Airbus aims to expand slice of smaller U.S. defense "pie"

WASHINGTON, March 7 Fri Mar 7, 2014 7:17pm EST

WASHINGTON, March 7 (Reuters) - Top Airbus executives on Friday said they still hoped to expand the company's share of the shrinking U.S. defense market but did not see a large U.S. acquisition target in the near-term.

Airbus Group Chief Executive Officer Tom Enders said the company had backed off an earlier target of boosting its U.S. defense and civil revenues to around $10 billion but said the company still saw opportunities for growth.

"It is less ambitious. That doesn't mean it hasn't any ambition left," Enders told reporters during a tour to meet with U.S. investors. "We have an opportunity to build a  stronger defense business here."

He said the company would focus more on organic growth than large-scale acquisitions, seeking to expand in markets such as helicopters, where it already has relationships, as well as looking for possible partnerships in the space arena.

"I do not see, at least in the near future, a realistic large M&A target," he said.

Allan McArtor, who took over as head of Airbus's U.S. business at the start of March, said the Army's plan to buy 100 more Airbus light utility helicopters would keep the company's factory in Columbus, Mississippi, busy for some time.

The company is nearing delivery of the 300th Lakota helicopter, McArtor said.

He said the orders could also lay the groundwork for additional sales of the helicopter in coming years given an increased drive to have common fleets, and the low acquisition and life cycle costs of the helicopters.

The company also builds helicopters for the U.S. Coast Guard and provides devices aimed at detecting explosive devices.

McArtor said his job in coming months would be to leverage the company's commercial brand to improve the competitiveness of the remaining products in the company's large portfolio, even as defense spending was shrinking.

"Even with the current budget realities that we're experiencing here in the U.S., it's still the largest defense market, clearly, anywhere," said McArtor, a former fighter pilot and chairman of the Federal Aviation Administration.

"We want to be opportunistic to take our share of even a smaller pie. We think we have some very competitive products to offer into the U.S. defense and government marketplace."

Enders and McArtor said a new final assembly facility in Mobile, Alabama, for single-aisle aircraft was taking shape, and the company was actively recruiting personnel for the site, which is due to deliver its first U.S.-built airplane in 2016.

The facility is slated to build four airplanes a month, but could expand to eight planes a month eventually, they said.

Airbus is the single, largest customer of the U.S. aerospace industry, with its commercial wing alone accounting for over $14 billion in purchases from U.S. suppliers last year.

McArtor said Airbus worked closely with its suppliers to drive down costs across the business, but did not approach the effort as aggressively as its rival Boeing Co.

"We think it's better to work with our suppliers and their processes, as opposed to dictating suppliers to carve 15 percent out of their cost," he said. "We may get to the same goal, but we're getting there using a different path."

Boeing announced last year that it was seeking big savings from suppliers under its "partnering for success" initiative, and told some companies they were no longer welcome to bid for work on new commercial aircraft.

Ender said Airbus sought to share developments with suppliers on more than just "a need-to-know basis," mindful that there were occasions when the company needed components on a quick turnaround.

"We treat our suppliers as if they were part of the company," he said.