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ASTRIUM: PROBLEMS AND PROSPECTS

It was approximately one year ago that the space divisions of Germany company DaimlerChrysler Aerospace (Space Infrastructure in Bremen and Dornier Satellitensysteme in Friedrichshafen) and the British-French Matra Marconi Space merged to become the third largest space company in the world, Astrium.

As well as the inevitable teething problems following the establishment of a trinational company, Astrium is having to contend with difficult market conditions and an uncertain political environment. The lack of a uniform set of baseline conditions in Europe is proving especially unfortunate for the German parts of the company in the competition between business locations. In an exclusive interview with FLUG REVUE Dr. Klaus Ensslin, Member of the Board of Astrium GmbH in Friedrichshafen, answered questions put to him by Volker K. Thomalla and Matthias Gründer.

FLUG REVUE: Dr. Ensslin, approximately one year after the company was formed what is your view of the status of the merger of European space activities at Astrium?

Dr. Ensslin: In Astrium we have succeeded in establishing a company such as has never existed in the industry before. In so doing, we also led the way for the merger of EADS, which was not founded until after Astrium.

For a year now Astrium has been a real company, employing a workforce of 7,500 in three different countries. The results of the first financial year have been published, and I think we have grounds for being more than just satisfied with them, even if not everything has gone quite as we originally hoped.

FLUG REVUE: And there is already talk of reorganisation...

Dr. Ensslin: Yes, that is true. The Space Infrastructure Business Division is to be hived off and merged with the space launch vehicle activities inherited from Aérospatiale as a result of the foundation of EADS. In view of the enormous competitive pressure on Ariane to improve efficiency, that makes a lot of sense.

FLUG REVUE: What will happen now at Astrium?

Dr. Ensslin: Having divested itself of Space Infrastructure, Astrium will then be able to concentrate entirely on its satellite business. Here too there is still a lot to be done to improve competitiveness. For the moment we are occupied with post-merger integration, i.e. bringing the different parts of the company together at the entrepreneurial and cultural levels. We shall co-ordinate internal processes better, and of course our product developments and market presence as well.

But almost more important is the task of getting to know each other and learning from each other. To assist with this we are putting on a series of seminars and workshops at which we hope to involve as many staff as possible. So far this process has gone very well. To me the question of how Astrium can gain acceptance externally as a politically desired showpiece company is a matter of greater concern. There are definitely problems in this area, which affect the playing field in which we operate, i.e. our customers, competitors and suppliers.

FLUG REVUE: What problems are these, and how did they come about?

Dr. Ensslin: Our customers are ESA and national space agencies. We have not yet been able to convince them entirely of what advantages Astrium has to offer them. On the one hand the sheer size of Astrium, which was founded to serve as a counterpart to the large American corporations and with an eye to the global competition, is disconcerting. On the other hand there is the disadvantage of a lack of "national identity" that any pan-European company inevitably has to live with. The companies out of which Astrium was formed come from three European states and have discarded their old, familiar names. They now have to be European while at the same time remaining national. There is a problem with the way the company is perceived, so that we risk being stamped as "stateless".

FLUG REVUE: How do you overcome this balancing act between the perception of national and European interests?

Dr. Ensslin: It is not something that a company whose revenue continues to come predominantly from the public sector can resolve on its own. In Germany we need the support of the politicians to strengthen the German arm of the company in its role as national systems leader and ensure that the small and medium-sized enterprises (SMEs) are promoted so that they remain in demand as specialist suppliers of components and subsystems in the European and global competition.

FLUG REVUE: It sounds rather as if you want to avoid a national competition at systems level.

Dr. Ensslin: That is not something I am afraid of. Essentially what is needed is for the German government to pursue a consistent industrial policy on space with the aim of ensuring that the German space industry remains competitive. This suggests that consolidation rather than fragmentation of strength would be more appropriate. But at present the support that is needed from the politicians appears to be wanting.

Our suppliers, some of whom are also our competitors in this matter, are exploiting this complicated situation with the argument that they are the only ones who can promote the national interest effectively. Or at any rate more effectively than a European company like Astrium.

FLUG REVUE: Can one no longer assume that market leadership and systems leadership will fall to the same company?

Dr. Ensslin: Of course we are familiar with the need to fight for market share, but we cannot surrender ourselves to the free play of forces. As a large European company, it is our job to organise the value chain and hence the success of all. This will also mean a bigger share for small and medium sized enterprises.

Nevertheless it is and remains difficult to counter the hostility of those who see us as having ceased to be a German company. This could have dangerous consequences for the competitiveness of the entire German space industry.

FLUG REVUE: Can you give an example of the way you feel things should be going?

Dr. Ensslin: We have coined the expression "convoy structure" for it. This is intended to express the idea that we as systems leader place the suppliers in the appropriate slots on the tow-rope and thus organise the value chain. This principle was to be applied for the first time with the large radar satellite that was planned for security applications. But because of a lack of financial resources on the German side it came to nothing.

In the matter of the national SAR-Lupe project, a small satellite system for global, weather-independent intelligence gathering, however, we had to depart from this principle because an SME company suddenly put itself forward not as a supplier but as a competitor at systems level.

