Groupe Dassault Aviation SA

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Groupe Dassault Aviation SA

9, Rond-Point des Champs-Elyssees
Marcel Dassault
75008 Paris
France
(33) 1 47 41 7921
Fax: (33) 1 40 83 9938
Web site: http://www.dassault-aviation.fr

Public Company
Incorporated: 1911 as S.A. des Ateliers d’Aviation Louis Breguet
Employees: 12,044
Sales: FFr 21 billion (US$3.51 billion) (1997)
Stock Exchanges: Paris
Ticker Symbol: Dassault Aviation
SICs: 3721 Aircraft; 3724 Aircraft Engines & Engine Parts; 3728 Aircraft Parts & Equipment, Not Elsewhere Classified; 3669 Communications Equipment, Not Elsewhere Classified

One of France’s most important developers and producers of military aircraft, including the famed Mirage series and 1990s-era Rafale, Groupe Dassault Aviation SA, with its Falcon series, is also the world-leading producer of executive class civil aircraft. Groupe Dassault Aviation also includes software development, through highly successful subsidiary Dassault Systèmes, and electronic communications products, through subsidiary Sogitec Industries. Long the only French company of its kind to have resisted government attempts to make it a completely nationalized industry, in 1995 Dassault Aviation signed a memorandum of agreement to merge its operations with the larger Aerospatiale. Pairing the private, profitable, debt-free Dassault Aviation with the chronically unprofitable state-owned Aerospatiale will present more than its share of challenges. Nonetheless, the French government’s strong position in Dassault, with 45 percent of shares and a possible majority in voting rights, has overcome Dassault’s resistance at giving up its long-cherished independence. The merger—performed in the face of heightened global competition for a vastly contracted military aircraft market—can be expected to occur as the century ends. Whether this will close an important chapter in France’s aviation and economic history remains to be seen.

Aviation Pioneers

Dassault was founded by Marcel-Ferdinand Bloch who was born in Alsace on January 22, 1892. As a schoolboy in Paris Bloch viewed his first airplane, built by the Wright Brothers, making a low pass over the city and then circling the Eiffel Tower. As a young man, still fascinated with aviation, Bloch attended the Ecole Supérieure de l’ Aéronautique, France’s first school for aeronautical engineering. He established a factory in a converted garage, and convinced his father-in-law to finance his small aeronautical business. During World War I Bloch developed a variable pitch propeller for the Spad fighter which gave French pilots the ability to outmaneuver their German adversaries. The Spad propeller made a great deal of money for Bloch who, after the war, went into housing construction.

Bloch began to manufacture airplanes again in the early 1930s when French military contracts were once more available. But the complexion of French politics changed abruptly in 1936 when the Socialist-Communist “Popular Front” government of Léon Blum came to power. On January 1, 1937 Bloch’s aircraft factories were nationalized by the Société Nationale de Constructions Aéronautiques de Sud-Ouest (S.N.C.A.S.O.), one of six state-controlled aeronautic factories. Bloch was retained as a civil servant and invested the compensation he received for his company in a variety of North American securities. After the Popular Front fell from power, Bloch founded a new aircraft company which later produced the highly successful Bloch 152 fighter.

After the Germans invaded France at the outset of World War II Marcel Bloch, a Jew, was asked to build aircraft for the German war effort as an “honorary Aryan.” Bloch refused to collaborate and was forced into hiding. He was later arrested in Lyon and jailed. Eight months before the war ended he was deported to the Buchenwald concentration camp where he remained until the area was liberated by American forces in May 1945.

Bloch converted to Roman Catholicism after the war and changed his last name to Dassault, the nom de guerre of his brother who was a member of the French resistance. Although an “l” was added, the name literally means “on the attack.” Marcel Dassault subsequently became an honored member of General de Gaulle’s inner circle, but since his company had been destroyed by the war it was once again nationalized.

