Strategic Plan
2010-2012
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Strategic Review
Strategic review of Group activities undertaken withinthe SBP2 framework
Presentation to Board on 10/12/09
Global Group strategy confirmed for the major markets:
� Aerospace� Space� Defence� Security
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Aerospace
Major difficulties on several programmesCorrective measures to redress the situation
First effects of the Civil Aerospace Crisis on salesEnd of recession expected in 2012
Euro/dollar exchange rateThreat to competitiveness to the horizon of 2012/2013
Pursue the preparation of future in ATMSESAR, NEXTGEN
Strategic partnerships in regions of growthBrazil, Russia, India, China
5
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Space
Enhance the competitiveness in telecoms(dollar market) and on ESA market
Optimisation of internal cost base
Strengthen business in Italy and in GermanyItaly : Sicral 2, SigmabusGermany : DLR partnership
Strengthen the Space AllianceComplementarity of systems / services
Pursue strategic partnerships outside EuropeSale of payloads in Russia, in USA
6
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Defence
Major difficulties on several contractsCorrective action to put situation right
Beneficial effects of French stimulus planMust be followed by export orders
Rapid technological evolution in tactical radio and optronic markets
Opportunity / threat to worldwide market shares
Capture market share in the naval domain in USAand in Germany
JVs or strategic partnerships
Promote renewal of radar familyFrom very short to very long range
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Turn around contracts in difficultyStrong action needed
Develop position in rail signallingPartnerships in growth regions (Brazil, Russia, India, China)
Propose innovative solutions for Civil SecurityR&D investment in supervision and video analysis
Strong growth in securing IT systemsExpansion of the range of products and services
Strengthen local integration centresBroadening of their business domains
Security
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Remember: our strategy is global
Hardware
Software
Processing
Systems
Space
Avionics
ATM
Radars
Radiocommunications
Defence networks
Defence systems
Security systems
Signalling systems
Optronics
Sonars
States
Public Operators
Large Accounts
Aircraft Cies
KeyTechnical Domains
Key CustomersWorldwide
KeyKnow-How Domains
PROBASIS
Performance plan
2010-1014
* "momentum" in ancient Greek
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Improve margin to fuel initial and external growth worldwide
Anticipate market price decreases and US dollar pressure
Enhance working methods within the Group by systematically matching best practices
Global target
A five-year action plan for a stronger Thales
Target a € 1.3 bn impact in 2014
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Reduce the cost of non qualityfocus operational units attention on strengthening programme management and increasing engineering capability bring all units to Thales « best in class » levels
Adapt to market price decreases and US dollar pressure through the supply chain
Stronger « make or buy », « design-to-cost » policies Further reduction of number of suppliers, rationalisation of production plants
Reduce internal costsshared services, support functions, general expenses,real estate
Major areas for performance improvement
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PROBASIS team headed by the CEO, assisted by the SVP Operational Transformation
Team work involving the Operational Managers to define the action plans
Follow up of action plans through monthly reporting
The « principle of subsidiarity» will be systematically taken into account in the day-to-day execution of the action plans
Methodology
Chorus II
2010-2011
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FactsMajor gaps revealed on ProgrammesMain root causes
Upstream technical choicesContract management Processes are neither simple nor precise enough; their implementation is not rigorous enoughDiluted responsibilities
ConsequencesReinforce the Design Authority Involve Purchasing, Legal and the Design Authority from the upstream phase onwardsDevelop process implementation measurement and introduce a Right to Veto for the Quality Department at key gates
Chorus II
Tailor the Chorus Reference Systemto support Thales Transformation
15
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Chorus II Orientation
Simplify and unify the Chorus Reference System(structure, content)
Define the Chorus Reference System in two layersSteering: those elements that are strictly for managing processesOperational: those operational elements associated with daily business operations, including IS solutions
Define convergence route at Group level while taking into account local business needs
Clarify Thales operating processes and individual roles and responsibilities within these processes
16
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nces � Chorus II KickChorus II KickChorus II KickChorus II Kick----off Reviewoff Reviewoff Reviewoff Review
� Project team and Group Project team and Group Project team and Group Project team and Group
