MILAN Feb 13 Italy's Finmeccanica is
expected to broaden the powers of its long-standing No. 2 on
Wednesday after the arrest of its head left the aerospace and
defence group facing serious damage to its reputation and delays
to vital asset sales.
On Tuesday Italian police arrested Chairman and Chief
Executive Giuseppe Orsi on allegations he paid bribes to win a
560 million euro ($754million) Indian contract for 12
helicopters. Orsi denies any wrongdoing.
Finmeccanica, 32 percent owned by the Italian state, is
scheduled to hold a board meeting on Wednesday afternoon to
address the governance vacuum.
Chief Operating Officer Alessandro Pansa, who joined Italy's
second largest corporate employer in 2001 as CFO, was likely to
receive wider powers as a stop-gap measure until a shareholder
meeting is called, a source familiar with the situation said.
"Pansa has been involved in the asset sales process and so
can give the market guarantees," the source said.
The heavily indebted group is seeking to sell assets
including its AnsaldoEnergia power engineering business to focus
on its core aerospace and defence activities and avoid more
credit rating downgrades.
In a statement on Tuesday the company said business would
continue as usual as it seeks to limit damage from the probe,
including impact on the disposals process under way.
However investors are concerned the departure of Orsi, who
was appreciated for his market-friendly style, could disrupt the
company's turnaround ambitions.
"If CEO Orsi is forced (or chooses) to step down this would
introduce risk and significantly alter our investment case which
is based on Orsi's ability to drive the restructuring and cost
cutting through the whole of Finmeccanica," UBS said in a note.
On Tuesday Fitch put Finmeccanica's rating under review for
a possible downgrade saying the arrest raised risks of "material
Standard & Poor's already cut Finmeccanica to junk in
January after the group missed its target for 1 billion euros of
asset sales by the end of 2012.
Analysts said another downgrade to junk could impact the
group's ability to receive pre-payments from customers and harm
its competitiveness outside Italy.
A series of scandals including derivatives losses at bank
Monte dei Paschi and a graft probe involving oil
services group Saipem has rocked Italy's business
world in recent weeks and sent waves through the political
On Wednesday Silvio Berlusconi, head of the centre-right's
leading party, said the arrest of Orsi would have very bad
consequences for the Italian economy.
"Finmeccanica acts just like the rest of its international
competitors, with the difference that magistrates elsewhere do
no react the same as in Italy," he said in a TV interview.
Concern is growing that the corruption probe could tarnish
Finmeccanica's reputation and the market is now looking to see
the reaction of important customers, especially in the US.
India has already said it would blacklist Finmeccanica and
cancel the helicopter deal if allegations of bribery are proven
against the company.
Being excluded from the growing Indian market could be a
major problem for the group, which faces defence budget cuts in
its main Italian, British and U.S. markets.