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Saturday, September 1, 2007

Editor’s Note: Building The Brand

Bill Carey

Brad Foreman, the former Marine Corps pilot who heads Thales Aerospace Activities in the United States, sees the Thales logo displayed when he passes through Charles de Gaulle airport in Paris, and he’d like a similar welcome in the United States.

Thales, the progeny of Thomson-CSF and Sextant Avionique, is a relatively recent phenomenon, dating to 2000. Fact is, the Thales name just doesn’t have the same ring as, say, Honeywell or Rockwell Collins in this country. But the partially French state-owned electronics concern is making a determined push to elevate its presence in the United States and to build the Thales brand in American minds. Recently, Thales paid to have several aviation and business reporters, including this writer, visit its product support facility near Seattle and in-flight entertainment (IFE) headquarters in Irvine, Calif., where the vision is rapidly taking shape.

Brand building is a means to an end, one in which a company is associated with a handful of go-to names for a given product or service, thus ensuring continued growth and profitability. In the U.S., as it happens, Thales’s progress toward that end is out front of the widespread recognition of its brand. The company at this writing employed 3,000 people in 15 locations, primarily in Seattle, Irvine and Edison, N.J. Last year, it registered $1.1 billion in sales, about 10 percent of the Thales Group total.

After growing quickly and then divesting $450 million in non-core businesses, Thales in the United States has experienced 5 percent compound annual growth in the past couple years; with added capabilities and further acquisitions, it projects 15 percent growth or better by 2010.

"No question about it, our posture in the United States is evolving. We’re being completely transparent in describing our optimism," said Allan Cameron, chairman and CEO of Thales North America. "...We view 5 percent growth as the absolute bare minimum. I view it as nothing to write home about," he added.

Thales also is transparent in identifying the customers — Boeing, General Dynamics (in the naval arena), the U.S. Marine Corps and the U.S. Special Operations Command — it sees as offering the best business potential for its technology. The company already has made inroads in U.S. military aviation, supplying the avionics suite of the Bell LUH-72A Lakota light utility helicopter ordered by the Army, the TopOwl helmet-mounted display evaluated by the Marine Corps for Cobra and Huey helicopters, and a drogue parachute video system mounted in the C-17 cargo bay.

Now, Cameron believes the stars are aligned for Thales to win a healthier share of the $440 billion the United States spends annually on defense, and the $140 billion invested on research and development across multiple agencies. While protectionist barriers may have eased on the one hand, Thales has replaced its "passport approach" of flying back and forth to meet U.S. customers with a "boots on the ground" strategy of locating people and infrastructure on terra firma America. It has formed joint ventures with Raytheon focused on air defense and with DRS Technologies focused on sonar. Thales ranked 46th on the Department of Defense’s roster of suppliers, but "we don’t intend to remain at Number 46," Cameron said.

In the commercial niche of IFE, Thales was in second place and closing on Panasonic for the lead. Its growth in IFE since parent Sextant Avionique acquired the in-flight entertainment business of B/E Aerospace in 1999 is remarkable. Thales introduced its TopSeries IFE line four years ago. It claims to have captured 41 percent of the market, by aircraft quantity, of all IFE competitions since 2004. Competing against Panasonic’s eX2 system, the TopSeries i5000 had been selected by 75 percent of carriers that had ordered IFE for their Boeing 787 Dreamliners. Thales will provide $3 million to $4 million of content on each TopSeries-equipped 787, most of it attributable to IFE; it expects to earn $500 million a year on Dreamliner IFE by 2010.

In terms of the installed base of IFE systems, the company still has some ground to gain, with only about 20 percent of systems of Thales provenance. But "from a business perspective, yesterday is yesterday," said Alan Pellegrini, Thales vice president and general manager of IFE. "What matters is what you are winning today."

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