Global Defence Review (1999) - Man with a Plan

	Man with a Plan
Top: The P90 sub-machine gun and Five-seveN pistol with laser, torch and silencer.	The Herstal 2000 Plan is the basis for the Herstal Group's recovery that will ensure it comes out on top in the year 2000. Most have only a broad outline of this plan, so Geoff Farmer talked to Phillipe Tennesson, Chairman and CEO of the Herstal Group, and asked a few leading questions.
	How did the Herstal 2000 Plan originate? In 1996 and 1997 the Herstal Group lost nearly US$120 million, so the choice was simple: it either recovered or disappeared. The plan refers to the missions and objectives of the group. It also stresses the goals. Our mission - indeed our job - is to design and develop light civil and military weapons, produce them, market them and provide support to meet the needs of our customers. Also we produce hunting accessories. This is how Herstal began more than 100 years ago. This is what we know best. This is our core business, our reason for being. For which objective? We have to become a world leader in the supply of small civil and military arms again. In which structure? Our predecessors built up the Herstal Group in an intelligent manner. They understood that it is easier to stand on two legs than one. Thus the civil and military branches are complementary and provide numerous synergies in research, manufacturing and quality. Only the commerce of these two activities is specific. The group must be organised around two sectors: the military (FN Herstal and FNMI), and the civil (Browning and USRAC (Winchester)). Plants are located in Liege and Zutendaal, Belgium; South Carolina, Columbia, Utah and Connecticut, US; Viana, Portugal; Anagni, Italy and in Japan with our Japanese partner, Miroku. We are currently adding a law-enforcement branch to provide products for police forces. What are the priorities of the plan? Three distinct requirements: to adapt capacity and flexibility to the realities of the market; to offer customers qualitative and innovative products; to produce and sell at competitive prices. How will you adapt to the market ?
Phillipe Tennesson	Adapting capacity and flexibility to the market is an urgent operation. The group had fallen behind on this front so all units are undergoing restructuring. The group will employ 2,300 persons at the end of 1999 and generate a turnover exceeding US$400m. Moreover, it must adapt its corporate culture and certain modes of behaviour to respond, as promptly as possible, to a fluctuating market of reduced visibility. Which products and for which markets? In the military sector, the MINIMI (M249 in the US inventory), the MAG (M240) and the .5O machine guns; the FNC rifle; the 5.7mm P90 submachine gun and the Five-seveN pistol. In the mounted weapon sector FN Herstal has equipped more than 600 helicopters and subsonic aircraft with pod and rocket weapon systems. In the civil sector, the Over-Under, Gold, BAR, M-70, etc. Conversely, some sectors must be renewed. We are giving priority to Winchester but all areas will be covered. The group has solid research, development and industrialisation capacities that should enable it to control its future. But we will have to force our talents. For manufacturing and R&D, the aims of company sectors and the skills in plants throughout the world must be defined with more precision and team working to improve and increase synergies and efficiency. The efforts being made to become more competitive total between 20 and 30 per cent of production costs. The marketing and sales organisation must be global, in line with today's marketplace. Finally, there is one unrelenting priority: quality. The 'made in Belgium' label, the brands of FN Herstal, Browning, Winchester, Miroku, Legia and Delcour translate a century of quality and reliability. This is our heritage, our pride and we must ensure this quality is present in each of our lines of business. What are the key figures for the plan?
The M2HB/QCB heavy machine gun, one of the .50 machine guns for which the group is famous	At the end of 1998, the equity of the group will be US$250m. We do not have any debts. Giat Industries, our former shareholder, had wiped off nearly all the debts when it assigned its shares to the new shareholder. The turnover is stable at about US$400m. During 1998 the group will have reduced its losses sharply. As of 1999, and then in 2000, we will have balanced the books and then will return to profit. At the end of the first quarter of 1998 we were 100 per cent aligned with the plan, an encouraging beginning. The second half of 1998 will break even and 1999 will be profitable with a turnover of $420 and a workforce of 2,300. What about your new shareholder? Our majority shareholder was Giat Industries, the leading land weapons industry in France. For financial reasons this group wanted to transfer its stake. The Walloon Region, already a minority shareholder, took over all of the capital, financed the planned redundancy scheme and boosted the operating capital. The operation has received the approval of the European Commission for Competition and the French Commission for Privatisation. In future, the minister, President of the Walloon Region Robert Collignon, has clearly stated that the region would like to have one or more industrial and financial partnerships. The Herstal Group is, therefore, expected to play a role in the industrial restructuring operations to be carried out worldwide. How can the unity of the group be secured?
US law enforcement troops use the P90 sub-machine gun	This challenge will decide our success. We must abide by three group rules. First to understand and to get to know each other, to know the role of every person, their qualities and weaknesses, and to learn to respect and appreciate each other. Second, to capitalise on our differences, to know how to establish synergies that will lead to more successful research, production, marketing, trade and quality. And finally to work together on our common objectives and meet our challenge. One example that illustrates the benefits of these rules is our new semi-automatic hunting rifles. Gold and Super XM2 were designed by a team in Morgan, Utah, and developed and industrialised by teams in Liege, Belgium. Some of their components were manufactured in Liege and some in New Haven, Connecticut. They were assembled in Viana in Portugal, distributed from Arnold in Missouri and from Hauts-Sarts in Belgium, and finally sold and followed up by our subsidiaries and distributors throughout the world. What is your message to the group's personnel throughout the world?
Email: info@FNHerstal.com	The Herstal Group has gone through difficult periods but still has considerable winning assets and great potential in a world market. All it has to do is develop and capitalise on them. The group is endeavouring to down-size and to rally all its forces. This approach, already under way, is necessary but not sufficient by itself. Each and every one of us, in every laboratory, office, workshop, and in the field, must contribute in order to provide added value and so help with the on-going construction of the whole. We have to innovate, to question ourselves and to advance in every one of our lines of business. This is the pre-condition to regaining our leading place in the world of small arms