1998 - 2001 New structures in Europe and the privatization

The history trail

The joint ventures period

The financial recovery – confirmed by the return to profit in 1999 – enabled the start of a policy of agreements on an international level which allowed Finmeccanica to seize the best opportunities offered by the reorganisation of the European aerospace industry, reversing a difficult starting position and achieving a highly respected role on the international stage. In 1998, Finmeccanica and the British group GKN began the process to create AgustaWestland, a 50:50 joint venture which the following year brought together the helicopter sector business of Agusta and Westland Helicopters. Agusta’s longstanding collaboration with the US company Bell also established the premise for a specific joint venture BAAC – Bell Agusta Aerospace Company, with the aim of developing a new model of helicopter, the AB139, and the innovative BA609 tilt-rotor aircraft. In the same year, Alenia Marconi Systems (AMS) was formed; a joint venture bringing together Finmeccanica and the British Marconi Electronic Systems (a Division of GEC- General Electric Company) for the activities involving radar systems, command and control land and naval systems, missile systems and air traffic control. In 1999, Marconi Electronic Systems was taken over by British Aerospace, a big British group dealing in aerospace and defence, which following the merger became BAE Systems and took over the joint venture with Finmeccanica. After the separation of the Defence activities, GEC focused on telecommunications and information technology under the new name Marconi Corporation plc. In 2001 a joint venture between Finmeccanica, EADS and BAE Systems united the activities in the missile sector (which reported, respectively, to Alenia Marconi Systems – Missiles Division, Aérospatiale Matra Missiles and Matra BAe Dynamics) creating MBDA, a company in which both BAE and EADS had a 37.5% holding, and Finmeccanica 25%, with equal governance rights.

Corporate restructuring

At the same time, the activities that had been initially organized as Divisions were re-aggregated into homogeneous operating companies coherent with international development strategies, leaving functions of strategic and industrial guidance and control to Finmeccanica. Many brands that had made the history of Italian industry returned to be independent companies under the common denominator of the holding company. In 1998, the new Elsag, which focused on Information & Communication Technology, was formed out of the Elsag Bailey Division. In 2000, Alenia Spazio and Agusta were formed out of the Space and Helicopters Divisions, respectively. In 2001, it was Galileo Avionica's turn to be formed out of the Avionics Systems Division; through later acquisitions and mergers, Galileo took with it all the various companies operating in the sector which had joined Finmeccanica in different periods and had all merged into the Avionics Systems Division (Meteor, SMA, FIAR, Agusta OMI, Alelco, Tecnospazio, Ce.Te.V.). Also in 2001, OTO Melara was formed out of the OtoBreda Division, while AnsaldoBreda came out of the merger of the Vehicles unit of Ansaldo Trasporti and Breda Costruzioni Ferroviarie. This generated an integrated railway group, with electric, electronic and mechanical expertise, to adequately respond to the biggest European competitors, permanently at the top in the international market. Finally, Ansaldo Trasporti Sistemi Ferroviari was formed out of the Ansaldo Trasporti's Sistemi business unit. At the same time, Finmeccanica acquired BredaMenarinibus shares from Breda Costruzioni Ferroviarie. The following year, Alenia Aeronautica was formed out of the Aeronautics Division and took over Officine Aeronavali Venice, dealing in the field of aircraft maintenance and overhaul and belonging to the Group since 1981. Finally, the activities of Finmeccanica's International Naval Systems division came together in a joint venture with Fincantieri, out of which came Orizzonte Sistemi Navali, a naval engineering company dealing in the design and construction of high-tech navy ships.

