July 25, 2012 / 8:06 PM / 5 years ago

UPDATE 1-Embattled Thales CEO strengthens grip with reshuffle

* Under-fire CEO promotes two senior loyalists, bolsters others

* Vigneron seen facing pressure from unions, politicians

* Move comes after better than expected first-half earnings (Updates, details management appointments)

By Cyril Altmeyer and Tim Hepher

PARIS, July 25 (Reuters) - The chief executive of France’s Thales has moved to stamp his mark on Europe’s largest defence electronics group by promoting two senior loyalists and unveiling a barrage of appointments amid growing opposition to his restructuring plans.

Luc Vigneron has been under fire from unions and dissenters in France’s constantly feuding defence industry ever since he was appointed in 2009, following a shake-up that saw planemaker Dassault Aviation take effective industrial control.

But the former Alcatel executive has faced intensified pressure in the French media over his future since the arrival of a Socialist government in May placed jobs at the top of the political agenda, while unions have slammed planned sell-offs.

Thales announced the changes on the heels of better than expected first-half earnings. Profits were supported by civil aerospace activities as defence cuts continued to bite into the partially privatized company’s traditional military business.

Vigneron played down the unexpected reshuffle, but its impact spread noticeably beyond the replacement of the single senior executive whose retirement triggered the changes.

Defence and security head Pascale Sourisse and Reynald Seznec, who heads a space venture with Italy’s Finmeccanica , will add two large geographical divisions to their roles after the retirement of Thales UK chairman Alex Dorrian.

Six other executives have been promoted or had their responsibilities expanded, Thales said.

“This is not a change in organisation. This reallocation of members will not lead to a change of strategy,” Vigneron told analysts.

PRESSURE FROM UNIONS, BUDGETS

Thales, formerly known as Thomson-CSF and responsible for the radar on French warplanes, has been under pressure to shore up profitability in the face of reduced defence spending.

It had been seen as front-runner to lead the next round of defence consolidation under ex-president Nicolas Sarkozy, but support for both Vigneron and the conservative Dassault family is reported to have wavered under President Francois Hollande.

The French government owns 27 percent of Thales, and Dassault Aviation, which reports earnings on Thursday, has 26 percent.

A proposal to acquire state-owned Nexter, the maker of Leclerc battle tanks which Vigneron ran before Thales, has been placed on ice since the elections, say industry officials.

Labour leaders, meanwhile, say they received a sympathetic hearing when they urged the government’s state shareholdings agency on Tuesday to impose a freeze on disposals including the sale of Thales Business Services Solutions to GFI Informatique.

The appeal follows a number of high-profile government interventions to prevent factories from cutting jobs.

“Luc Vigneron will be weakened because his policies go against the government’s policies as far as employment is concerned. Either he changes or he will have to resign,” said Laurent Trombini, an official with the CGT union.

Vigneron pledged to press ahead with efforts to improve the company’s performance, under way for the past two years.

Thales said commercial orders would not make up entirely for falling military sales in 2012 but reaffirmed its target for a 6 percent operating margin as a result of its Probasis cost plan.

“The European sovereign debt crisis is very much rampant and pressures on defence budgets are very real,” Vigneron said.

Vigneron’s arrival as a compromise choice for CEO in 2009 followed an internal power struggle and led to an undercurrent of press reports and industry comment over style and strategy.

The former civil servant and technology strategist keeps a low public profile but supporters insist improving Thales finances is overdue after a series of loss-making contracts.

Thales said operating income rose 11 percent to 338 million euros in the first half on revenues which rose 7 percent to 6.41 billion. Analysts had expected 327 million and 6.09 billion respectively, according to Thomson Reuters I/B/E/S data.

The company’s shares closed before the announcement and were up 0.8 percent at 25.98 euros. They have risen 6 percent this year. (editing by Jim Marshall in Chicago)

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