Identifier
Created
Classification
Origin
07PARIS1076
2007-03-20 10:05:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Paris
Cable title:  

FRANCE'S AEROSPACE CLUSTER

Tags:  TSPL EINV EAIR TSPA TNGD EIND ECON PGOV FR 
pdf how-to read a cable
VZCZCXRO0078
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFR #1076/01 0791005
ZNR UUUUU ZZH
P 201005Z MAR 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC PRIORITY 5775
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUCNMEM/EU MEMBER STATES PRIORITY
UNCLAS SECTION 01 OF 02 PARIS 001076 

SIPDIS

SENSITIVE
SIPDIS

STATE PASS NSF AND NASA
STATE FOR OES/PCI (EISENSTAT),STAS, EB, EUR/WE
USEU FOR SMITHAM

E.O. 12958: N/A
TAGS: TSPL EINV EAIR TSPA TNGD EIND ECON PGOV FR
SUBJECT: FRANCE'S AEROSPACE CLUSTER

REF: A. 06 PARIS 7882, B. Paris 1075

UNCLAS SECTION 01 OF 02 PARIS 001076

SIPDIS

SENSITIVE
SIPDIS

STATE PASS NSF AND NASA
STATE FOR OES/PCI (EISENSTAT),STAS, EB, EUR/WE
USEU FOR SMITHAM

E.O. 12958: N/A
TAGS: TSPL EINV EAIR TSPA TNGD EIND ECON PGOV FR
SUBJECT: FRANCE'S AEROSPACE CLUSTER

REF: A. 06 PARIS 7882, B. Paris 1075


1. (U) SUMMARY: As part of France's new scientific and innovation
policy (see ref a),France embarked on an ambitious program of
naming competitiveness clusters throughout the country (ref b).
Possibly the most visible of these clusters focuses on aerospace and
embedded systems in the Midi-Pyrenees and Aquitaine regions, home to
Airbus and Dassault Aviation. Although almost six hundred companies
already belong to this grouping named "Aerospace Valley," one of the
program's goals is to grow the cluster. Toward this end, the
government is offering significant tax incentives to draw firms and
institutions to the cluster in addition to central and regional
government funding. End Summary.

--------------
BACKGROUND
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2. (U) Toulouse is playing a significant role in the GOF's promotion
of competitiveness clusters ("poles de competivite" in French),
combining the efforts of enterprises, research entities, and higher
education institutions to develop technologies into products with
practical applications. The GOF believes its designation of
sixty-six competitiveness clusters (six of which are labeled "global
level") provides a partial answer to its industries' declining
comparative advantage faced with increased competition from emerging
economies (see ref b for more information on the general strategy).
Especially aimed at innovative, high value-added industries, such as
biotechnology, medicine, and aerospace, the clusters policy seeks to
support those sectors that hold the key to remaining a major
economic power. Two of the clusters, one specializing in aerospace
and another in cancer and other health issues, are based in
Toulouse, with aerospace being one of the "global level" clusters.



--------------
AEROSPACE CLUSTER
--------------


3. (U) The GOF selected Midi-Pyrnes and Aquitaine regions, home to
Airbus, Toulouse's prestigious engineering schools, and a plethora
of Airbus suppliers and other aerospace firms, as one of France's
six global-level clusters. Dubbed "Aerospace Valley," the regions
boast almost six hundred French and foreign firms. In addition to
Airbus, some of the larger groups involved are Alcatel, Dassault
Aviation, Siemens, EADS Space Transportation, and Thales. A number
of important U.S. aerospace suppliers, as well as U.S. semiconductor
company Freescale and Sun Microsystems, are also present. Presided
over by Airbus France's president, a Director, three engineers, and
a secretary carry out Aerospace Valley's day-to-day operations.



4. (U) The French government aims for the cluster to become the
world leader in aerospace and embedded systems, creating 40,000 new
jobs in the next twenty years, which would increase the sector's
employment by approximately fifty percent. It also hopes to attract
more foreign direct investment and stimulate the economy by
developing new marketable technologies in the highly competitive
aerospace industry. To ensure its competitiveness, the cluster has
contracted a French strategic intelligence company, ADIT, to develop
an economic intelligence program.


5. (U) The aerospace cluster is scheduled to receive 250 million
Euros (USD 325 million) over three years of a total budget of 1.5
billion Euros (USD 1.95 billion) for all clusters (two years remain
in this budget cycle),with fifty percent funded by the central
government and the other half by the regions. Among the cluster's
seventy projects announced, forty have already been selected to
receive 57 million Euros (USD 74 million) in central and regional
government funding. In addition, the government is granting
substantial tax incentives to draw firms and institutions to the
cluster. It is offering a hundred percent tax exemption for a
business' first three profit-earning years and a fifty percent
exemption for the following two. Furthermore, the government is
giving small and medium-sized enterprises a twenty-five to fifty
percent rebate for employer social charges for employees involved in
research and development projects.


6. (U) The cluster's projects include EGNOS/GALILEO, primarily
located in Toulouse, which seeks to develop real-time satellite
pinpointing for ground vehicles. The MONADE project is creating an
inter-agency digital simulation system of prototype aircrafts,
satellites, and onboard systems. The BATTLION project seeks to
develop lighter batteries for airplanes. French company MTS is
developing composite materials for aircraft and space use. Even an
American company, Rockwell Collins, has an official project, working
with a small French enterprise to develop a device that allows blind

PARIS 00001076 002 OF 002


people navigate with the assistance of Galileo. In addition to
these projects, the cluster will build "Aerospace Campus" to bring
together the numerous aerospace engineering programs already in
Toulouse and house Galileo Industries.


7. (SBU) COMMENT: Fearful of losing its place among economic powers,
the French government is seeking a way to ensure that its industries
innovate. Its belief that the government should play a role in this
process is clearly evident in its clusters policy. The GOF appears
to view the aerospace cluster as a means to gain political advantage
by supporting its aerospace companies when times are tough at
Airbus. In November 2005 following disclosure of Airbus' difficult
financial situation and the first leak that Airbus planned to
drastically reduce its number of direct suppliers, Prime Minister
Dominique de Villepin specifically pledged 50 million Euros (USD 65
million) in supplementary aid to the cluster. Last week, the Prime
Minister announced 100 million Euros (USD 130 million) for
composites, some of which will probably be funneled through the
cluster. Obviously aimed at reassuring French electors in advance
of the upcoming Presidential election, even those close to Aerospace
Valley do not know if either pledge represents "new" money or if the
government is just repackaging old programs for short-term political
gain.


8. (SBU) Viewed from the other side, it remains unclear what, if any
role, the cluster will play in Airbus' current attempts at
restructuring/cost cutting. Still, the regions' strong stake in the
success in the cluster may have encouraged their recent moves to
attempt to buy into Airbus capital.


9. (SBU) Another issue apparent in this program is a desire to
please as many regions as possible, hence the naming of sixty-six
clusters throughout France-although only six are labeled
"world-class." France's seriousness about advantaging the
world-class clusters will become apparent after the latest round of
cluster submissions given that the Ile-de-France region (home to
Paris and the headquarters of many aerospace offices) has now
applied to have its own aerospace cluster.

STAPLETON