Process OwnersProcess OwnersProcess OwnersProcess Owners
� 26262626thththth January 2010January 2010January 2010January 2010
Planning
Initialisation
Target
vision
Target
architecture
Deploym
ent principles
Realisation
Implem
entation and D
eployment
T0 = 19/10/2009
2 months 2 months 6 months 12 months
2009 2010 2011
New GroupNew GroupNew GroupNew Group
OrganisationOrganisationOrganisationOrganisation
ProjectProjectProjectProject
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Bring organisation closer to the customer
De-centralise to be more efficient
Simplify procedures to be more competitive
Favour international Growth
Objectives of change
19
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nces Countries act as simple « host » structures for the DivisionsNo global approach nor P&L responsibility at Country level, therefore local resources not optimisedNo real « business » motivation for the Country Directors, therefore insufficient regional growth
Previous matrix
Division 1
GBL 1 (Global Business Line)
CTU 4
CBL 2
CBL 5
GBL 2 (Global Business Line)
GTU 2(Global Technical Unit)
CENTRES OF EXCELLENCE, SHARED
SERVICES, AND FUNCTIONS
GBS 1 (Global Business
Segment)GBS 2 GTU 1
Country 1CBL 1
(Country Business Line)
CBL 4
CTU 1 (Country
Technical Unit)LE 1 (Legal Entity)
CBS 1 (Country Business Segment)
CBS 2
CTU 2 CTU 5
Country 2
LE 2 CBS 3 CBS 4
CBL 3
CBL 6
CTU 3 CTU 6LE 3 CBS 5 CBS 6
20
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Concept inherited from the Thomson-CSF era, when France dominated largely, with a business model based on direct exports to the rest of the world � out of step with current size of Group’s presence abroad (>50% of employees)
Overcentralisation of powers by the Divisions, so that :Responsibility removed from local teamsImpossibility of Division’s staff to keep pace with everythingGreat difficulty in establishing local inter Divisional synergies (« silo » effect)Inadequate response to contracts difficulties, loss of commercial opportunities, failure to optimise local costs
Matrix too complex, each Division having its own reference system and imposing it in each country (proliferation of reporting lines and systems, regional JVs uncoordinated)
Significant waste of internal effort, lack of coherence within the Group
Too many interfaces with client Thales’ image misunderstood by client, scale of Group insufficiently exploited
Disadvantages of current organisation
21
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Example of current complexity of reporting lines
CEO Thalesgroup
HQ
ThalesgroupArea A Area B&C
1
2 3 4 51
2
3
4
5
Finance Reporting
HR Reporting
Operation Reporting
Technical Reporting
Sales&Marketing Reporting
DIV
L&J
DIV
NAV
DIV
AERO
DIV
SPACE
DIV
D3S
DIV
Air Systems
SBL
T&S
SBL
Security
SBL
CS
2 3 4 51 2 3 4 51
2 3 4 51 2 3 4 51
2 3 4 51 2 3 4 51 2 3 4 51
CCD
Thales Germany
HQ
Thales Germany
2 3 4 51
BA
AS
BA
Trans
BA
C&S
TDD-GmbH
2 3 4 51
Thales Koblenz
2 31
BA
Defence
2 3 4 51
BU
T&S
4 5
BU
Security
5
BU
AS/CS
5
VP
M&S
KAM
Defence
KAM
Security
KAM
Transport
KAM
Industry
Thales GroupThales Germany
22
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Evolution of the matrix:Domestic Countries become responsible for bids, contracts, customer satisfaction and for P&L (= short term)Divisions to focus on R&D strategy, products & services, industrial policies (= long term)
Evolution of Divisions: transition from six to seven, with the improvement of real coherence within each DivisionReduction in the number of Business Lines:move from 44 to 33Removal of management of Business SegmentsRemoval of Country Division Director, Global Technical Unit, Country Technical Unit conceptsUnification and simplification of economic and financial reporting, via the Domestic Countries
Envisaged way forward
23
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Country Directors are motivated by the global objectives of the Group in the Country, including successful implementation of contracts, customer satisfaction, profitability and working capital requirement.Countries are responsible for optimising local resources (Integration centres, support functions)Divisions are to focus on worldwide strategies (R&D, products & services, industrial policies)
Project for new matrix
« Shared services »
Management Domestic Country
Division 2Division 2BL 1
BL 2
Division 1Division 1
Business R & D Industry
BL 1
BL 2
24
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Two types of role coexist in the projectfor the new matrix:
Country axis: operational role, to include P&L, with a wide range of managerial responsibility (bids, programmes, customer relationship management, Human Resources and asset management, cost and WCR optimisation)
example: Area DirectorDomestic Country DirectorCompany Chairman & Chief Executive
Divisional axis: functional role, to include responsibility for strategy, with specific powers on operational managers (definition of R&D policy, product policy & services, and industrial policy) and associated methods of control (approval of R&D budget, of industrial and technical investment, and of technical content of bids)
example: Division DirectorBL Director
…
