thalesdecembre2009executivebriefing-091214085004-phpapp02

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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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