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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 rate
Threat 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
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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, Sigmabus
Germany : DLR partnership
Strengthen the Space AllianceComplementarity of systems / services
Pursue strategic partnerships outside EuropeSale of payloads in Russia, in USA
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Defence
Major difficulties on several contractsCorrective action to put situation right
Beneficial effects of French stimulus plan
Must be followed by export orders
Rapid technological evolution in tactical radioand 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 family
From very short to very long range
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Remember: our strategy is global
Hardware
Software
Processing
Systems
Space
Avionics
ATM
Radars
RadiocommunicationsDefence networks
Defence systems
Security systems
Signalling systems
Optronics
Sonars
States
Public Operators
Large Accounts
Aircraft Cies
KeyTechnical Domains
Key CustomersWorldwide
KeyKnow-How Domains
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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 dollarpressure
Enhance working methods within the Group bysystematically 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 strengtheningprogramme management and increasing engineeringcapability
bring all units to Thales best in class levels
Adapt to market price decreases and US dollarpressure through the supply chain
Stronger make or buy , design-to-cost policiesFurther reduction of number of suppliers, rationalisation ofproduction 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 theSVP Operational Transformation
Team work involving the Operational Managers todefine the action plans
Follow up of action plans through monthly reporting
The principle of subsidiarity will be systematicallytaken into account in the day-to-day execution of the
action plans
Methodology
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Chorus II
2010-2011
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FactsMajor gaps revealed on ProgrammesMain root causes
Upstream technical choices
Contract management
Processes are neither simple nor precise enough; theirimplementation is not rigorous enough
Diluted responsibilities
ConsequencesReinforce the Design Authority
Involve Purchasing, Legal and the Design Authority from theupstream phase onwards
Develop process implementation measurement andintroduce a Right to Veto for the Quality Department at keygates
Chorus II
Tailor the Chorus Reference System
to support Thales Transformation
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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 processes
Operational: those operational elements associated with dailybusiness operations, including IS solutions
Define convergence route at Group level while taking intoaccount local business needs
Clarify Thales operating processes and individual roles andresponsibilities within these processes
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ferences Chorus II KickChorus II KickChorus II KickChorus II Kick----off Reviewoff Reviewoff Reviewoff Review
Project team and GroupProject team and GroupProject team and GroupProject team and Group
Process OwnersProcess OwnersProcess OwnersProcess Owners
26262626thththth January 2010January 2010January 2010January 2010
Planning
Initialisation
Target
vision
Target
architecture
Deployment
principles
Realisation
Implementation
andDeploym
ent
T0 = 19/10/2009
2 months 2 months 6 months 12 months
2009 2010 2011
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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
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ferences Countries act as simple host structures for the Divisions
No global approach nor P&L responsibility at Country level,therefore local resources not optimised
No 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 1
CBL 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
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Concept inherited from the Thomson-CSF era, when France dominatedlargely, with a business model based on direct exports to the rest of theworld out of step with current size of Groups presence abroad(>50% of employees)
Overcentralisation of powers by the Divisions, so that :Responsibility removed from local teamsImpossibility of Divisions staff to keep pace with everything
Great difficulty in establishing local inter Divisional synergies ( silo effect)
Inadequate response to contracts difficulties, loss of commercialopportunities, failure to optimise local costs
Matrix too complex, each Division having its own reference system andimposing 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 clientThales image misunderstood by client, scale of Group insufficiently
exploited
Disadvantages of current organisation
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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
VPM&S
KAM
Defence
KAM
Security
KAM
Transport
KAM
Industry
Thales GroupThales Germany
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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 eachDivision
Reduction in the number of Business Lines:move from 44 to 33
Removal of management of Business Segments
Removal of Country Division Director, GlobalTechnical Unit, Country Technical Unit concepts
Unification and simplification of economic and
financial reporting, via the Domestic Countries
Envisaged way forward
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Country Directors are motivated by the global objectives of the Group inthe Country, including successful implementation of contracts, customersatisfaction, profitability and working capital requirement.
Countries are responsible for optimising local resources (Integrationcentres, 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
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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 widerange of managerial responsibility (bids, programmes,
customer relationship management, Human Resources andasset management, cost and WCR optimisation)
example: Area DirectorDomestic Country Director
Company Chairman & Chief Executive
Divisional axis: functional role, to include responsibility forstrategy, with specific powers on operational managers(definition of R&D policy, product policy & services, andindustrial policy) and associated methods of control(approval of R&D budget, of industrial and technicalinvestment, and of technical content of bids)
example: Division DirectorBL Director
New responsibilites
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Project for New Country Organisation
Area A Area B
UK
Australia
USA
Canada
Netherlands
Norway
Germany
Italy
Spain
Singapore
Saudi Arabia
India
South Korea
North andCentral
Europe Region
North andCentral Asia Region
Southern EuropeRegion (inc. EEC)
South Asia Region
Middle East Region
Central America
RegionAfrica Region
DomesticCountries
CommercialNetwork
DomesticCountries
CommercialNetwork
NATO
UN
Austria
Switzerland
France, specific Domestic Country
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Four dual Divisions (Defence and Civil)
Defence & Security C4I Systems (3.1 B): Network & InfrastructureSystems, Radio Communication Products, Information TechnologySecurity, Protection Systems, Critical Information Systems
Project for new organisation of Divisions (1)
DSC
Air Operations (1.2 B): Defence Air Operations, ATM & NavaidsSystems, 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
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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
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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
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New organisation project explained to Unions:
10 December: Thales SA CCE15 December: Thales European Committee
21 December: Major French Thales companies
Consultation of Unions about the project:January 2010
Implementation after consultation of Unions
Timetable
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Project ofProject ofProject ofProject of
New ExecutiveNew ExecutiveNew ExecutiveNew Executive
CommitteeCommitteeCommitteeCommittee
P j t f N E ti C itt
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Project of New Executive Committee
Reynald SeznecSenior Vice President,
Space
Pascale SourisseSenior Vice President,
Defence & Security
C4I 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-Loc GalleSenior Vice President,
Air Operations
Luc VigneronChairman & CEO
Marko ErmanSenior Vice President,
Research &Technology
Yves BarouSenior Vice President,
Human Resources
Patrick FourniSenior 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
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Project ofProject ofProject ofProject of
new Areanew Areanew Areanew Area
organisationorganisationorganisationorganisation
P j t f N A O i ti
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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
Project of Ne Area Teams
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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
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Project ofProject ofProject ofProject ofFrench KeyFrench KeyFrench KeyFrench Key
AccountsAccountsAccountsAccountsManagementManagementManagementManagement
Project of French Key Accounts Management
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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
GENDARMERIE
LA 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
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