system, in the same way as the major carrier manufacturers are perceived. We should never forget that missiles are the tip of the iceberg that delivers the required military impact, no system, no matter how complex, is fully efficient if it is not accompanied by "effectors".

• Défense:  Are you envisaging new acquisitions in the medium or long term?  Are you envisaging new cooperation with countries outside Europe, for example Russia?

MBDA is now finalizing the acquisition of Bayern Chemie, a propulsion company equally owned by EADS and Thales, to reinforce its position in the propulsion field and particularly in very high technology ramjet propulsion.  MBDA already has expertise in this field sharing a 50/50 stake with SNPE in Roxel, which is another important player in the propulsion field.  After the integration of Bayern Chemie, MBDA will have a competitive propulsion cluster.

MBDA cooperates in partnerships with European and non-European countries, and considers them to be an essential element of its development strategy. This is the prerequisite for long-term success in a high technology field .

• Défense: Do you think that MBDA's present industrial model is optimum?

I started a new company organization last year with the support of the management team. We believe that this organization that is being steadily implemented will improve MBDA’s ability to compensate for cyclical movements and maintain its performance in the long term. It would be pretentious to think that our present organization is final. I would say that it is adapted to our present needs and to future requirements as they are seen today. This does not mean that we should not consider possible improvements, particularly in terms of rationalization of production and the number of sites.  For example, starting in January 2007, we will combine the three sites in the Paris region into a single site, after having started an industrial reorganization of the Région Centre (Orléans Region) last year to become even more competitive. We are carrying out similar operations with our sites in the United Kingdom and in Germany.

• Défense: The question of your share holding was raised a few months ago, with the possible withdrawal of some shareholders.  Declarations made by BAE and Finmeccanica managers now show a clear wish to remain, how do you explain this?

Guy Griffiths and Marwan Lahoud presenting MBDA results for 2006

I did hear that my shareholders wanted to keep their holdings in MBDA's capital, no doubt because it is a good business and it is not so badly managed after all.  Mike Turner, CEO of BAE Systems and Pierfrancesco Guarguaglini, CEO of Finmeccanica, have stressed the importance to their two groups of remaining in missile systems which is seen as a strategic sector for their defense activities. This is consistent with the analysis already made by EADS. This is why I think that MBDA's position, supported by Europe’s three large aeronautical and defence groups, is secure for the foreseeable future.

• Défense: What sort of relations do you have with your shareholders?

We have very good relations, undoubtedly because MBDA is one of their most profitable and stable subsidiaries. Their desire to keep their share in MBDA's capital is a sign of these good relations and MBDA’s solidarity with its three shareholders. I would like to add that the equity situation that I have mentioned is a guarantee to each company that its interests will be protected.  Furthermore, these three shareholders have seats on the MBDA Board of Directors, giving their representatives a good opportunity to play an active role in an activity that is a world leader in its sector, rather than simply defending the specific interests of particular groups.  In this sense, they are genuinely associated with MBDA's strategic management and share the highest levels of responsibility with it.

• Défense: What is MBDA's policy towards its suppliers?

With a number of suppliers their status has in many cases evolved from that of supplier to one of partner, here I am thinking of Thales, Sagem, Selex (Finmeccanica group), and even BAE Systems and EADS.  In addition, we also benefit from putting them into competition with each other occassionally which further helps to improve our own competitiveness. In any case, the idea is to make our suppliers more responsible towards the overall effort made by MBDA to deliver on time; our suppliers also have to be motivated to assure our final customer's satisfaction.

• Défense: Is it possible for an enterprise such as MBDA to call upon new suppliers, for example such as Russia, as some players in the aeronautical sector are envisaging?

There are many opportunities with Russia, but we could also talk about other countries, India for example. MBDA's aim is to build up sustainable relations with reliable manufacturers, and their nationality is not the main criterion. Beyond its customer - supplier relations, MBDA has the necessary skills and means to advance a truly effective strategy, and one of the elements of this strategy is to set up European and international partnerships.

• Défense: What approach have you adopted and what values did you use to successfully create a company now presented as an example or a prototype of an integrated European company?

Above all, MBDA is a defence company, therefore collective security and world security are its main values. If each MBDA employee is convinced of this, as I am, then motivation and conscientiousness in their work will be strengthened. Working in defence also means being at the service of a higher cause, therefore we need to cooperate with and be at the service of others including MBDA employees, MBDA shareholders, and also the countries with which MBDA is working.

Another value is our multicultural approach; we do not have any dominant national culture, I try to listen to everyone and take advantage of our diversity, which is how MBDA has become an integrated European company.

