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24 Aug 05. Peter Spiegel of the FT reported that beneath the snow-capped Italian Alps, on the edge of Turin’s construction-choked international airport, is a factory just larger than a football pitch where Italy’s share of the four-nation Eurofighter programme is assembled.

Because Italy is buying only 121 of the planned 620 fighters – Germany, Britain and Spain have committed to take the rest – the work allocated to Italy represents just 19.5 per cent of the value of the total aircraft: the jet’s left wing, which moves from station to station down one side of the factory, and its rear fuselage, which is assembled across the floor. Despite the exacting detail in the multinational contract that ensures no country does more than its fair share, Finmeccanica, the Rome-based aerospace and defence group, has managed not only to secure the airframe operations in Turin. As a result of aggressive corporate moves, it also now provides nearly two-thirds of the aircraft’s advanced electronic content, its most valuable and complex part.

How did a conglomerate that, until last year, was largely considered an also-ran in defence and aerospace suddenly become the largest supplier of the most sophisticated parts of Europe’s premier military programme? The answer reveals one of the most remarkable reversals of fortune in the recent history of the European defence sector, one that signals a shift in who builds and sells the continent’s largest and most important weapons. Through a series of bold and sometimes costly restructurings and acquisitions – particularly in the UK, where over the past nine months it has spent more than £1.6bn ($2.9bn, €2.4bn) to become, by some measures, the second largest defence group in the country – Finmeccanica has thrust itself into the centre of what many expect to be the second large-scale consolidation the European sector has seen in a decade.

“It’s like the end of a very big chess game,” says a senior executive at a rival defence company. “There are not so many pieces left – so, if you move one or two big pieces, all the rest are concerned. Now Finmeccanica is part of this game.”

Just seven years ago, Finmeccanica was an unfocused industrial conglomerate owned by the Italian state and, to all intents and purposes, bankrupt, with €6bn in debt and huge losses. Its future had become the stuff of bitter, high-level rows that led eventually to the resignation of Fabiano Fabiani, Finmeccanica’s long-time chairman and one of the last of Italy’s old-guard, state-sector industrial barons. To save itself, the company planned a radical shake-up. First, it would go public, injecting market-driven incentives into the business for the first time. “I worked for corporate Finmeccanica on a junior level eight or nine years ago,” recalls Giovanni Soccodato, the company’s head of strategy. “I just came back and I found a different culture, a different kind of attitude. Now, I see people going around and looking at the share price.”

Second, the company would focus on its defence and aerospace business, which at the time accounted for just 43 per cent of revenues, and begin shedding its non-core assets. That resulted in, for instance, the $2.1bn sale of Elsag Bailey, one of the world’s leading process automation companies, to ABB, the Swiss-Swedish engineering group.

Finally, in order to break away from its reliance on the Italian government, it would seek partnerships and joint ventures with other European defence groups, attempting to increase its stature and international reach. “It was very difficult for an Italian-based entity with the market size that we had to demonstrate that we could play this game at a global level or even an international European level,” says Alberto de Benedictis, who had just become the group’s head of strategic finance at the time, overseeing the divestiture of more than 60 subsidiaries.

The decision to go for joint ventures rather than look

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