Flat Space Budgets, Galileo Restructuring Hurts Small Firms

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  Space News Business

Flat Space Budgets, Galileo Restructuring Hurts Small Firms

By PETER B. de SELDING
Space News Staff Writer
posted: 19 May 2008
01:42 pm ET





PARIS –
Numerous small- and mid-size space
�companies in Europe have been quietly put up for sale as they feel the squeeze of flat national space budgets, a generally flat European Space Agency (ESA) spending profile and the dominance of the larger companies, European industry officials say.

 

With export markets made more difficult by the drop in the value of the U.S. dollar, these euro-based companies say they are more than ever dependent on the kind of timely cash flows that large European programs don’t always promise or produce.

 

The most public example of an otherwise successful enterprise that has been offered for sale is small-satellite manufacturer Surrey Satellite Technology Ltd. (SSTL) of Britain, which
recently was sold to Astrium Satellites for around 45 million British pounds ($87.9
�million).

 

Saab Space of Gothenburg, Sweden, is another company whose owner, Saab AB, is soliciting bids for a sale, concluding that the manufacturer of satellite on
board electronics and satellite-separation systems for launch vehicles is not a core holding.

 

Industry officials say Saab has received informal offers, but no sale has been announced despite the fact that Saab AB signaled its intention to seek bids in late 2007.

Several industry and government officials said the Galileo satellite-navigation program, the biggest single new capital spending effort in Europe’s space sector now, is an example of how smaller companies are suffering.

 

“The two big prime contractors between them have about 100 million euros ($155 million) that have been set aside for smaller subcontractors, with the work completed. But they cannot pay the money because of authorizations needed from ESA. It’s not that anyone is playing rough, it’s that the rules slow things down.”

 

Astrium Satellites and Thales Alenia Space, Europe’s two principal space-hardware suppliers, are responsible for large segments of the contracts awarded thus far for the Galileo program.

 

European governments late last year decided to restructure the program into an all-government financial model, and also ordered that a consortium of manufacturers set up to do the work, called European Satellite Navigation Industries, be disbanded.

 

ESA has been criticized for being slow in approving payment for work, and the agency has adopted measures to
speed its check-writing, particularly for small companies with less ability to adjust for nonpayment.

Galileo has accentuated that problem. Giuseppe Viriglio, outgoing director of navigation at ESA, agreed that smaller companies have been paying the price for the reorganization.

 

“Regarding payment of money to second-level companies, it’s true we have a slight delay,” Viriglio said in an April 23 press briefing at the Toulouse Space Show. “Before, we had [European Satellite Navigation Industries] as our interface. Now that has gone away and we are dealing with the prime contractor for each Galileo segment. ESA is a complex machine.”

 

Industry officials say the problem has been compounded by the fact that ESA’s Galileo team has been overloaded with work including oversight of the launch of the second of two demonstration satellites, which was finally placed into orbit April 27.

 

Javier Benedicto, head of the Galileo project at ESA, agreed with Viriglio that the shift in contractors following the breakup of European Satellite Navigation Industries has had the unintended consequence of making life difficult for the dozens of smaller companies working on the program.

 

“This reshuffle of contractors should be of significant benefit to the smaller companies in the longer term,” Benedicto said in an April 29 interview. “But in the shorter term, the invoicing procedures have to be modified. This has created a significant administrative burden. But this has been cleared up and is an absolute priority for us. We at ESA are ramping up quickly on staffing levels as part of the reorganization our [Galileo] program office. I believe we are equipped to address this issue now.”

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