France - Military Industry

During the Cold War France took special pride in its national defense industry. Independent of NATO, France equipped its armed forces largely from indigenous capabilities, to include its prestigious nuclear force. In the process, the French defense industrial base developed several leaders in global defense technology. French aircraft, space systems, tactical guided missiles, electro-optics and naval systems are recognized everywhere as among the most technologically advance in the global market.

Leading traditional French defense industries include: Aerospatiale (missiles), Alcatel (space), Dassault Aviation (combat aircraft), Direction des Constructions Navales (DCN) (naval vessels), Eurocopter Group (helicopters), Hurel-Dubois (aircraft design, production, and maintenance), Lagardere (space, armored vehicles), SAGEM (control systems and optronics), Sextant Avionique (air and space avionics), Starsem (space), SNECMA (propulsion systems), and Thomson-CSF (defense electronics).

The Direction Generale de l’Armament (DGA) is responsible for all French armament programs. It controls all research, development, and production. It also does its own research and development for all military services and monitors the activities of both nationalized and private firms involved in the armament process.

In 1991 France had eight companies in the global top 100 defense industries as measured by annual defense revenue. Those eight companies had a combined defense revenue of about $13.8B (1991$US). By 1999 that number had dropped to seven but the combined revenue had increased to $14.5B (1999$US). Those seven companies are EADS, Thomson-CSF, DCN, Dassault Aviation, GIAT Industries, SNECMA, and SAGEM. Annual defense revenues for the largest French defense company in 1999 were $6B, compared with $4.8B in 1991. The largest French company (in terms of annual defense revenue) ranked 6th globally in 1999, compared with 11th globally in 1991. In 1999 France had two companies (the very newly formed transnational EADS and Thomson CSF) in the top 10 globally.

In 1995, confronted with both financial problems in the defense industrial base and the need to modernize the Armed Forces to meet the new French security concept, France appointed a Strategic Committee to review French defense and defense procurement policy. The general directions of the recommendations were to move France away from a near total indigenous armament strategy, and much more toward a mix of indigenous and external acquisition, in spite of the potential impact on domestic high technology employment. Continued French arms exports were viewed to be indispensable to the future health of the defense industrial base. The final goal of this comprehensive reform effort is to significantly reduce the costs of developing and procuring weaponry and other defense equipment.

France strongly supports the development of a European-wide defense industrial base, preferably with France as the leader. France views Germany and the UK as the best collaborative partners and has several cooperative programs underway with these countries. These include the VBCI light armored vehicle, the COBRA radar system, the Horizon frigate, the MU90 torpedo, the Tiger Helicopter, the NH 90 helicopter, and the ANF, Apache/Scalp, and MILAS missile programs.22 France also has been working with the UK on a new British requirement to acquire two new aircraft carriers. France views the main objective of cooperative programs to be the sharing of nonrecurrent costs and larger production runs. These objectives lead to the need to create transnational integrated European defense industries that decide on work share based on profitability.

France supports the development of a European armaments policy focused on synchronizing requirements, integrating the defense industrial bases, and creating an institutional mechanism for cooperation that at the same time respects the strategic interests of the European states. New European dependence on export markets is one of the main factors encouraging consolidation in order to improve European competitiveness against the “omnipresent Americans.” Within a new consolidated and restructured common European industrial base, France is trying maintain a leadership position in those sectors that feature their technological strengths.

The main organizational and decision making structure in the French acquisition process is the DGA (the Direction Generale de l’Armement), the national defense development and procurement agency, which was founded in 1961. This entity, which oversees all French armament programs and employs several tens of thousands of employees among its main technical directorates, is the link between French defense producers and the government and is a foundation for the French strategy to transform its defense industry. Reform of the DGA, moreover, is crucial to the most recent phase of the overall national defense modernization effort formally announced in early 1996. In 1997, in response to the Chirac defense modernization plan, the DGA underwent significant restructuring to achieve better operational efficiency. This included the adoption of industrial program management methods and the widespread adoption of commercial rather than MILSPEC standards.

Although France produced about 90 percent of its own armament requirements, the defense industry also exports to more than 25 countries. Arms exports have traditionally played a broad role in French foreign policy. They are one method that France has traditionally used to assert its defense and diplomatic independence. During the Cold War, French arms exports also were viewed as contributing to the reduction of the dependence of the recipients on armaments from either the United States or the Soviet Union. Finally, arms exports are viewed as means of sustaining the French defense industrial base so that it can provide an indigenous capability to meet the needs of the French armed forces. Within France, there traditionally has been a broad multi-party consensus favoring arms exports.

Because of this philosophy, in 1990 arms exports accounted for about one-third of France’s total armament transactions. This figure steadily declined for the next five years. Moreover, the rate of decline for arms exports exceeded the rate of decline in domestic arms sales during this same period of time. By 1995 arms exports represented about one quarter of France’s total arms transactions. In 1996, however, arms exports experienced a dramatic turnaround and rose by almost 50 percent, while domestic arms sales remained essentially the same. This trend continued in 1997 when arms exports increased approximately 30 percent and represented some 40 percent of France’s total arms transactions.

At the same time, differences in the military-technical requirements of the French Armed Forces compared to those of France’s export customers have raised doubts about the degree to which arms exports actually contribute to French independence. If long production runs are made of weaponry designed to meet French needs, then its appeal to potential customers is limited. On the other hand, if the technical production specifications are reduced to meet the needs of export customers, than the capabilities of the French Armed Forces suffer.

By 2007 the French defence industry had undergone major restructuring since the mid-1980s in response to an increasingly competitive international market. New players that have emerged include Israel, Russia and China, and these will probably be followed by countries like Brazil, India, Pakistan and other Asian powers. The restructuring of Giat Industries (now Nexter), begun in 2003, and of the defence electronics industry or, more recently, the transformation and development of French naval shipbuilder DCN (Direction des Constructions Navales) have all helped to consolidate the country’s industrial and technological base. Even so, the French and European defence industries remain fragmented. Problems have increased due to national concerns exclusive to individual States, and a tendency for some of them to turn to non-European suppliers.