buglerbilly
02-06-10, 04:08 AM
By Pierre Tran
Published: 1 Jun 2010 13:18
Paris - Defense companies are owed an estimated 1.8 billion euros ($2.2 billion) in late payments following the French government's move to a new accounting system, causing serious strain on cash flow, Christian Mons, the president of the GICAT land systems association, said June 1.
The amount owed to the defense sector was estimated at 1.8 billion euros as at May 1, Mons said. (AFP)
The switch at the end of 2009 to the Chorus accounting and payment system from SAP has led to unpaid bills piling up, provoking a "situation of extreme gravity," Mons told a press conference on the 2009 accounts of the Groupement des Industries Françaises de Défense Terrestre.
Smaller companies face collapse and the responsibility lies with the government, he said.
The GICAT trade body has proposed that the government settle unpaid bills with a single check covering 80 percent of the amount owed to companies, instead of dealing with each invoice individually. That individual handling is too slow as the late payment "weighed on companies' cash positions," he said.
The suggestion of a single-check payment is being studied by the government departments but no decision has been made, he said.
Firms are being forced to borrow from banks to keep themselves afloat, which is costly and is an indirect way of financing the government.
The amount owed to the defense sector was estimated at 1.8 billion euros as at May 1, Mons said. That is the sum agreed upon by the Conseil des industries de Defense Française, the body which groups GICAT, GICAN and GIFAS, the three trade associations for land, sea and aerospace sectors, but other estimates "heard in the corridors" run as high as 5 billion euros, he said.
The large defense groups, which act as prime contractors, are coping with the cash flow squeeze by delaying payments to their suppliers, the small and medium sized enterprises (SMEs), he said.
The spokesman for the Ministry of Defense, Laurent Teisseire, said there had been a buildup of unpaid bills between January and April and the government has hired temporary staff to process payments so all the invoices are cleared up by the end of the summer.
The 1.8 billion euros covered the whole of the defense industry, Teisseire confirmed. The ministry is looking into the feasibility of the single payment, but no decision has been made, Teisseire said.
Measures have been adopted to speed up payment to small and medium companies and the two units dedicated to working with SMEs at the Direction Générale pour l'Armement (DGA) procurement office and the Ministry of Defense have been instructed to help urgent cases, Teisseire said.
A DGA spokesman said, "We are giving priority to SMEs in difficulty." Some 55 percent of the delayed bills were paid a couple of weeks ago, he said.
Another concern for GICAT was the 50 million euros allotted to research and technology in the land sector, compared with the overall 700 million annual R&T defense budget spent on the three defense domains of land, sea and air, Mons said. That figure failed to reflect the effort of the French Army, which makes up 80 percent of the French forces deployed in Afghanistan, he said. The current figure represented a halving of the annual 100 million previously earmarked for land systems, he said. "This is dangerous for the future," he said.
Capitals from London, Washington, Ottawa and Sydney had shown a "recentering" on land armies reflecting the operations in Iraq and Afghanistan.
Overall, sales of GICAT member companies rose 10 percent last year to 5.26 billion euros covering the land and air-land sector, which includes helicopters, drones and missiles. Of the total amount, 2.11 billion euros was made through exports, with Thales (1.47 billion euros), Nexter (887 million) and Eurocopter (527 million) leading the foreign sales.
New orders last year totaled 5.48 billion euros compared with 1.58 billion euros in 2008. The sector employs about 20,000 directly and a similar number indirectly.
Of the 3.15 billion euros in domestic sales, the reflation package accounted for around 700 million-800 million euros, Mons said.
Services, which included sales of spares, maintenance and technical assistance, showed a sharp increase to about 13 percent of the total amount from 3 percent previously.
Looking ahead, however, there were concerns for the next five years as budgetary constraints were likely to hit defense.
The Scorpion modernization program would probably go ahead, but financing would likely be delayed. The 2,300 Véhicule Blindé Multi-Role vehicles intended to replace the VAB troop carrier from 2015 should "in principle" go ahead but the deliveries could be spread out as funding is scarce. There are fears land programs in the 2011-13 period could be hit if cost cuts were made.
As part of GICAT's strategy, the association is opening up to members in the security field. The trade body is making efforts to help the SME sector, including a 10 percent reduction on exhibitor fees for the Eurosatory exhibition opening June 14, and organizing open days with prime contractors including Thales and Renault Trucks Defense, and fostering exchanges between SMEs.
The association also helps SMEs to book space in French pavilions in foreign exhibitions including MSPO in Poland and AUSA in the United States later this year.
