Overseas buyers for two more Aussie aerospace manufacturers
Two of Australia’s leading aerospace companies will become part of the US $6.3 billion Mumbai-based multinational corporation Mahindra & Mahindra Ltd.
The company announced on December 15 its simultaneous acquisition of 75.1% stakes in general aviation aircraft manufacturer Gippsland Aeronautics, and parts supplier Aerostaff Australia through its wholly-owned Mahindra Aerospace Pvt. Ltd. and jointly with Kotak Private Equity.
Based at Latrobe Valley Airport, Gippsland Aeronautics was formed in 1984 by George Morgan and Peter Furlong, initially building agricultural aircraft, and currently has IP/type certificate approvals for four aircraft. GA is an established brand in general aviation and has delivered more than 200 FAR 23 certified aircraft in 32 countries. The acquisition signals Mahindra’s entry into a wide cross section of the general aviation market, with current products including its two-seat GA200 agricultural aircraft, several variants of its GA8 passenger and utility Airvan, and the twin-turboprop Nomad aircraft, the type certificate of which GA recently acquired from Boeing. The strategy is to create a family of aircraft between two and 20 seat capacity by progressively consolidating programs already in place.
As Australia’s only manufacturer of aeroplanes for commercial use, GA now expects the move to propel it into global player status as well as providing training and employment opportunities for budding aerospace engineers and technicians.
Aerostaff Australia (AA), formed in 1990 and based in Melbourne, is a component manufacturer of high-precision close-tolerance aircraft components and assemblies for large aerospace OEMs including Boeing and Lockheed Martin. AA’s acquisition will help catapult M&M into the burgeoning defence offset and commercial aviation market. It currently exports to North America and Europe, offering total turnkey solutions for OEMs’ manufacturing needs.
The two acquisitions have been made with a total commitment of about INR 1.75bn (US$37.4 million) and the remaining 24.9% stake in both companies will be eventually converted into stocks in Mahindra Aerospace, Arvind Mehra, senior vice president of strategy at Mahindra Systech, told reporters.
The move signals Mahindra’s strategic entry into the global aerospace components and general aviation markets, continuing the aerospace commitment the group made in 2006 with the acquisition of Engineering Design Company, Plexion Technologies.
George Morgan, joint founding director of GA, says: “We’re required as part of the investment package to develop the whole family of aircraft which is currently:
- A Lycoming powered electronically controlled and turbocharged Airvan adapted for MOGAS automobile fuel;
- An upgrade to a three-bladed propeller non-turbocharged Airvan which is currently approaching certification;
- A stretched 10-seat single Rolls-Royce turboprop version;
- A later twin-turboprop Airvan version;
- A turbocharged floatplane Airvan for which US manufacturer Wipline has already started developing floats;
- A program to update the current design and factory requirements for the Nomad N24 and returning it to production with the latest upgraded versions of its engines and propellers.
“The package also includes a serious marketing plan which has been developed cooperatively with Mahindra in the lead-up to the deal.”
Hemant Luthra, President of Systech Sector and Member of the Group Management Board, Mahindra & Mahindra, told reporters that following the deal GA will produce aircraft with two to 20 seats, selling 25-30 aircraft a year, with the aim of having 475 aircraft flying in five years and expected revenue of INR6.50 bn over that period.
Formerly Thales executive Terry Miles has been appointed as GA’s new CEO.
Mahindra will retain the existing managements of both GA and AA, securing the services of the corporate founders who developed their technologies. These include George Morgan and Peter Furlong at GA, and Stephen Roebuck at Aerostaff. A plant is being set up in Bangalore to complement the acquisitions and provide dual shoring cost benefits to customers.
GA’s product portfolio also complements the NM5, which is being jointly developed by Mahindra with India’s National Aeronautics Laboratory (NAL) as a multi-role general aviation aircraft, with its maiden flight scheduled for 2010.
Mr. Anand Mahindra, Vice Chairman and Managing Director, Mahindra Group, said, “M&M’s move into the Aerospace segment is deliberate, bold and timely, and is supported by a renewed demand for economical air transportation around the world. Our investment in component capability addresses the growing needs of both the civil and defence markets.”
Hemant Luthra, President, Systech Sector and Member of the Group Management Board, Mahindra & Mahindra, added, “I am delighted that the M&M Board has endorsed our strategy to extend our Art to Part strategy from Systech to a promising new vertical.”
Stephen Roebuck, Managing Director, AA, and George Morgan, Founding Director, GA, both assert their organisations will benefit enormously as a result of their association with Mahindra, given its strong global brand, impeccable standards of corporate governance and its ability and willingness to expand both component facilities and the GA product line-up.
Both Mr Roebuck and GA CEO Terry Miles are confident their former businesses will continue to have a strong future in Australia.
Both however say that the acquisition had been inevitable, given Australia’s current industry-negative regulatory environment and lack of government support to establish the level playing field demanded by global competition.
“From my perspective [the situation] is actually due to our government’s lack of strong policy. We would have withered on the vine if this deal hadn’t come along. But now it’s here I’ve been inundated with quotation packages from big companies in America and Europe that want to put work in India.”
Roebuck says the India/Australia relationship is a winning formula for growth and future success: “Initially single parts will be manufactured in India then assembled in Australia, providing a world class product at best market prices. Everyone the world over is looking for best value, Australian companies need to move into niche and highly technical areas to ensure survival or find a partner in a low cost country. As they say if you can’t beat them, join them!”
GA has noted similar market responses, says Miles: “We welcome support from the Australian government to assist in every way possible to help deliver world class aircraft and now that GA has a stronger brand in Mahindra, we have already seen the increase in enquiries in the last two days.
“Mahindra is a leader in such diverse businesses as automobiles, engines, information technology, holidays, rural finance, engineering and stamping and steel too. They’ve now ventured into aerospace, and they’ve made two very good acquisitions for different reasons. Over time they’ve created a footprint which is much bigger than India, and I think they’ll do the same thing in aerospace. They want a global footprint, and that suggests it’s going to create jobs in Australia”
Mahindra began its journey assembling the Willys Jeep in India. The group now employs over 100,000 and enjoys a leadership position in utility vehicles, tractors and information technology, with a significant and growing presence in financial services, tourism, infrastructure development, trade and logistics.
Image Below: Red Baron Adventure Flights (Bankstown, Sydney) – Airvan Adventures
“A plant is being set up in Bangalore to complement the acquisitions and provide dual shoring cost benefits to customers.”
But moving the entire operation to Bangalore would make them even more competitive. This is the likely future of Gipps Aero. This is probably a bit embarrassing for the Rudd Government, coming as it does only days after GA was mentioned in the White Paper as an example of how the Government is supporting aviation manufacture in Australia.
It will be sad to see Airvans and Nomads with “Made in India” stamped on the side.
Maurice Waugh
Absolutely right, Maurice. Not looking forward to seeing that stamp on the side of Airvans and Nomads at all. An opportunity for Australian investors has now gone and Boeing’s comments about keeping the Nomad in Australia seem frivolous.
With the right marketing, I’m fairly certain that the amount of capital required could have been raised locally. There are some astute investors out there that would have seen the potential in GA as a company, and the product line up, but now…
As a nation we seem hell bent on selling our great ideas overseas.