| BAGNOLET, France
BAGNOLET, France France's Saft S1A.PA, a leading industrial battery maker, said the grounding of Boeing's 787 Dreamliner had not hurt its confidence in the aircraft's lithium-ion batteries.
The head of the company developing similar batteries for rival Airbus EAD.PA insisted the powerful but lightweight power packs are the best and safest way of providing backup power for the new generation of 'wired' passenger aircraft.
"It is difficult to imagine that we could stop this kind of progress," Chief Executive John Searle said in an interview.
He declined to comment on U.S. and Japanese investigations into two separate lithium-ion battery incidents, including a fire, on two Boeing (BA.N) Dreamliners, all of which were grounded by regulators earlier this month.
Searle said he was confident regulators would not change their minds about the benefits of lithium-ion technology or seek to ban it from commercial jets.
Saft, which says it is the world leader in lithium-ion batteries for the space and defense sectors, is developing them for the Airbus A350, which is due to make its maiden flight later this year.
It also provides lithium-ion batteries for the Lockheed Martin (LM.N) F-35, the world's largest military project.
Boeing's 787 is the first passenger jet to rely on lithium-ion main batteries, which weigh up to 40 kg less than traditional nickel cadmium ones.
Boeing said on Wednesday it saw no immediate reason to switch back to the technology used in previous jet models, citing progress in finding the cause of the two battery scares.
But pressure is growing on regulators to guarantee the safety of lithium-ion batteries before the 50 Dreamliners that have already been delivered, each costing $200 million, can return to service.
Shares in Saft are up 13 percent so far this year in the wake of the 787 crisis, after dropping 19 percent in 2012, valuing the company at 500 million euros ($678.5 million).
Faced with competition from Asian battery makers in the car market, Saft will stick to niches such as heavy goods vehicles, limited series such as Formula One racing cars and possibly small, low-cost hybrid vehicles, Searle said.
"The very large markets are markets for large Chinese manufacturers. For this reason, we are not that interested in electrical cars in volume," Searle said.
The British-born engineer said lithium-ion technology could represent 35 percent of Saft's sales in 2015, compared with 10-12 percent in 2011, thanks to output hikes in Jacksonville, Florida.
Slower demand in its traditional businesses of nickel and primary lithium batteries for industry, transportation, civil and military electronics forced the company to cut its sales target twice last year.
In October, Saft said it expected 2012 sales to drop around 2 percent at constant exchange rates and its EBITDA margin to be around 16 percent, down from 17.5 percent in 2011. The company reports earnings on February 18.
Pressure on the industry was highlighted when A123 Systems AONEQ.PK, a U.S. maker of electric car lithium-ion batteries, filed for bankruptcy protection last year. The U.S. government this week approved its takeover by a U.S. unit of Wanxiang Group, China's largest auto parts maker.
"It is clear that for some of our competitors, last year was very difficult, with the bankruptcy filing of A123 but also of smaller companies," Searle said.
"All the projects take some time, and if you don't have other sources of revenue and profit, it is hard to support medium-term losses," he added.
In 2011, Saft and U.S. auto parts supplier Johnson Controls (JCI.N) ended a five-year partnership in lithium-ion batteries for hybrid and electric cars.
(editing by Jane Baird)