PARIS (Reuters) – The fall of the French government has created political and economic uncertainty that can sap investor confidence, the head of partially state-owned Safran said on Thursday.
“Obviously it creates political and economic uncertainty, that’s clear. It’s a situation that investors – whether financial, economic or industrial – don’t like,” CEO Olivier Andries told reporters, adding that a possible rollover of the 2024 budget into next year could harm the defence sector.
Jet engine maker Safran, 11% owned by the French government, is one of the world’s largest aerospace suppliers and its activities include strategic sectors such as defence and space.
Andries was among the first high-profile French CEOs and the first leader of a privatised group to address the fallout of France’s growing political crisis.
The euro zone’s second-largest economy faces uncertainty over its 2025 budget after far-right and leftist lawmakers toppled Michel Barnier’s minority government on Wednesday.
If parliament has not passed a budget by Dec. 20, a caretaker administration could propose emergency legislation that would roll over spending limits from 2024, pending the installation of a new government and a new 2025 budget bill.
Andries noted that this was the most probable scenario.
“In defence, that will create pressure,” he told reporters during a briefing on the group’s latest financial targets.
“Beyond that, where the pressure will land and how the defence ministry will manage that, I can’t say,” he said, adding: “The pressure is already there; we are feeling it”.
FACTORY SHORTLIST
Political and economic stability are among factors in a long-awaited decision on where to place a new carbon brakes factory, with France, the United States and Canada shortlisted, Andries said, adding that stable energy prices would be most critical.
Safran announced plans in 2019 to open a new factory for energy-intensive carbon brake production in Lyon, France.
The idea fell victim to the pandemic in 2020 and in 2022, plans to take advantage of a rebound in air travel by renewing the project were postponed for another 18-24 months as European energy prices soared following Russia’s invasion of Ukraine.
Safran is now looking at other options in addition to France for the plant, with a decision due in the first half of 2025.
Andries said Safran would look at three main criteria: competitive energy prices, stable and clean supplies based on nuclear or hydraulic power and a 10-year visibility on prices.
“After that, there are other criteria of economic and political stability,” he said.
“The first option is obviously France,” he said. Others included Quebec, where hydroelectric power is among the most competitive, and Oregon where energy prices are regulated.
European manufacturing firms are bracing for possible U.S. tariffs announced by the incoming Trump administration.
Safran is among Boeing’s largest suppliers via a joint venture with GE Aerospace to produce engines.
The French company is also the latest European supplier to try to target the world’s largest defence and space market by setting up a secure proxy structure in the United States.
(Reporting by Tim Hepher; Editing by Sudip Kar-Gupta, Kirsten Donovan)
