Snecma, EADS Space To Merge Propulsion Divisions

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  Space News Business

Snecma, EADS Space To Merge Propulsion Divisions

By PETER B. de SELDING
Space News Staff Writer
posted: 24 January 2005
11:54 am ET


PARIS — Rocket- and satellite-motor builder Snecma expects to complete an agreement with EADS Space this year on a merger of their liquid-propulsion and satellite-propulsion divisions, Snecma Chairman Jean-Paul Bechat said.

But Bechat cautioned that the agreement with EADS Space, while backed by the management of both companies, still must pass muster with the German government.

“There is not enough financial backing in Europe to justify the existence of two space-motor companies,” Bechat said here Jan. 10 during a press briefing on the company’s 2004 financial results. “Things are advancing with EADS, but this is a European proposal, and we have already seen how complicated things can be even in a France-only context.”

Bechat was referring to the long-expected merger of the solid-fueled rocket propulsion divisions of SNPE of Paris and Snecma into a company called Herakles. The creation of Herakles has been stalled for years, in part because of a deadly September 2001 explosion at an SNPE site in Toulouse, and partly because Snecma has been preparing its stock-market introduction and a merger with aerospace and consumer electronics manufacturer Sagem S.A.

The EADS Space-Snecma merger appears to be moving faster. However, because EADS Space’s liquid-propulsion and satellite-propulsion businesses are located mainly in Ottobrunn and Lampoldshausen, Germany, the German government will have to approve the deal.

EADS Space and Snecma have estimated that the merged company would have generated about 400 million euros ($520 million) in 2004 sales and would have 1,250 employees in France and 450 in Germany.

The deal could be further complicated by the fact that while the French test facility for Ariane 5 main-stage engines is owned by Snecma, its German twin in Lampoldshausen is owned by the German space agency, DLR.

Joel Barre, general manager of Snecma’s space engines division, said EADS Space and Snecma have assured German authorities that the merger proposal is not a disguised attempt to shut down German operations in favor of French industry.

Bechat said the merger idea is part of a broad reorganization of Europe’s launcher sector following the December 2002 failure of an enhanced version of the Ariane 5 rocket during its maiden flight. European governments, through the European Space Agency, subsequently agreed to a billion-dollar financial-aid package, but only on the condition that Europe’s launch industry streamline operations.

The Arianespace commercial launch consortium of Evry, France, has reduced its staff, from 350 to around 250, as part of the sector’s reorganization. The consortium recently received its shareholders’ approval for a recapitalization totaling 60 million euros — Arianespace had proposed 150 million euros — and Snecma used the occasion to increase its stake in Arianespace to 10.2 percent.

Arianespace Chief Executive Officer Jean-Yves Le Gall had evoked the possibility of a second share-capital increase in 2005, but Bechat said he would oppose such a move.

“If you ask for a recapitalization it is because you need it,” Bechat said. “Arianespace, given the solid shareholders that it has, does not need the money to maintain its financial credibility with customers.” In addition to Snecma, Arianespace shareholders include Finmeccanica of Italy, EADS and the French government.

Snecma, whose main business is building commercial jet-aircraft engines, expects to report 2004 sales of 6.81 billion euros when it closes its accounts in February, Bechat said. Barre said total space propulsion sales were about 600 million euros in 2004.

Barre said the Vulcain 2, the redesigned Ariane 5 main-stage cryogenic engine, whose nozzle design flaws caused the December 2002 failure, has passed its various reviews and is ready for a planned mid-February reflight.

Requalifying the Vulcain 2 with an actual launch will be one of several key Snecma milestones in 2005. Another will involve the Ariane 5’s Vinci cryogenic upper-stage engine, now in development.

Vinci was designed to permit Ariane 5 to lift up to 12,000 kilograms of satellite payload into the geostationary transfer orbit used by most telecommunications satellites. In addition to providing extra power, the stage will be re-ignitable in orbit — a feature that Arianespace’s main competitors already offer on their rockets.

To cope with the financial crisis in Europe’s launch sector caused by the 2002 failure, European governments ordered a slowdown of Vinci development to divert cash to salvaging the Ariane 5 program.

Arianespace officials have since said that they have no immediate need for Vinci. But for Snecma the program is an important revenue source and a way of keeping its rocket-motor experts employed in the absence of any major future-launcher program in Europe.

Barre estimated that about 400 million euros had been spent on Vinci, with another 200 million needed to fully qualify the motor. A first test-firing is planned for February at Snecma’s Vernon, France, facility.

“If we to want continue development of cryogenic engines in Europe and maintain our knowledge base, Vinci or some equivalent program will need to be decided by European governments in late 2005 or early 2006,” Barre said.

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