BERN --- At its meeting on 15 March 2019, the Federal Council approved unbundling procedures for the sections of RUAG that perform services for the armed forces. At the same time, it decided that RUAG International should be developed into an aerospace technology group and fully privatised in the medium term. The Federal Council takes the view that this approach will best meet the armed forces' needs and take account of the Confederation's ownership interests and Switzerland's position as a location for work and technology.
In the past 20 years, RUAG has developed from an armaments enterprise into an international technology group. Nowadays, fulfilling its statutory role to provide equipment to the armed forces constitutes only part of the enterprise's activities. Therefore, the Federal Council decided last year to separate the sections that perform services for the armed forces from the other business areas, and last Friday has given this fundamental decision a more tangible form.
On 1 January 2020, RUAG Holding AG will become a new holding company with two subsidiaries: MRO Switzerland, which will be responsible for providing services to the Swiss Armed Forces (approx. 2,500 employees, manufacturing sites in Switzerland), and RUAG International, which will perform for the other areas of business (approx. 6,500 employees, two thirds of whom are based abroad). These subsidiaries will be managed separately, be legally and financially independent, and will operate separate IT systems.
MRO Switzerland's IT system will be integrated into the DDPS security perimeter, which will further strengthen IT security in the aftermath of the 2016 cyberattack. In order for the RUAG Holding AG and MRO Switzerland to continue to act in the interests of the owner, a majority of the board members of both companies will be independent directors approved by the Federal Council.
MRO Switzerland as the centre of excellence for armed forces equipment and material
MRO Switzerland will provide all security related services for the DDPS that RUAG has provided to date, which mainly involve maintenance, repair and overhaul (MRO), and maintaining operational systems such as combat jets. In doing so, the Federal Council is confirming that MRO Switzerland fulfils the role of the Swiss Armed Forces' material centre of excellence, and at the same time strengthening the transparent and cost-efficient provision of services to the DDPS, and thus meeting the demands of the Swiss Federal Audit Office and the parliamentary commissions. To a limited extent, MRO CH will also be able to carry out third-party orders but only from Switzerland and if synergies with business for the armed forces, for example in helicopter maintenance, can be created.
Strategy for RUAG International: Focusing on aerospace as a privatised enterprise
For all other internationally oriented business areas, the Federal Council has examined the further development options RUAG has devised and supports setting-up an aerospace group as suggested by the RUAG board. In the medium term, this will comprise the aerostructures and space divisions. The focus lies on developing the expertise RUAG has built up in these business fields in recent years, and in retaining the technical knowhow in Switzerland; this also applies in relation to Switzerland's space policy. RUAG will submit an implementation plan to the DDPS and the Federal Finance Administration by the end of this year.
The Confederation cannot hold a stake in a technology group of this type in the long term, as there is no legal basis and the Federal Council does not see a public interest. Therefore, the Federal Council intends to fully privatise RUAG International in the medium term.
Gradually proceeding to full privatisation
RUAG has submitted several options for privatisation. The Federal Council will decide on what approach to take at a later point in time. Plans are to proceed gradually and in coordination with the development of the aerospace group. To begin with, RUAG International will continue to manage the business sections that are incompatible with the new orientation of an aerospace group, and that cannot be integrated in MRO Switzerland due to their networking with other countries. Partners will be sought that offer better prospects for these sections, which include Cyber, MRO International and RUAG Ammotec. A joint venture is planned for Simulation & Training.
The Federal Council believes that selling RUAG Ammotec will not affect the security of supply. As regards small calibre ammunition, Swiss production sites are already dependent on procuring components from abroad. The Federal Council is aware that the potential buyer must be chosen very carefully and wishes in particular that operations continue at the Thun site.
Switzerland as a location for work and technology
The Federal Council is convinced that the planned approach will serve the interests of both the armed forces and the enterprise. MRO Switzerland will be in a position to concentrate on its key mission to support the armed forces. At the same time, the aerospace group will continue as an attractive technology enterprise based in Switzerland, which, although the growth of these markets primarily takes place abroad, offers the opportunity to preserve and expand highly specialised technological processes and related jobs in our country. Furthermore, the planned divestitures and privatisation of the Aerospace Group will enable the Confederation to reduce its financial risks.