That is not without risk. For the first time a contract is to be placed with the German space industry from the defence budget. Nothing must go wrong here, especially when one considers the export market.

FLUG REVUE: Are the export rules governing the EU states in need of harmonisation here?

Dr. Ensslin: Definitely! But today it continues to be the case, for example, that the issue of export licences differs between EU states and German policy, in particular, is very restrictive. A European company has its advantages here because, if necessary, the order can be carried out by a part of the company that is sited in a different country.

But the German business locations - and this affects Astrium and the national supplier industry equally - are at an enormous competitive disadvantage as a result. Harmonisation on this issue in Europe is urgently required.

FLUG REVUE: Is there a lack of a coherent industrial policy on space in Germany?

Dr. Ensslin: That is precisely the point. In Europe political and financial resources have a significant impact on the success of a given business location in bidding for work. The result is that state interventions disable market economy mechanisms. The first to the post is not the best but the one whose government promises more or less credibly to provide the necessary resources.

In France and Italy the space industry benefits from such a state industrial policy. This can be seen in the discussions not just on the Galileo navigation system, but also on future Earth observation programmes. In Germany there is an absence of direction regarding the fields within space in which we want to be serious contenders.

FLUG REVUE: Precisely in the areas you mention the politicians are asking for greater financial commitment on the part of industry. What is your view of this?

Dr. Ensslin: There is a lot of talk about public-private partnerships, a business model based on partnerships in which industry and the public sector each put up half of the finance. Astrium welcomes this approach as a matter of principle, as it opens up to industry the possibility of developing products for new markets in which the risk is too great for the entire investment to be funded by private companies.

However, this approach only works if the other market players are kicking off on equal terms. This applies not just to the position of the European companies Astrium is competing with for systems leadership but also to the SMEs. They too must assume their fair share of the risk and upfront investment. Otherwise the systems leader is left carrying an unreasonable, disproportionately high risk.

FLUG REVUE: How is this viewed in the other European countries?

Dr. Ensslin: Opinions on such issues vary widely in Europe. In Italy and France, for example, satellite networks for navigation or for the much talked about data highway to the sky are viewed as elements of an infrastructure which provides basic services to the population.

In Germany by contrast it is quite different. There politicians expect private capital to be injected at a very early stage of a project.

FLUG REVUE: What form could the partnership model take?

Dr. Ensslin: From the point of view of industry it is essential that commercial principles are adhered to. In particular there must be a positive return on investment within a reasonable period.

For the satellite systems that means that the public sector must make its contribution to building the infrastructure, i.e. in the first phase of investment that revolves around design and procurement. The space industry will then concentrate its resources on the development of products and services and on commercial operations.

FLUG REVUE: But you have voluntarily invested considerable sums in new projects...

Dr. Ensslin: ... Of course, when we are convinced that money can be made on those projects. With the TerraSAR programme, a high-resolution commercial Earth observation system with radar, we said from the start that we wanted not only to build it but also to operate it. We are working with the British here, and not just with industry, but the national agencies are also involved. So far we have contributed around EUR20 million upfront. And the marketing company InfoTerra has also been in existence already for a year.

Regrettably we have not succeeded in getting the Italians to join in with us. The Italians have their own rival programme, in which the state is funding the entire cost of the investment. The result is an intolerable distortion of the competition. Harmonisation is required here urgently at the European level.

FLUG REVUE: In your opinion what role does government policy play in Germany in supporting industry?

Dr. Ensslin: In the present political climate in Germany space is not viewed as an engine of innovation. Politicians are only interested in programmes which they themselves find interesting and which will make them look good to the voters.

The report produced by a US commission that was published in January - in fact under the leadership of the present Secretary of Defense Donald Rumsfeld - must have been a real eye-opener for them. In the report the American government is asked to make space a top priority. The preservation of America's superior capability in space is to be assured through investment in scientific and technical resources. The declared aim of this policy is to always be one technology generation ahead of the global competition.

FLUG REVUE: What requests would you put to the politicians in order to change this unsatisfactory state of affairs?

Dr. Ensslin: The government must articulate its need for the space infrastructure. At the end of the day we cannot develop and provide systems which no one then wants. We need a certain security that our investments will pay off at some point in the future.

The state certainly has a need for space technology and services even if some of this is at present covered by alternative means. Think of environmental conservation, for example: the governmental committees should be crying out for Earth observation right now. Other examples are the use of satellite navigation to make traffic and logistics flows more efficient, or the use of satellites as an instrument of Germany's security policy.

FLUG REVUE: What do you feel is not right at present?

Dr. Ensslin: The German space programme is overly dependent on the priorities of the Federal Ministry for Education and Research. Moreover, up to now the only governmental department to have contributed towards the costs of weather satellites has been the Ministry of Transport. The financial constraints of the budget are preventing other departments, for which space could well have solutions to offer, from publicly voicing their interests.

In other words, the industrial policy which is a precondition to improving the situation and with which the relevant government department would have to identify is lacking.

FLUG REVUE: Dr. Ensslin, thank you for the interview.

From page 56 of FLUG REVUE 7/2001