Post-World War II Renewals

Dassault recruited the most brilliant engineers from the best schools in France to work for a new company, Avions Marcel Dassault. Dassault’s first project was the development of a small military liaison aircraft which was later manufactured for Air France under the name Languedoc. In 1951 the company began production of its Ouragan (Hurricane) jet fighter. When production of the Ouragan ended in 1953, the company had built 441 of the planes. In 1954 Dassault introduced its next jet, the Mystère. Designed as a subsonic fighter, the Mystère was the first European jet to break the sound barrier in level flight. The Mystère was followed by the Etendard attack jet. In 1953 Dassault acquired the manufacturing license for Armstrong Siddeley’s Viper turbojet engine. The Viper was the intended power plant for Dassault’s delta-wing Mirage fighter jet, which made its maiden flight in 1955.

Dassault had grown quickly in 10 years. Yet the company employed only a small workforce primarily comprised of engineers and designers. Most of the actual production of aircraft was subcontracted to the state-owned company Sud-Aviation. Doing so was an intentional policy of Marcel Dassault. Unlike Dassault, state-owned companies were better able to keep workers employed while demand for their products was low. As a private company, however, Dassault was free to continue developing new aircraft designs without worrying about laying off production workers. The company’s engineers were less specialized than others; each was capable of designing an entire airplane. As a result, they could be moved easily from one project to the next, wherever they were needed most. In short, Dassault did not encounter the kinds of employment problems that plagued the state-operated companies.

In 1958 Marcel Dassault was elected a member of the French Parliament and represented the Beauvais region north of Paris. As a Gaullist deputy, Dassault continued to support the conservative political causes of his party. During this time France implemented a policy of independent military deterrence which culminated in the nation’s 1966 decision to withdraw from the North Atlantic Treaty Organization. The defense of France was now solely the responsibility of the French military. Consequently, the demand for military equipment increased greatly, and the primary beneficiary was Avions Marcel Dassault.

Dassault owned factories in nine locations across France. The design facilities and primary factories were located at Saint-Cloud outside of Paris. The Bordeaux plant handled the final assembly of components manufactured by Sud-Aviation, while the other plants handled sub-assembly work and flight testing. The Martignas facility, however, later became primarily responsible for manufacturing missiles. Dassault also founded an electronics company in 1963 called l’Electronique Marcel Dassault. The electronics company, which was operated by Dassault’s son Serge, provided his aircraft company with a variety of flight control and avionics devices.

Against the advice of several advisers, Marcel Dassault ordered the development of the Mystère into a small business jet. The civilian version of the Mystère was sold outside of France under the English name of Falcon (it was thought that this would increase its international marketability). The Mystère/Falcon later became one of the world’s most popular private jets. In 1972 Dassault and Pan Am created an American subsidiary called the Falcon-jet Corporation for the sale and service of Falcon jets in the United States. Besides assisting Sud-Aviation in the development of the French-British Concorde SST at this time, Dassault also developed improved versions of its Mirage fighter jet. Regarded as the most successful European jet since Britain’s Canberra bomber, the Mirage was sold to over a dozen foreign air forces.

In June 1967 Avions Marcel Dassault purchased a 62 percent majority interest in Breguet Aviation, the French partner in the Franco-British Jaguar jet project. Breguet was founded in 1911 by the French aviation pioneer Louis Breguet. The company was nationalized in 1936, but managed to regain a significant degree of independence three years later when it repurchased three of its former factories from the government.

During June of the same year, Egypt, Syria, and Jordan launched a surprise attack on Israel in what later became known as the Six Day War. Israel, however, was armed with Dassault’s Mirage fighter jets which destroyed the Soviet-equipped Egyptian air force in three hours. The Mirages performed so well during the conflict that they were given much of the credit for the subsequent Israeli victory. President de Gaulle imposed an embargo on 50 additional Mirages bound for Israel. The embargo was lifted three years later by President Georges Pompidou, after it was learned that Israeli spies had acquired the plans for the Mirage and that modified versions were already being built in Israel. At approximately the same time, the French government also agreed to sell 110 Mirage fighters to Libya.

Company Perspectives:

The real wealth of Dassault Aviation lies in the men and women working in the Company. Through them, it has acquired unrivaled experience in the fields of aeronautics and space and in their applications. These engineers, managers, technical staff, consultants and employees, help the Company to keep ahead and to retain its technical excellence in order to meet the challenges of the future.

