Industry Perspective: Eurocopter
None of the world’s major helicopter manufacturers stands to lose more than Eurocopter should the U.S. economy falter. The company is making large capital investments throughout the country to sustain its huge production, support, warehouse and training operations in Texas, Ohio and elsewhere. The last thing it wants is a recession wiping away sales already in its order book.
Still, money being spent now in the U.S. represents a long-term investment by Eurocopter, and North America appears to be a good bet. Sales to U.S. buyers account for 30 percent of the company’s business in terms of units delivered and the total dollar figure has been climbing every year. The company also landed a major contract with the U.S. Army to produce Lakota light utility helicopters, a machine based on the EC 145. Sales to new buyers outside North America could help pick up the slack in the event of a downturn here, but clearly the U.S. is a market Eurocopter covets.
Of course, the fact that Eurocopter stands to lose so much merely reflects the fact that it stands alone as the world’s leading producer of turbine helicopters in terms of numbers. Eurocopter senior executive vice president Philippe Harache made it clear in a recent interview that the company has no intention of relinquishing the title anytime soon.
What are your thoughts on the
current market, and in particular 2007?
We French boast–maybe unduly–inventing the first helicopter, when on Nov. 23, 1907, a Frenchman named Paul Cornu achieved the first liftoff of what could be called a rotorcraft. We can think of no better way to celebrate this 100th anniversary of the helicopter than achieving an absolute record in terms of sales. If you had asked me this question at this time last year, I would have told you that we booked 615 aircraft in 2006. We booked 401 in 2005. And in 2007 we reached the outstanding level of 802 sales. The peculiarity of this performance is that it touches on every product in our range, be it civil or military and across all market segments.
You’re in the process of making some large capital expenditures in the U.S. market to boost your capabilities. How concerned are you about the potential impact of a U.S. economic slowdown?
Very concerned, like everyone else. This concern has been growing over the last few months. This being said, we are trying to use a few advance indicators of how the market will be impacted. First, we don’t see any impact at all on our military business with the U.S. Army. As you know we have received additional orders for the Lakota light utility helicopter from the U.S. military and we don’t think that in any way this program will be slowed down. On the civil side we are monitoring the potential consequences of the credit crunch resulting from the subprime crisis. I have to say that at this point we have not yet perceived a slowdown in our market, but we are very worried and focused on identifying any early indicator of a slowdown in activity.
What level of activity do you anticipate from emerging markets in places like Asia, India, Russia and South America? Do you think these markets can absorb some of the business you might lose in North America?
Definitely so, yes. Brazil, Russia, India, China and a few others are emerging markets, but they are emerging at their own pace. The level of maturation is different for each, but these countries might be less impacted than North America in case of crisis, and we think that in our business the potential is so huge that we don’t see any stall in demand for helicopters. In fact, we see a constant request for helicopters. The reason for the bottleneck today is not due to any failing on the demand side, but more the supply side which cannot satisfy the expectations of the market.
And so that’s the reason for your capital investments?
Yes. We are still confident in the medium- and long-term future, and we are still concentrating on sizable investments to make sure that we can satisfy the market.
Does that mean you think the historically cyclical nature of the helicopter industry will be less apparent in the future?
We are sure of nothing as far as the long-term is concerned but we think the usual cycles that used to exist in our market could be disrupted by these emerging-country requirements. This situation did not exist before.
What is your strategy in the U.S. market in terms of what you hope your investments will achieve?
We have a threefold strategy. First, we are carrying on with the expansion of our Grand Prairie, Texas facility to improve the logistics with our hub at Dallas Fort Worth [International Airport]. We are increasing our training facility by including a full-motion simulator for the EC 135. We are revamping our delivery center in Grand Prairie and opening additional avionics shops.
Next, in Columbus, Ohio, our facility has grown to 314,000 square feet. The assembly hall for the UH-72 Lakota is located there. We have increased the warehouse area and parts inventory there as well to support our requirements for our U.S. military business.
And the third element in our strategy is the expansion of our regional support facilities. In November we opened a new West Coast regional support facility and we are preparing this year to open facilities in the Southeast, Northeast and Gulf of Mexico. We are serious about the North American market, and through these capital expenditures are aiming to keep our dearly contested position as the leading civil helicopter manufacturer in the U.S.