New responsibilites
25
date
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ncesProject for New Country Organisation
� Area A � Area B
UK
Australia
USA
Canada
Netherlands
Norway
Germany
Italy
Spain
Singapore
Saudi Arabia
India
South Korea
North andCentralEurope Region
North andCentral Asia Region
Southern EuropeRegion (inc. EEC)
South Asia Region
Middle East Region
Central AmericaRegion
Africa Region
Domestic Countries
Commercial Network
Domestic Countries
Commercial Network
NATO
UN
Austria
Switzerland
� France, specific Domestic Country
26
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Four dual Divisions (Defence and Civil)
Defence & Security C4I Systems (3.1 B€): Network & Infrastructure Systems, Radio Communication Products, Information Technology Security, Protection Systems, Critical Information Systems
Project for new organisation of Divisions (1)
DSC
Air Operations (1.2 B€): Defence Air Operations, ATM & Navaids Systems, Surface Radars
DAO
DAV
Space (1.5 B€): Thales Alenia Space organisation unchanged(JV with Finmeccanica)
DSP
Avionics (2.4 B€) : Commercial Aircraft Solutions, In Flight Entertainment, Military Avionics, Helicopter Avionics,Electrical Systems, Training & Simulation, TWT & Imaging Subsystems
27
date
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Two Divisions 100% Defence:
Defence Mission Systems (2.2 B€): Electronic Combat Systems, Mission Airborne Solutions, Above Water Systems,Under Water Systems
Project for new organisation of Divisions (2)
DMS
DLD
DTS
Land Defence (1.5 B€) : Missile Systems, Optronics,Protected Vehicles, Armament & Ammunition
One Division 100% Civil:
Transportation Systems (1.3 B€) : Main Line Signalling,Urban Rail Signalling, Integrated Supervision Systems,Revenue Collection Systems
28
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KAM KAMKAM KAM KAM KAM
New commercial organisation of Domestic Countries
Large Clients ("Key Accounts")Large Clients ("Key Accounts")
KAM = Key Account Manager
CountryCorporate
LocalCompanies
Key Account ExecutiveKey Account Executive
The Key Account Executive is the Country Director or a close collaborator
29
date
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New organisation project explained to Unions:
10 December: Thales SA CCE15 December: Thales European Committee21 December: Major French Thales companies
Consultation of Unions about the project:January 2010
Implementation after consultation of Unions
Timetable
Project of Project of Project of Project of
New ExecutiveNew ExecutiveNew ExecutiveNew Executive
CommitteeCommitteeCommitteeCommittee
31
date
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Project of New Executive Committee
Reynald SeznecSenior Vice President,
Space
Pascale SourisseSenior Vice President,
Defence & SecurityC4I Systems
Alex CresswellSenior Vice President,
Land Defence
Pierre-Eric PommelletSenior Vice President,
Defence Mission Systems
Jean-Loup PicardSenior Vice President,
Strategy
Blaise JaegerSenior Vice President, Area B
Patrice DurandSenior Vice President,
Finance & Administration
Jean-Loïc GalleSenior Vice President,
Air Operations
Luc VigneronChairman & CEO
Marko ErmanSenior Vice President,
Research &Technology
Yves BarouSenior Vice President,
Human Resources
Patrick FourniéSenior Vice President,
Operational Transformation
Michel MathieuSenior Vice President,
Avionics
Jean-Pierre ForestierSenior Vice President,
Transportation Systems
Alex DorrianExecutive Vice President, Area A,
CEO of Thales UK
Project of Project of Project of Project of
new Areanew Areanew Areanew Area
organisationorganisationorganisationorganisation
33
date
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Project of New Area Organisation
Area A Area B
Domestic Operations B
UK
US
Canada
Netherlands
Australia & NZ
Norway
South Korea
Northern &Central Asia
Northern &Central Europe
Nato/UN
Austria
Saoudi Arabia
Spain
Italy
Europe inc EU Germany
India
Singapore
SwitzerlandAfrica
Latin America
Middle East
South & SouthEast Asia
Int’ lCo-ord A
HR
LEGAL
FINANCE
Sales & Marketing
Business Development
34
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Alex Dorrian Blaise Jaeger
G Delevacque
A Dorrian
A Cameron
TBD
A Blokhuis
C Jenkins
G Pedersen
I Kim
O Guibert
I AzemardE Buckley
M Veider
JY Tolot
A Parrondo
P Salvato
P Mathieu M Hellenthal
F Dupont
L Mayer
B GigerC Costes
C Kuberek
O Badard
M.L. Bourgeois
S. Lucot
TBD (1)
TBD (1)
TBD (1)
R Eskinazi
O Conrozier
Project of New Area Teams
Project ofProject ofProject ofProject of
French Key French Key French Key French Key
AccountsAccountsAccountsAccounts
ManagementManagementManagementManagement
36
date
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Project of French Key Accounts Management
R. Seznec P.E. Pommellet M. Mathieu J.L. Galle M. Erman J.P. Forestier B. JaegerP. Sourisse
DGACEADS/AIRBUS
EADS/EUROCOPTER
EADS/ASTRIUMCNESESA
DCMATDGA/DADGA/DO
DGA/UM ESIODGA/UM HORUS
DGA/UM NBCDGA/UM TER
DIRISIEADS SDE
EMATEMA
GENDARMERIELA POSTEMEDDATMINIMMMINDEFMINEFIMININT
NEXTEROTAN (France)
SGDNTOTAL
DASSAULTDCNS
DGA/UM AERODGA/UM COELDGA/UM HELIDGA/UM MIDDGA/UM NAVDGA/UM RAF
EMAAEMM
SIMMADSSF
MBDA
CEADGA/DSDGA/DTMIN E&R
SE Pro/Eco Num
RATPSE Transport
SNCF
COFACEDGA/DDIMIN AEE
SE AFF EUROSE COM EXT