We also need to remember that MBDA is a very high-tech industrial company. Therefore, it is important to remain close to engineering problems that are the basis of the company's success.  Without technical excellence, the company would never be able to respect its contractual commitments, either in terms of deadlines or cost, and therefore would no longer be efficient or sustainable.  As an engineer by education, I value pragmatism for programmes and ambition for the company. Therefore I try to emphasize programme management through organization, to make it the basis on which we can build performance to guarantee MBDA's capacity to have a strategy and to implement it.

Finally, I am convinced that we can never succeed alone and that team work is essential to assure information transparency and fluidity. Unlike others, the MBDA model is a collective game.

• Défense: What role can a weapons manufacturer play at a time when sustainable development and environmental protection concepts are major concerns for citizens?

Sustainable development is too frequently perceived as being nothing more than respecting the environment. In my opinion, sustainable development forms part of the logic that already encompasses ethics, particularly in terms of international trading of weapons, and the social responsibilities of companies concerning equality of opportunity, equality between men and women, the right to education and training or any other subject related to social development.

Regardless of their field of activity, responsible industrialists must consider these three requirements more so now than ever before. These three requirements include respecting in -force regulations, and also the voluntary and personal actions taken by all, regardless of their position, within the company. Consequently, they form an integral part of the group of values that contribute to the forging of MBDA's identity.

The industrial world must accept this desire to protect the environment. This concern must be particularly strong in the mechanical, electronic and chemical industries that are very important within MBDA.  The specific nature and character of our weapons business do not release us from this responsibility in any way.

Specifically, the environmental approach adopted by MBDA relates primarily to our industrial sites and particularly work conditions offered to our employees. My first thought is the energy diagnostics and treatment of our buildings. This global approach also needs to be related to our production life cycle, from conceptual design to dismantling, including the choice of materials and components used in the manufacturing process. The new element is dismantling. At the moment, the industrial life cycle stops at maintaining in operational condition. What about the "end of life" of our equipment?  I would like MBDA to be a center of excellence in demilitarization, firstly because we have the knowledge and skills to do it, but also to demonstrate that we accept our environmental responsibilities.

• Défense: Should European industry fear the rise of emerging countries in the defence field, at a time when Europe is opening up its markets to international calls for bids?

I don't think so. The technological superiority of European defence products is an element that still protects this industry. However, some countries have now reached a high-tech level in some segments and they often have a price advantage that can make all the difference. 

Therefore, we need to remain very vigilant to maintain a technological lead and to continuously work towards keeping European products competitive. This is why we need to maintain a high investment level in R&D and continuously improve our processes to control costs.

• Défense: Would you say that integrated European industrial companies provide one solution or the only solution to anchor industry in Europe in the long term?

It is no doubt the only solution. European companies are the only way forward. They must also be accompanied by an even more global industrial approach. The economy is now completely international, therefore we need to find the means of globalizing companies, while maintaining our bases without denying our culture, origins and ties, otherwise we would tend towards concentration, then shrinking, and finally disappearance.

• Défense: The recent conflict in Lebanon brought a certain amount of military intelligence, do you think that this intelligence will change anything in European defence policy and particularly for land combat?

Above all, it is important not to draw any hasty conclusions after each war. The concept of Network Centric Warfare became a panacea after the 1990-1991 Gulf War. More recent operations in Iraq and in Lebanon illustrated the limits of this approach.

I think that the major intelligence to be drawn is the ever-increasing need for forces on the ground to have multi-purpose weapons, very flexible in use. The capacity to use a system for very different missions is a genuine advantage. This is the case particularly for ground combat, with the need for portable weapons capable of destroying hot targets (combat tanks or armored or unarmored vehicles), cold targets (bunkers, buildings), fixed or moving targets with the same efficiency. Experience in the field clearly shows that wire-guided missiles are better adapted to this type of need than missiles fitted with infrared homing heads.

• Défense:  The wish to reduce public expenses and particularly defence budgets is a leitmotiv, what could be the strategic, social and industrial consequences if such a drop occurred?

Firstly, I would like to say that defence expenditure in France has not reduced for several years and I am very pleased about this, but it is true that elsewhere defence expenditures are being reduced, particularly in the United Kingdom and in Italy. MBDA has anticipated this type of risk by setting up a rational industrial organization, a policy to reduce costs in the four European countries in which it is located to be able to face a shrinkage of the market.