Moving into microelectronics and privatisation

Finmeccanica’s entry into microelectronics was confirmed in 1999 through the merger with MEI (Microelettronica Italiana), the Italian company owned by the Ministry of Treasury and the IRI, which held (equally with a French public partner) 22% of ST Microelectronics, the world’s leading semiconductor company. The transaction was part of another recapitalisation project required to guarantee resources for the ambitious programme of European alliances which the Finmeccanica Group was carrying out. As a result of the merger with MEI, the public share in Finmeccanica rose to 83% (IRI to 54% and the Ministry of Treasury to 29%). Meanwhile the conditions were ripe for the privatization of Finmeccanica. The Andreatta (the then Italian Foreign Minister) - Van Miert (EU Competition Commissioner) agreement, that Italy had signed in 1993, committed the Italian government to cut the debt of public enterprises (including IRI) to "normal" levels, i.e. "acceptable to a private investor operating under a market economy" and to reduce its stake below 100 per cent in order to avoid the unlimited liability of the State for any new debt. This agreement marked the de facto establishment of a comprehensive privatization programme that IRI put in place in order to fulfil the commitments made by Italy, and that affected most of the sectors under public control (banks, food, iron and steel, telecommunications, motorways, airports, aerospace). In 2000, IRI then sold nearly all of its stake in Finmeccanica for a total value of over 5 billion euro, thereby reducing the public presence in Finmeccanica. The public stake in Finmeccanica thus decreased to about 34%.

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Marconi Electronic Systems was a division of GEC (General Electric Company) and had a hundred-year history behind it, being the direct heir to The Wireless Telegraph & Signal Company, founded in London in 1897 by the great Italian scientist Guglielmo Marconi. The company opened its first factory in Chelmsford, in Essex County, and in 1898 began the research and production of various transmission devices, later used for radio, television, radar and avionics. In 1900, the company changed its name to Marconi's Wireless Telegraph Company; it was acquired in 1946 by English Electric and changed its name to Marconi Company in 1963. Then began a period of strong expansion in communications, electronics, radars and components. The company opened several offices in the UK and acquired a number of companies abroad. In 1968, the Marconi Company was acquired by GEC (General Electric Company), becoming its defence division and specialising in the development and commercialization of radar and defence systems, systems for the navy, weapons, electro-optic materials, communications and aviation products and technologies. In 1987, it was renamed GEC-Marconi and continued to expand, with major acquisitions such as British companies Plessey (in 1987) and Ferranti Defence Systems (in 1990), dealing in radar systems, avionics, electronics and defence communications. In 1998, it was renamed Marconi Electronic Systems after spinning off activities not related to the defence sector. Marconi Electronic Systems later entered the AMS joint venture with Finmeccanica and a year later, in 1999, was acquired by British Aerospace, which took over the joint venture with Finmeccanica under the new name of BAE Systems. GEC retained the right to use the Marconi name after the sale of Marconi Electronic Systems, and became Marconi Corporation Plc, focusing its activities on telecommunications and information technology.

Westland Helicopters had important history too; it had started in Yeovil (Somerset, UK) in 1915 as a military aircraft manufacturer under the name of Westland Aircraft Works, producing warplanes for the Royal Naval Air Service, and soon becoming one of the most important companies in the sector. In the postwar period, despite difficult market conditions, it developed the Westland Wapiti, the aircraft used worldwide by the Royal Air Force, and the Westland Wallace, the first aircraft in the world to fly over Mount Everest. In World War II, during the Battle of Britain, Westland Aircraft became the maintenance centre of the Spitfires and the production centre of the Seafires, the naval variant for the Royal Navy. In 1947, Westland decided to specialize in the field of helicopters and became a Sikorsky licensee for the manufacture of the WS-51 Dragonfly. In 1948, the company ended production of fixed-wing aircraft, after over thirty years and more than 6,000 aircraft produced. In 1960, following a restructuring of the entire UK industry for the sector, Westland acquired a number of small manufacturers, including Bristol Helicopters, Fairey Aviation and Saunders-Roe, and became Westland Helicopters, the only British helicopter company. In 1965, for the first time, it crossed paths with Agusta; the two companies collaborated to produce 250 units of the Bell 47G Sioux helicopter for the British Army, under license of the Italian company. In 1980, Agusta and Westland joined forces again to produce the EH101, a new helicopter to replace the Royal Navy's Sea Kings. In 1994, GKN became the company's new sole shareholder, until 2001, when the joint venture with Finmeccanica came about.