PARIS — Germany’s MAN Group is threatening to shut down its MAN Technologie subsidiary, a key manufacturer of Ariane 5 rocket components, unless it finds a buyer for the money-losing operation by mid-2004.
Despite staff reductions totaling more than 30 percent of its work force since 2002 and other cost-cutting measures, Augsburg-based MAN Technologie has been unable to counteract the effects on its business of the collapse in the commercial-launch market.
In a Nov. 12 announcement of its financial results and a conference call, MAN officials said they no longer believe the space business offers enough growth to justify continued investment.
Ulf Steinborn, director of investor relations at the Munich-based MAN Group, said Nov. 14 that the company sees no way for its Technologie division to become a leader in its markets, even if an expected large order for Ariane 5 rockets arrives.
"We have clearly stated we will sell or close the division in the first half of 2004," Steinborn said. "We hope to negotiate a sale to EADS, but until recently there have been no real negotiations with EADS. Of course we would prefer to sell it, but we cannot continue to make our shareholders liable for the losses."
EADS Space, the space division of European Aeronautic, Space and Defense Co., is prime contractor for Ariane 5. "It seems to us that, as prime contractor, EADS is the most logical buyer," Steinborn said.
EADS officials have said in recent months that they do not want to enter further into the Ariane supply chain. EADS spokesman Rainer Ohler said Nov. 14 that this position has not changed.
"Activities like what MAN Technologie does is supplier work that is crucial to the future competitiveness of the industry," Ohler said. "But it should remain supplier work. EADS is not interested in the activities of MAN Technologie, although we will certainly help them in finding another supplier that might take part of the division."
MAN Technologie makes Ariane 5 strap-on booster casings and the front skirt for the rocket’s upper stage. Its role in Ariane 5 generates substantially less revenue than its previous work on the smaller Ariane 4 rocket, which has been retired. The company’s MAN Spatial Guyane S.A.S. subsidiary maintains the Guiana Space Center spaceport launch facility, a business that has fallen off in tandem with the reduction in Ariane launches.
MAN, which is a 7.5 percent shareholder in the Arianespace launch consortium of Evry, France, in 2002 wrote off its equity stake in Arianespace of 15 million euros ($17.27 million). Its space-related sales in 2002 dropped 32 percent, to 120.1 million euros, and its backlog dropped 37 percent. Employment followed suit, declining from 1,023 people in late 2001 to slightly fewer than 900 at the end of 2002.
But in early 2003 MAN officials continued to hope for a rebound in the commercial-launch market. In its 2002 annual report to shareholders, it said a "full recovery — defined as 25 to 30 launches per year — is forecast for 2005."
Industry officials now estimate that a commercial-launch market even half that size will be difficult to reach in the next few years.
MAN and other Ariane contractors have been expecting a 30-rocket order from Arianespace through EADS Space. But despite signing a 3-billion-euro letter of intent for the contract in June, the two companies have not yet finalized a contract.
The contract has been delayed in part because of the December 2002 failure of the inaugural version of a more-powerful variant of the Ariane 5.
"We cannot continue to take losses while EADS and Arianespace negotiate," Steinborn said. "Our people have no work." He said that the signing of the contract, and the expected work to flow to MAN Technologie, would not change MAN Group’s determination to leave the business by mid-2004.
"We have said that our business divisions should have leading market positions, which means in the top three of their industries," Steinborn said. "We think that cannot be the case here, and so we need to look at other solutions."
Steinborn said selling MAN Technologie in pieces — the company also has an aircraft-parts manufacturing business — is a possibility, but that MAN Group would not be retaining ownership of any of the component parts.
In addition, Steinborn said, MAN would not be participating in the planned 2004 recapitalization of Arianespace.
EADS Chief Financial Officer Hans Peter Ring said Nov. 6 in a conference call with financial analysts that EADS, which owns 27 percent of Arianespace, would be seeking to purchase a majority stake in 2004 after the recapitalization.
MAN Technologie’s fortunes were also hit hard by the cancellation of the X-38 experimental crew-rescue vehicle for the international space station in which Europe, and particularly Germany, had invested alongside the United States.