Published: 1 Jun 2010 13:18
Paris - Defense companies are owed an estimated 1.8 billion euros ($2.2 billion) in late payments following the French government's move to a new accounting system, causing serious strain on cash flow, Christian Mons, the president of the GICAT land systems association, said June 1.
The amount owed to the defense sector was estimated at 1.8 billion euros as at May 1, Mons said. (AFP)
The switch at the end of 2009 to the Chorus accounting and payment system from SAP has led to unpaid bills piling up, provoking a "situation of extreme gravity," Mons told a press conference on the 2009 accounts of the Groupement des Industries Françaises de Défense Terrestre.
Smaller companies face collapse and the responsibility lies with the government, he said.
The GICAT trade body has proposed that the government settle unpaid bills with a single check covering 80 percent of the amount owed to companies, instead of dealing with each invoice individually. That individual handling is too slow as the late payment "weighed on companies' cash positions," he said.
The suggestion of a single-check payment is being studied by the government departments but no decision has been made, he said.
Firms are being forced to borrow from banks to keep themselves afloat, which is costly and is an indirect way of financing the government.
The amount owed to the defense sector was estimated at 1.8 billion euros as at May 1, Mons said. That is the sum agreed upon by the Conseil des industries de Defense Française, the body which groups GICAT, GICAN and GIFAS, the three trade associations for land, sea and aerospace sectors, but other estimates "heard in the corridors" run as high as 5 billion euros, he said.
The large defense groups, which act as prime contractors, are coping with the cash flow squeeze by delaying payments to their suppliers, the small and medium sized enterprises (SMEs), he said.
The spokesman for the Ministry of Defense, Laurent Teisseire, said there had been a buildup of unpaid bills between January and April and the government has hired temporary staff to process payments so all the invoices are cleared up by the end of the summer.
The 1.8 billion euros covered the whole of the defense industry, Teisseire confirmed. The ministry is looking into the feasibility of the single payment, but no decision has been made, Teisseire said.
Measures have been adopted to speed up payment to small and medium companies and the two units dedicated to working with SMEs at the Direction Générale pour l'Armement (DGA) procurement office and the Ministry of Defense have been instructed to help urgent cases, Teisseire said.
A DGA spokesman said, "We are giving priority to SMEs in difficulty." Some 55 percent of the delayed bills were paid a couple of weeks ago, he said.
Another concern for GICAT was the 50 million euros allotted to research and technology in the land sector, compared with the overall 700 million annual R&T defense budget spent on the three defense domains of land, sea and air, Mons said. That figure failed to reflect the effort of the French Army, which makes up 80 percent of the French forces deployed in Afghanistan, he said. The current figure represented a halving of the annual 100 million previously earmarked for land systems, he said. "This is dangerous for the future," he said.
Capitals from London, Washington, Ottawa and Sydney had shown a "recentering" on land armies reflecting the operations in Iraq and Afghanistan.
Overall, sales of GICAT member companies rose 10 percent last year to 5.26 billion euros covering the land and air-land sector, which includes helicopters, drones and missiles. Of the total amount, 2.11 billion euros was made through exports, with Thales (1.47 billion euros), Nexter (887 million) and Eurocopter (527 million) leading the foreign sales.
New orders last year totaled 5.48 billion euros compared with 1.58 billion euros in 2008. The sector employs about 20,000 directly and a similar number indirectly.
Of the 3.15 billion euros in domestic sales, the reflation package accounted for around 700 million-800 million euros, Mons said.
Services, which included sales of spares, maintenance and technical assistance, showed a sharp increase to about 13 percent of the total amount from 3 percent previously.
Looking ahead, however, there were concerns for the next five years as budgetary constraints were likely to hit defense.
The Scorpion modernization program would probably go ahead, but financing would likely be delayed. The 2,300 Véhicule Blindé Multi-Role vehicles intended to replace the VAB troop carrier from 2015 should "in principle" go ahead but the deliveries could be spread out as funding is scarce. There are fears land programs in the 2011-13 period could be hit if cost cuts were made.
As part of GICAT's strategy, the association is opening up to members in the security field. The trade body is making efforts to help the SME sector, including a 10 percent reduction on exhibitor fees for the Eurosatory exhibition opening June 14, and organizing open days with prime contractors including Thales and Renault Trucks Defense, and fostering exchanges between SMEs.
The association also helps SMEs to book space in French pavilions in foreign exhibitions including MSPO in Poland and AUSA in the United States later this year.