The French government, fully aware of the French aerospace industry’s decreasing ability to compete internationally, campaigned for the rationalization (or merger) of several French aircraft manufacturers. The state-owned aircraft companies Sud-Aviation, Nord-Aviation, and Sereb (a missile manufacturer) were merged to form Aerospatiale in 1970. A year later, with the encouragement of the government, Breguet Aviation, a publicly traded company which was controlled by Marcel Dassault, merged with the larger, privately owned Avions Marcel Dassault. The new company, Avions Marcel Dassault-Breguet Aviation, operated 20 factories and accounted for 35 percent of all French aerospace production. Marcel Dassault’s reason for merging his company with Breguet was that both companies could economize their operations by eliminating duplicated facilities and bureaus. Dassault also wanted to take advantage of Breguet’s public stock listings in Paris and Brussels in order to raise capital. Dassault required a $280 million line of credit in order to develop a new 134-passenger commercial jetliner called the Mercure.

The Mercure was a twin-engine airliner very similar in appearance to the Boeing 737. In fact, the Mercure competed with the Boeing 737 for the same market. Only 10 Mercures had been sold by 1976, all of them to the French domestic airline Air Inter. The project was abandoned after the company failed to reach an agreement with McDonnell Douglas whereby the two companies would coproduce the subsequent Mercures.

Dassault-Breguet became involved in an unusual scandal during 1976 when the company’s financial director, Hervé de Vathaire, disappeared with FFr 8 million from the company account. As the company accountant, de Vathaire was more familiar with the company’s finances than anyone. He had become disillusioned a few months earlier after the death of his wife. He reportedly began assembling incriminating evidence against Dassault-Breguet, a photocopy of which fell into the hands of Jean Kay, a French right-wing “soldier of fortune” who became known for his flamboyant terrorist activities. Kay demanded FFr 8 million from de Vathaire for his copy of the dossier and threatened to turn the document over to news organizations if his demand was not met.

De Vathaire was introduced to Kay by his mistress Bernardette Roels, whose roommate was a friend of Kay’s. Together with his mistress and Kay, de Vathaire went to Divone les Bains near the Swiss border. When French authorities began to search for de Vathaire, all three vanished. De Vathaire turned up a few weeks later in Corfu, and then returned to Paris where he surrendered to the police. In the meantime, an anonymous caller to a Paris television station announced that all 8 million francs had been turned over to Lebanese Christians for arms purchases. Marcel Dassault also confirmed that Kay had returned the document.

Details of the document’s contents were published in Le Point in October. Among other things, Dassault was accused of diverting funds for his personal use and attempting to avoid payment of taxes. According to the allegations, Marcel Dassault used company funds to build a replica of King Louis XIV’s Petit Trianon palace at Versailles. The disclosures led to tax evasion investigations of Marcel Dassault and severely damaged his political position.

In 1978 French Socialist and Communist politicians pledged to nationalize Dassault-Breguet if they were elected. Marcel Dassault, who owned 90 percent of the company and was believed to have been the wealthiest man in France, stood for all that leftist politicians opposed. The leftists charged that the French government was allowing Mirage fighters to be sold to anyone who had the money to purchase them. Dassault-Breguet, they claimed, was only interested in making money by taking advantage of the ambitious military requirements of oil-rich and other third world nations. In answering these charges, Dassault maintained that these nations would purchase their arms from other manufacturers if they did not purchase them from Dassault and that its position as an arms supplier strengthened French political influence in the third world.

The following year leftists won enough seats in the national assembly to implement their nationalization policies. The government purchased a 21 percent share of Dassault-Breguet for $128.5 million. This included a special 33 percent voting interest which under French law enabled the government to exercise veto power over company decisions. When François Mitterand was elected president of France in 1981, the government increased its share in Dassault-Breguet to 46 percent, with a special 63 percent voting majority. The move was regarded by many as an act of spite against the 89-year-old Marcel Dassault who continued to be regarded as a political opponent.

The French arms industry broke into the newspaper headlines again in 1982 during the brief South Atlantic war between Britain and Argentina over the Falkland Islands. During the hostilities Argentina destroyed a number of British ships with Matra Exocet missiles launched from a Dassault-Breguet Super Etendard. A French embargo on additional arms for Argentina had little effect on the losses suffered by British forces, who successfully completed their invasion of the Falklands and achieved an Argentine surrender.

