In March 2018, the Swiss Federal Council decided to combine the RUAG business units that work almost exclusively for the Swiss Armed Forces into a new company and completely separate this from RUAG’s other activities. The concept for the unbundling was approved in June 2018. Under the umbrella of a holding company, the Group will be organised into two new separate companies: RUAG MRO Switzerland and RUAG International. RUAG MRO Switzerland, as the material centre of excellence, will ensure the Swiss Armed Forces are provided with reliable, cost-effective equipment in a way that is open to public scrutiny, all while remaining wholly owned by the Swiss Confederation. RUAG International will take care of all other activities, the majority of which are performed for civilian customers and international third-party customers.
By completely unbundling the IT systems of both RUAG units, RUAG MRO Switzerland can meet the security standards of the Swiss Armed Forces, which is absolutely essential for ensuring reliable service provision in all threat situations. In addition, the further development of the existing Space and Aerostructures Divisions, which involves merging them into a single Aerospace Group, will require substantial investment in future. Accordingly, the Swiss Federal Council has decided to fully privatise this area.
In 2019, the Swiss Federal Council specified its mandate to RUAG. It was decided in March that RUAG International should be developed into an Aerospace Group and privatised in the medium term. In August, the Swiss Federal Department for Defence, Civil Protection and Sport (DDPS) was issued the mandate to found a new holding company (BGRB Holding Ltd), which would be responsible for overseeing the implementation of the unbundling and further development processes. The official foundation ceremony took place on 15 November 2019 and was attended by President of the Federal Council Ueli Maurer and Federal Councillor Viola Amherd.
Organisational structures established and infrastructures unbundled
In 2019, RUAG prepared and established the structures for the organisations to be unbundled in all its business units. To achieve this, it formed legal entities that enable the separation of liability between MRO Switzerland and RUAG International and, at the same time, meet the specification that all investments of the Swiss Confederation must be kept in a holding company. Although the companies will be legally active in May 2020, each of them is already working to bring its activities in line with the future corporate structure.
RUAG MRO Switzerland
RUAG MRO Switzerland focuses on the life cycle management of the current and future systems for the Swiss Armed Forces. As a material centre of excellence, RUAG MRO Switzerland is also responsible for maintaining and developing the necessary engineering and ICT expertise as well as conducting research and development activities on behalf of the Swiss Armed Forces. Any third-party business is required to create synergies with the activities carried out for the Swiss Armed Forces; furthermore, the added value it brings must benefit Switzerland and its total must not exceed a benchmark amounting to 20 % of total turnover.
The new company commenced business under the leadership of the former CEO of RUAG Defence, Andreas Berger, on 1 January 2020. The legal unbundling process is scheduled for May 2020. The bulk of the unbundling process is expected to be completed in July 2020. The future organisational charts of the central support functions for Finance, Human Resources, Legal & Compliance and IT have already been communicated.
As a result of the Swiss Federal Council’s decision and, consequently, the new strategic focus on the Aerospace business unit, RUAG International will be made up of both the Aerostructures and Space business divisions in the medium term. RUAG Ammotec is to make additional operational improvements so that it can be sold to another company that is prepared to continue operating the Thun (Switzerland) site. A joint venture is being sought for the current Simulation & Training business unit to ensure that operations and further development of the Swiss combat training centres can continue. Efforts are also being made to find solutions that will provide long-term security for jobs in aeroplane production, military aircraft maintenance and MRO services for business jets at the Oberpfaffenhofen site. Some initial success has been achieved on that front with the sale of the Business Aviation locations in Geneva and Lugano to the French company Dassault Aviation, and the sale of the cybersecurity business to the US company HelpSystems.
In 2019, the business model was defined and the organisational structures established for the Aerospace Group, which became operational on 1 January 2020, with the members of the current Group taking up management roles. Following on from the departure of previous CEO Urs Breitmeier at the end of 2019, Urs Kiener, formerly the CFO, has additionally taken over leadership of the Group ad interim until a successor is appointed. The Finance, Human Resources, IT and Legal & Compliance support functions will be managed centrally with the aim of helping the Group to deliver what it has to offer in a uniform, focused manner. The structures associated with this were established in 2019.
Strategic goals defined for 2020–2023
The Swiss Federal Council works on behalf of the Confederation, attending to its interests as the owner and its rights regarding the holding company as the sole shareholder. It sets out the goals that the owner of the holding company wants to achieve, working in four-year cycles each time. In the period 2020 to 2023, there will be a particular focus on ensuring the service provision for the Swiss Armed Forces is on schedule, cost optimised and high quality, on preparing the Group for the privatisation of its international activities, and on completing the unbundling process by the end of 2021 at the latest.
The Swiss Federal Council has also defined the applicable frameworks for all companies in more detail, in the areas of risk management, compliance, environmental sustainability, HR policy based on a social partnership, promoting vocational training, compensation schemes and reporting. Indicators have been defined in order to verify strategic targets and manage the holding company.
Future of the RUAG brand
The division of the company into two separate companies also means the RUAG brand itself is being unbundled, something that has been accompanied by the decision to transfer the name from RUAG to RUAG MRO Switzerland. To help the new RUAG company position itself appropriately in the market, the brand presence will be adjusted both internally and externally in line with the strategic focus of RUAG MRO Switzerland. A new brand is being developed for RUAG International, with the aim of representing the strategy and portfolio of the future Aerospace Group in the best possible light.