Finmeccanica Open target Investors open fire on Italy’s defense and aerospace giant
(Editor's Note: Finmeccanica is the parent company of Honolulu rail car contract winner Ansaldo.)
The Economist, August 6, 2011
WHEN Finmeccanica announced bad results on July 27th, investors strafed its share price, cutting it down by 28% in four days (see chart). In the first half of 2011, excluding a gain from the sale of one of its businesses, the firm made barely any profit: €13m ($18.2m) on revenues of €8.4 billion. Shareholders are spitting fire.
The Italian government holds a 32% stake. That prevents the company from sensibly quitting unprofitable businesses….Its former boss, Pier Francesco Guarguaglini, tried to simplify the group down to three areas: aeronautics, helicopters and defence. But the group still owns several businesses that do not fit.
Its biggest problem is AnsaldoBreda, a maker of trains and trams, which has lost more than €1 billion. The government’s unwillingness to allow job cuts makes a solution impossible. Politicians from AnsaldoBreda’s home region in Tuscany objected loudly this week after Finmeccanica’s new boss, Giuseppe Orsi, talked about selling the division. Some 60% of Finmeccanica’s employees are Italian, though the domestic market yields just a fifth of its revenues.
Finmeccanica is used as a dumping-ground for unwanted state assets….
The Libyan Investment Authority took a 2% stake in the firm in 2009 and is its fourth-largest shareholder. Finmeccanica won rail and border-security contracts from Muammar Qaddafi’s regime. This year’s revolt against the bemedalled despot will reduce Finmeccanica’s revenue by some €300m.
Mr Orsi took over in May, and has pledged to make the business more efficient. Mr Guarguaglini remains at the company as chairman, though he has been weakened by a probe into alleged slush funds at Finmeccanica. (Both he and the firm deny wrongdoing.) “Being in defence means state-sector inefficiencies, political interference and perhaps corruption,” says Giacomo Vaciago of the Università Cattolica in Milan. Still, an arms firm that barely makes money is unusual.
Just for amusement, take a look at how today’s Star-Advertiser reported this news: Rail board mum on bidder's pickle
Railway Gazette: Ansaldo STS wins huge Libyan signalling contract