Nonetheless, Dassault-Breguet remained in excellent financial condition due to its continued marketing success with improved versions of the Mystère/Falcon and Mirage fighter. Generally, the company remained competitive because it avoided the costs involved in developing new aircraft from scratch. Instead, Dassault-Breguet continually improved existing aircraft, the designs of which had been thoroughly proven. This was Marcel Dassault’s rationale for campaigning against French participation in the four-nation Eurofighter program led by British Aerospace and MBB. Without a government commitment to purchase, Dassault-Breguet developed an entirely French-built fighter jet called the Rafale, which was intended to serve as the basic instrument for the aerial defense of France.

Dassault-Breguet became involved in spacecraft engineering during 1985 when the French space agency Centre Nationale d’Etudes Spatiales assigned the company to lead the aeronautical development of the Hermes spaceplane as a subcontractor to Aerospatiale. The Hermes, similar in design to the American space shuttles, was expected to fly into space atop an Ariane 5 rocket in 1995. Despite its position in the Hermes program, Dassault-Breguet had no plans to establish a space division.

Shadow of Dassault in the 1990s

Marcel Dassault died on April 18, 1986, at the age of 94. His son Serge was placed in charge of the company. Dassault-Breguet remained through the 1990s France’s most dynamic aeronautical manufacturer. In addition to the Super Etendard and Mirage and Falcon series, Dassault-Breguet was a partner with British Aerospace in the Jaguar fighter program, and with Dornier of West Germany in the Alpha jet program. The company also manufactured aircraft fuselages for Fokker of the Netherlands.

Serge Dassault would be roundly criticized as being a shadow of his powerful father; nonetheless, Serge Dassault would fight tenaciously to maintain the long-cherished independence of the family-controlled company, renamed Dassault Aviation in 1990. After the failure of the Mitterand government to nationalize the company in the early 1990s, the right-wing government led by family friend Jacques Chirac tried its hand at taming Dassault. In 1996, Chirac succeeded in winning an agreement to merge Dassault with Aerospatiale, but only after the larger state-owned aeronautics company would be privatized. The defeat of the rightists in 1997 and the installation of a Socialist government under Lionel Jospin did not relax the pressure on Dassault, however. The Socialists, wary of job losses, refused to privatize Aerospatiale, suggesting a derailment of the merger agreement. Nonetheless, the merger of Dassault into Aerospatiale was expected to be forced through, one way or another. In 1997, the government stepped up the pressure on Serge Dassault by turning over documents to a Belgian court investigating bribery and other charges against him. The move effectively “imprisoned” Dassault within French borders.

In the face of global competition against such giants as Lockheed-Martin, the restructuring of Dassault, Aerospatiale, and other important components—such as Matra, Snecma, and Thomson—of France’s industrial military complex seemed inevitable in the late 1990s. Whether Serge Dassault and the Dassault family could be expected to maintain their grip on an important sector of France’s aviation industry remained to be seen. Despite slowdowns in worldwide and French government aircraft purchases in the post-Cold War 1990s, and a corresponding drop in Dassault’s revenues—from FFr 16.4 billion to FFr 13 billion in 1996—Dassault exhibited an impressive resiliency, maintaining its profitability and continuing the development of its aircraft. After the Rafale’s debut in 1991, the company introduced new models of both this polyvalent aircraft and its Mirage predecessor; the company’s civil aircraft, the Falcon, also saw its series expanded, as the company claimed 50 percent of the worldwide high-end executive jet market. In 1997, Dassault Aviation’s revenues returned to a growth movement, reaching FFR 16 billion of the group’s FFr 20 billion total sales.

Principal Subsidiaries

Génerale de Mécanique Aéronautique; La Compagnie de Gestión de Rechanges Aéronautiques (COGER); Sociedad de Coordinacion Aeronautica (Spain); Dassault Aéro Service; Dassault International (U.S.A.) Inc.; Dassault International (France); Falcon Jet Corporation (U.S.A.); Corse Composites Aéronautiques (with Aérospatiale and SNECMA); Dassault Systèmes (France).