Missile maker MBDA hits snags in effort to re-arm Europe
Manufacturer of Storm Shadow or Scalp missiles has increased production but inefficiencies hinder expansion efforts
Europe’s war effort for Ukraine has one of its front lines in the historic town of Bourges in central France, a hub for defence companies. Here, European missile champion MBDA has for the past three years invested heavily in new equipment and added hundreds of workers to accelerate output amid strong demand which has pushed orders to a record.
The efforts have put the group, which is best known for making the Storm Shadow/Scalp missile, on track to double production this year compared with 2023.
MBDA has faced intense pressure from the French military to deliver its long-range Aster missiles faster, but like other European defence contractors, it has struggled with the costs of expansion and strained supply chains. The pan-European arms group is also finding that inefficiencies which did not matter in peacetime are now a handicap.
MBDA’s order book has ballooned to €37bn that would take about seven years to meet at its current pace.
Chief executive Éric Béranger said the group had more to do to adapt to a wartime economy in which speed and volumes are crucial for the first time in decades.
“We need to be much more industrial, so to speak, in order to face [the] challenges” of boosting production, he told the Financial Times.
MBDA’s complex manufacturing process of its powerful Aster missile is a case in point. The unfinished weapon is shipped across the Alps between France and Italy several times for different phases of production, adding months for little industrial benefit.
Such problems would be “pretty easy to solve” if MBDA were a normal company, Béranger said. But they were much harder for a cross-border defence group that needed to balance the interests of its shareholders — Airbus and Britain’s BAE Systems each hold 37.5 per cent and Italy’s Leonardo 25 per cent — as well as those the militaries it serves.
However, a proposal floated last year by Béranger to simplify the manufacturing footprint was rejected by France, which saw the reorganisation as a threat to its leadership in the group and as disruptive to the effort to increase production, said two people familiar with the matter. Nor was the UK particularly supportive, said one of them, and both viewed the proposal as favouring Italy.
“I put the question on the table of whether we should consider evolving the organisation,” Béranger said, adding talks were ongoing. But it was to be expected that the topic was “very sensitive” for the countries involved given how MBDA provided weapons crucial to their sovereignty.
MBDA, conceived as a Franco-British collaboration in 1996, with Italy joining in 2001, still stands out as one of Europe’s few successful cross-border defence companies in a region that remains fragmented with mostly national players. It makes some of the world’s most sought-after missiles, and is competitive with US groups RTX and Lockheed Martin.
In this “moment of truth” for Europe, Béranger said MBDA could be a vehicle for additional joint weapons programmes. “In our DNA, we are a tool for co-operation,” he said.
But critics say MBDA has not done enough to adapt. Sash Tusa, defence analyst at Agency Partners, said the company had been structured for the decades past of weak demand, and is “failing the current situation”.
MBDA, he added, “needs to be proactively building up working capital, heavily funding its suppliers, and establishing second sources for key components such as rocket motors, so that it can raise production”.
Tusa also questioned whether MBDA’s shareholders were cramping its ability to invest by requiring regular dividend payments.
Béranger declined to comment on the dividends. “So far, we have been able to mobilise the investments that we thought were necessary,” he said.
MBDA is planning investments of €2.4bn from 2023 to 2028 to increase production, and Béranger said that amount could rise if needed.
In Bourges, much of the focus has been on increasing production of the Aster. Made up of 10,000 components from titanium wings to high-performance computer chips, the missile is among the most complex weapons that MBDA produces.
Some €50mn was spent last year to add 12 additional robotic machines to carry out various steps of manufacturing to 50. Another dozen will be installed next year. The workflow was overhauled to accommodate the equipment and staff. Weekend shifts expanded from three people to 13, while overall hours worked at the group are on track to double from 2020 to 2025.
On a recent visit, the robots on the hangar-like factory floor where the Aster is assembled sanded down metal components and fabricated carbon fibre storage cases able to contain any accidental explosions.
Speeding up production has required creative thinking. Instead of waiting a year or more for the robotic machines to be delivered, a production manager on the Aster last year flew to Germany and Japan and convinced their manufacturers to sign long-term leases of three showroom models. They were operational in Bourges only four months later.
MBDA has reduced production time of the Aster from more than three years in 2022 to just over two years, and aims to go further. Progress has been better on the smaller, simpler Mistral and Akeron missiles.
One person who works at the company admitted the Aster was conceived when no one thought mass quantities would be needed, so there was no downside to complexity. “The production was carved up like a puzzle to keep each country happy,” the person said. “It’s an exceptional product, with proven effectiveness on the battlefield, but industrially, it’s a nightmare.”
But some steps have been hard to speed up, such as making a critical component of the missile’s guidance system that includes a circuit board studded with chips. Cutting the number of round trips between France and Italy would also be difficult and risky while also increasing output. New production lines would have to be recertified and quality standards could degrade, according to officials.
Like some peers, MBDA has bet that vertical integration will help boost its output, last year acquiring Roxel, its supplier of solid rocket motors. It will now pump in more cash to expand the group — something the smaller company would have struggled to do on its own — while also preventing competitors from buying its rocket motors that have been in short supply.
Asked if MBDA should be acquiring more suppliers similar to Roxel, Béranger said he was open to it. “There is no dogma. What matters is that it is efficient,” he said.
