Europe: Quo vadis Thales?

Business diplomacy: emblematic companies acting as ambassadors of their country (1))

Some companies hold the rank of extraordinary ambassador of their country in international markets. Even multinationals, in many cases they symbolize their country of origin or mother country, its scientific and technological progress, its economic power and its cultural identity and its creativity. In France, for example, large companies, most of which are part of the CAC40, are approached by foreign partners and international customers as carrying the French flag, such as the oil company Total, the company of Thalès defense electronics, Renault and Peugeot car manufacturers, and even the French-European aircraft manufacturer Airbus, etc. By this position, the responsibility of these companies and their leaders becomes a multiple responsibility, including a national responsibility in its twofold moral and political dimension. They can not jeopardize this aspect of their responsibilities or consider it as secondary, for what it impacts the moral image of France and its political credibility too.

Thales, more than an ambassador, a French jewel

Among these large French companies, which has a strong and direct historical presence in the Middle East markets and especially in the Gulf countries, the Thales company, heiress to Thomson-CSF (2000), is considered one of the most advanced companies. in the field of defense electronics. This company has an important contribution in consolidating France’s position as a partner of several Arab countries, including the Gulf countries, which have based their security and defense systems on its equipment, innovations and services. This was especially true in the 1980s and 1990s (several Gulf country programs including the al-Thaqeb program for Saudi air defense and essential equipment provided under Sawari programs to the Saudi Navy) when Arabia and the United Arab Emirates and other Middle Eastern countries were open to it to contribute as a supplier of defense and security systems under French programs to include the armies of the countries of the region and their security services. Its success continued with the strengthening of political relations between Paris and the Arab capitals, and as long as Thomson-CSF remained faithful to its mission of suppliers and subcontractors in the context of major programs led by a project manager.

Thales: the prime contractorship, a new strategy…

But things changed later and after her star shined more than two decades, when she successfully weathered the wave of huge defense and security programs then pursued by France’s partners, the position of the French company, which is nevertheless a leader in many niche markets, has begun to regress with the disorientation of its commercial strategies following its decision to assume the role of prime contractor for major projects that it was unable to control. nor even conceive originally, instead of remaining committed to its role that it managed to fulfill as subcontractors, she who is a leader in the manufacture of advanced equipment in various fields including radars, sonar etc. .

but leading to negative results

In Saudi Arabia, where Thales was one the most prominent suppliers of the Kingdom, the sum of all the failures is stunning.

  • MIKSA first. This is what happened with the MIKSA program for the benefit of the Saudi Ministry of the Interior and which was to be attributed to France by mutual agreement, before the French company failed to convince the Saudi partner of its engineering of program and its ability to manage it. This led to the loss by the French of the program of protection of the Saudi borders from which they finally only had a few crumbs.
  • Air Defence, then: instead of investing in a full-new air defence system to replace the Crotale and the Shahine, Thales chose to challenge a French project led by MBDA – associating Thales’C2 solutions – to modernize the medium and long-range Saudi air defense systems, practically marginalizing French offers by the Saudis who then chose to negotiate with the United States. for the Patriot and with Russia for a medium-range system. As a result, it discredited French offers in the eyes of Saudi clients and the Parisian networks that its leaders mobilized in France. After a 10-year war against MBDA, Thales lost, but all French solutions lost (except for the SANG, equipped with MBDA Mistral & VL MICA).
  • Naval domain: Thales failed to convince the Navy to keep its ageing Crotale and to to keep the Arabel 3D- band surveillance radar. This radar equipped the three frigates class F-3000 manufactured by DCNS/Naval Group. The Navy which realized that Thales did not invest in a new and cost-competitive radar, could choose the Kronos of Leonardo.

in the UAE: in the competition for 2 corvettes, Thales has been active in two rival teams; Thales Nederland partnered with Damen and Thales France, with Naval Group.  When the Navy decided to select Naval group (November 2017) but to keep the Tacticos of TNL, TNL increased the price and extended the delivery in  its offer to Naval Group, hoping that this will discredit the French offer…In vain, the Setis combat management system was pitched by the Navy exactly as did the malaysian Navy in a very similar case (2011).

In Qatar, Thales International imposed its network of agents in the naval competition agaisnt Ficantieri. This network did not understand the real requirement sof the end-user and was not able to counter the lobying campaign of the Italian side. As a result, Fincantieri clinched its biggest naval package (€3.2Bn, see our articles on this).

The Gulf customers’s expectations

 

In addition to its erroneous strategic choices, the management of Thales and its team in the region have accumulated commercial errors to such an extent that they have put their company more than once in a legal embarrassment that would threaten its interests and interests. interests of its French partners and through them the interests of France. This is what happened with one of its partners in Saudi Arabia Nabil Barakat who decided to bring a lawsuit against Thales before the US court which could embarrass him in the future and affect his moral image and the image of his mother country France.

More serious still, on the commercial level as well, would be its attempts sometimes to impose techniques and programs to the customers of France who are without real interests confirmed in their eyes or which are not priority according to the priorities of the Arab partners of France who do not understand, for example, Thales’s promotion of artificial intelligence programs that are complex for them, as well as other technologically advanced programs that they do not see as immediately useful …

They also do not accept the attempts by the French company to market to them programs and equipment that do not fully meet their operational needs. With the destabilization of its strategy, which has secured its previous successes, Thales’s position has weakened on the Arab and Gulf markets, and with it the interests of the French defense sector in these markets. Thus, the flaws in Thales’ strategies in these markets are one of the reasons that have shaken confidence in the French defense industries and one of the reasons that have affected the credibility of players in this sector. Those who are involved in cooperation programs with France, Abu Dhabi and Riyadh, which they perceive as laissez-faire on the part of the political authorities in the face of this reality, and their disinterest in the trend negative that take the relations of cooperation between Paris and its main Arab partners through the excesses of Thales in the management of some important joint projects, especially that the company gives the impression to favor in its activities in Saudi Arabia and UAE operations and rapid blows to the detriment of a lasting partnership.

The partners of Riyadh, Abu Dhabi and Cairo do not despair of seeing the French authorities take seriously the risks of losing shares in the Arab defense markets because of the disorientation of the strategies of a giant like Thales, and that they take the initiative quickly to put an end to the abuses that are seen on these markets by some officials of the French company, and this in defense of its interests and those of the French industrialists and the image of France and its relations with its partners.

 

(1) : this article is the English traduction of the article published by our partner in the Middle East, the renowned Middle East Strategic Perspectives (MESP). Please click on the link to read the original article: https://www.mesp.me/2019/04/17.

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