Beyond the organization and industrial processes, MBDA's objective in recent years has been to make its industrial facilities as flexible as possible, for example to be able to adapt a previously developed product for a new mission. This possibility limits the customer’s costs and development times, while producing an end product that satisfies requirements at lower cost.  Finally, faced with the prospect of a shrinkage in MBDA’s domestic market, export has always been a key element of MBDA's commercial policy, and in this respect I am very pleased about the remarkable report made by Yves Fromion, Member of Parliament, on the subject that should contribute to the development of exports in the future.

• Défense:  Are you in favor of a European defence policy?

Both demand and supply are necessary to develop a market. My field is supply, and this has now been rationalized and consolidated in Europe with MBDA; it would be wonderful if demand could be rationalized as well.  We have already created a European domestic market and provided independent capabilities within Europe, but a genuine European defence policy is still missing.  I am very delighted to observe the build-up in power of the European Defense Agency that is an "embryo" of demand rationalization.  We need to monitor how its activity grows in the future through budgets allocated to it and the programmes that it is asked to perform.

• Défense: Is Europe's technological level comparable to its competitors'?  Does Europe have the means to maintain this level in the long term?

This depends on the sector, but in the special case of aeronautics and defence, the answer is clearly yes, there is no "technology gap". 

Europe might even have a higher technological level than the United States in some fields.

I think that choices made in Research and Development have been good and will enable Europe to maintain this level. Moreover, the educational standard of our engineers is high, and we will be able to maintain our level if graduating engineers continue to believe that starting their working life as an engineer in industry is an excellent way of advancing their careers.

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[1] Défense, issue n°125 is dated January – February 2007. Défense is the bimonthly review of the Union of IHEDN (Institute for Higher National Defence Studies) Auditors Associations. Subscriptions: BP 41-00445 Armées). Téléphone: 01.44.42 31 47 & Fax: (331) 45 51 54 65.

[2] Jean-Michel Boucheron, French Member of Parliament (MP of Ille-et-Vilaine, SP). Former President of the Defense Commission of the French National Assembly (1988-1993). Member of the Defense Commission.

[3] MBDA: the different locations of the group..

[4] Marwan Lahoud's Profile :

Education:  Graduate of the École Polytechnique,  as an engineer educated at the École Nationale Supérieure de l'Aéronautique et de l'Espace (Higher National School of Aeronautics and Space).

Specialty:  Aeronautics, Defence and Armament

For the French government:  He began his career at the DGA (General Directorate of Armament) in 1989, where his most notable responsibilities were acting as Computer Center Manager at the Landes Test Center and then heading test facility renovation projects and investment coordination. ..

Project Leader within the tactical missile systems engineering department in 1994 going on to become Assistant Director for Missiles and Space.  He participated in the writing of the 1995 - 2000 military programming law, organising several political - military or industrial work groups, including a work group dealing with the policy for the prevention of the proliferation of weapons of mass destruction, Franco-German cooperation within space programmes and broader air defence programmes.

Appointed Chargé de Mission within the Ministry of Defence in May 1995. At the end of 1995 he became adviser for industrial affairs, research and armament within this department at a time when the sector was changing dramatically in terms of the armed force structure and also the consolidation of industrial facilities.  In this respect, he was placed in charge of industrial consolidation operations initiated in February 1996.  In June 1997 he became Chargé de Mission of the DGA Human Resources directorate.

Commercial background:  In May 1998, he joined Aerospatiale as Director of Development,  his functions including the setting up of agreements with the Lagardère Group for the merger between Aerospatiale and Matra Hautes Technologies.  He then acted as General Secretary for the Aerospatiale - Matra Hautes Technologies board.

Appointed Assistant Delegate Director responsible for strategic coordination of the Matra Aerospatiale Company, and Assistant Delegate Director for military affairs, in June 1999.

With the creation of EADS in July 2000, he was appointed Senior Vice President Mergers and Acquisitions with responsibility for EADS mergers and acquisitions. These included the creation of the Airbus Company, MBDA, Astrium and EDSN.

CEO of  MBDA since  1^st January 2003.

Other activities:  President of the Association of the Friends of Saint Cyr, Vice President of the CEPS, Director of the Aspen Institute and Director of the French American Foundation.

Honours: Chevalier dans l’Ordre de la Légion d’Honneur.

Personal: Marwan Lahoud is married with one child.

[5] Yves Fromion, Member of the French National Assembly (MP of Cher Department, UMP), Member of of the Defense Commission.

[6] Final qualification firing successfully completed for MBDA'ASTER SAMP/T Air defence System

• See also: MBDA : une société au cœur des grands projets européens