AKE SVENSSON - Defense News
Swedish defense giant Saab is awaiting key decisions by officials far from Stockholm: Will Brazil and/or India order its Gripen fighter aircraft?
In general, the company is gradually moving away from its reliance on the Swedish market and expanding its international business. Saab is increasingly active in areas such as UAVs, where it is developing sense-and-avoid technology, and underwater maritime systems, in which the European Defence Agency (EDA) has expressed an interest.
Ake Svensson, who began his career at Saab in missile development in 1976, has led the company since 2003. He will step down Sept. 1 to become president of the Association of Swedish Engineering Industries.
Q. How do you see Saab's export prospects in the next year or two, given that many European countries are in such deep financial trouble?
A. Saab has gradually increased its international export business, with around 5 percent annual growth every year for the last 10 years. Meanwhile, it has been reducing the amount of business it does in Sweden. Currently, about two-thirds of its business is made up of exports, and about a third is done in Sweden. The company's biggest markets are in Europe, South Africa, Australia, the U.S. and in the Middle East.
If we're talking about the fighter aircraft market, then even if the financial situation is unfavorable in buyer countries, there are solutions. If a buying country is buying with the Swedish government, there are arrangements where that country can pay over a longer period. So it is possible even for countries in a poor financial situation to take part in programs.
For smaller acquisitions, such as camouflage or training systems, the financial crisis has not had so much of an impact. We're seeing delays in major programs as countries postpone the bigger acquisitions, while the small and medium-sized procurements are continuing. In Saab's year-end report for 2009, we had fewer orders than usual because of the lack of major orders due to countries postponing these sorts of decisions.
Q. Is there a danger that Saab will be knocked out of the fighter market - both the aircraft and equipment in the aircraft - if it doesn't win contracts for its Gripen from Brazil and India?
A. No, not knocked out. The Swedish Air Force and government made it very clear last year that they see the Gripen as a core component of the long-term future of the Swedish defense forces. The defense minister has said that the defense forces are looking to use it for the next 30 years.
The defense forces also need continuous upgrades. There are also customers in South Africa, the Czech Republic and Thailand who are looking to upgrade their fighters. We already have a customer base, whether we win the Brazil contract or not.
Q. The Swedish government seems to be shifting from its traditional policy of buying domestically to one in which it will buy from foreign companies. What does that mean for Saab in terms of its areas of focus for the future?
A. I expect to see more competition in Sweden. That coincides with Saab competing more on the international market. Sweden will be looking to buy more off-the-shelf or almost-off-the-shelf equipment.
Here, we have a strong product portfolio competing inside and outside Sweden. The Swedish government realizes that by moving to off-the-shelf solutions, then some systems will need further development.
Sweden has said that it will take part in international programs such as Neuron. For Neuron, Saab is the second biggest company in the consortium behind Dassault [the French aircraft manufacturer]. We're developing a UAV almost the size of the Gripen to fly autonomously, at high speed and far away. We're producing a demonstrator UAV that will be ready to fly in around two to three years. The technology being developed for this can then be used for manned and unmanned aerial vehicles.
Q. What are the main features of Saab's more streamlined business portfolio that you have announced? Which areas are you focusing on to make profits?
A. The focus is on five main business areas: aeronautics, including the fighter business; dynamics, with the emphasis on shoulder-launched types of weapons, lightweight missiles, underwater systems and camouflage systems; high-performance electronic defense systems (e.g., radar and countermeasures); integrated security and defense systems for command-and-control and for civil security; and support and services.
There is also a new relationship growing between the customer and industry. In the past, armed forces might have just wanted a radio, but now, they want an operating radio network. They may have wanted very specific equipment and maintenance services. Now, they want capabilities.
For example: Afghanistan. In Afghanistan, Saab has sent its people to put in place the power supply and communications links for a camp. This has, with time, evolved into an infrastructure support capability that we can also apply in other areas as well, such as in civil security.
PPP [public-private partnership] business is also a big potential growth area for Saab. In a first step on this road, we have taken over responsibility for the SK 60 trainer system in Sweden, and we see more of this type of business on the horizon.
We are also looking out for partnerships or divestments for some parts of the business, but I can't say which areas for now.
Q. What future do you see for your niche missiles business? Would you consider merging your missiles division with the missiles division of another company?
A. One shouldn't rule anything out, but we're not losing sleep over that. We have a very strong portfolio in that field and lots of orders. Saab has a strong position on the lightweight missiles side. There is no immediate move to find a partner.
Q. Do you anticipate making any changes to the company's shareholding structure? Is the fact that Britain's BAE Systems owns 20 percent of Saab good for the company?
A. It is good that BAE Systems has two board members, as they are active in the board and have a lot of knowledge about the industry.
Change to the shareholding is a question for the shareholders.
As for when Saab is in competition with BAE products, the BAE members of the board leave the board meeting when such a situation arises.
Q. Do you see potential gains for Saab if Nordic military, political and industrial cooperation moves ahead? If so, in which sectors?
A. There should be an opportunity for the defense forces and industries of Nordic countries to work closer together, as we share the same geography and culture. It would have been helpful if Norway had chosen the Gripen last year, but they chose the Joint Strike Fighter. But there is potential in the Nordic region.
In terms of cooperation, there are a number of projects where a Swedish system has been sold to Finland. There is also a small Saab operation in Finland. There is potential in all the areas in which Saab is working, but it depends on the Swedish defense forces wanting to cooperate.
Q. The European Union recently agreed to look further into maritime surveillance. Can Saab provide solutions?
A. Saab has a lot of airborne sensors, airborne early warning systems, maritime patrol installations, ship-based transponders for the location of ships, and underwater technology with sensor applications for close-to-shore, harbor and out-at-sea protection. We can integrate sensors into command-and-control systems so that operators can get a full picture of the situation. We've produced a demonstrator which is a joint management tool to keep track of ships in the Baltic Sea.
We have developed the medium-sized tactical helicopter UAV system Skeldar, which is now in the final stages of customer adaptations and qualification. The systems are very easy to operate, and the helicopters can be flown from a PC-based ground control station. The operator clicks on a map and can direct the helicopter to fly to or look at a particular position.
We have received a lot of interest for the Skeldar system, and we hope that there will be sufficient customer interest to give us the opportunity to further develop its capabilities for military use as well as for coastal and harbor protection.
Q. The EDA is launching a new 60 million euro joint investment program in unmanned underwater systems, which may include new sensors and maritime mine detection capacities. Is Saab working on new products in this area?
A. Yes, we have some underwater systems. We have developed specific technology for shallow waters and low salinity. We have torpedo and sensor systems already in operation. We also acquired a U.K. company called Seaeye a couple of years ago, which has produced similar underwater vehicles for oil platforms. The combination of Saab and Seaeye offers good potential to work in an EU program.
Q. Is the UAV market a big focus for Saab? Where can Saab add value here?
A. Even if rather rudimentary, current UAVs are effective in operations, but they can only fly in restricted airspace and not civil airspace alongside military and civilian aircraft. We're developing sense-and-avoid technology for that. Part of the key to getting the market up and running is for UAVs to be able to fly in unrestricted airspace.
By Julian Hale in Brussels.
* 2009 sales: 24.6 billion Swedish kronor ($3.4 billion)
* Net profit: 699 million Swedish kronor
* Employees: About 13,000
* Order bookings for 2009: 18.4 billion Swedish kronor
* Order backlog at end of 2009: 39.4 billion Swedish kronor
* Major defense products: Gripen fighter jet and weapon systems
Source: Defense News research