ANALYSIS OF ALTERNATIVES SOCIO-ECONOMIC ANALYSIS
Transcript of ANALYSIS OF ALTERNATIVES SOCIO-ECONOMIC ANALYSIS
ANALYSIS OF ALTERNATIVES
&
SOCIO-ECONOMIC ANALYSIS
Public version
Legal name of Applicant(s): Nexter Systems
Nexter Mechanics
Submitted by: Nexter Systems as submitting Applicant
Nexter Mechanics as co-Applicant
Substance: Chromium trioxide, EC 215-607-8 and CAS 1333-82-0
Dichromium tris(chromate), EC 246-356-2 and CAS 24613-89-6
Use title: Use-4
Industrial use, of a qualified mixture of chromium trioxide by spraying
or immersion, and of a qualified mixture of dichromium
tris(chromate) by pen application, for the chromate conversion
coating of welded mechanical structures of armoured vehicles and
associated parts made of high mechanical properties aluminium
alloys for military use, and requiring a maintained electrical
conductivity after severe climatic environments, atmospheric
corrosion resistance and paint adhesion.
Use number: 4
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C ON T E NT S
LIST OF ABBREVIATIONS .......................................................................................................... 6
1. SUMMARY ....................................................................................................................... 7
2. AIMS AND SCOPE OF THE ANALYSIS .................................................................................. 9
2.1. Equipments concerned and applications .......................................................................... 12
2.1.1. VBCI ........................................................................................................................................ 13 2.1.2. JAGUAR and GRIFFON ............................................................................................................ 14
2.2. Elements of context........................................................................................................... 16
2.2.1. Focus: Maintenance in Operational Conditions (MOC) .......................................................... 17
2.3. General methodology ........................................................................................................ 18
2.3.1. Scope of the AfA ..................................................................................................................... 19 2.3.2. An argument partly based on representative examples for the French army ........................ 21 2.3.3. Actualisation ........................................................................................................................... 22 2.3.4. Confidentiality ........................................................................................................................ 23
2.4. Substitution strategy ......................................................................................................... 24
2.5. Definitions of the “applied for use” and “non-use” scenarios .......................................... 24
2.5.1. “Applied for use” scenario ...................................................................................................... 24 2.5.2. “Non-use” scenario ................................................................................................................. 24
3. “APPLIED FOR USE” SCENARIO ....................................................................................... 26
3.1. Analysis of substance function .......................................................................................... 26
3.2. Market and business trends including the use of the substance ...................................... 28
3.2.1. Annual tonnage ...................................................................................................................... 30
3.3. Remaining risks of the “applied for use” scenario ............................................................ 30
3.4. Human health impacts and monetised damage of the “applied for use” scenario .......... 30
3.4.1. Medical cancer treatment ...................................................................................................... 31 3.4.2. Mortality and morbidity ......................................................................................................... 34 3.4.3. Synthesis of the monetised damage of the “applied for use” scenario .................................. 39 3.4.4. Complementary elements of analysis: values taking into account a 4% discount rate .......... 39
3.5. Environment and man-via-environment impacts and monetised damage of the “applied
for use” scenario .......................................................................................................................... 40
3.5.1. Environment impacts and monetised damage ....................................................................... 40 3.5.2. Man-via-environment impacts and monetised damage ........................................................ 40
3.6. General conclusion on the impacts and monetised damage of the “applied for use”
scenario ........................................................................................................................................ 40
4. SELECTION OF THE “NON-USE” SCENARIO ....................................................................... 41
4.1. Efforts made to identify alternatives ................................................................................ 41
4.1.1. Research and development .................................................................................................... 42 4.1.2. Data searches ......................................................................................................................... 42
4.2. Identification of known alternatives ................................................................................. 43
4.3. Assessment of shortlisted alternatives ............................................................................. 44
4.3.1. Alternative 1 ........................................................................................................................... 45 4.3.2. Alternative 2 ........................................................................................................................... 47 4.3.3. Alternative 3 ........................................................................................................................... 49 4.3.4. Alternative 4 ........................................................................................................................... 49 4.3.5. Alternative 5 ........................................................................................................................... 51
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4.3.6. The most likely “non-use” scenario ........................................................................................ 53
5. IMPACTS OF GRANTING AN AUTHORISATION ................................................................. 57
5.1. Economic impacts .............................................................................................................. 58
5.1.1. Loss of revenues, profits and orders ....................................................................................... 58 5.1.2. Lost investments ..................................................................................................................... 61 5.1.3. Contractual penalties ............................................................................................................. 61
5.2. Human health or Environmental impact ........................................................................... 62
5.3. Social impact...................................................................................................................... 62
5.3.1. Impact on employment........................................................................................................... 62 5.3.2. Territory vulnerability ............................................................................................................. 68 5.3.3. Indirect employment .............................................................................................................. 69
5.4. Wider economic impact .................................................................................................... 70
5.5. Distributional impact ......................................................................................................... 70
5.5.1. Impact on operational availability of armament systems ...................................................... 72 5.5.2. Impacts on Maintenance in Operating Conditions of equipments ......................................... 75 5.5.3. Loss of investments for the French State ................................................................................ 75 5.5.4. Impact on France’s sovereignty .............................................................................................. 76 5.5.5. Impact on Nexter’s industrial partners ................................................................................... 77
5.6. Uncertainty analysis for both the “applied for use” and the “non-use” scenario ............ 78
5.6.1. “Applied for use” scenario ...................................................................................................... 78 5.6.1. “Non-use” scenario ................................................................................................................. 79 5.6.1. Synthesis ................................................................................................................................. 82 5.6.2. Conclusion............................................................................................................................... 84
5.7. General conclusion on the impacts of granting an authorisation ..................................... 84
6. CONCLUSIONS................................................................................................................ 86
6.1. Comparison of the benefits and risks ................................................................................ 86
6.2. AoA-SEA in a nutshell ........................................................................................................ 86
6.3. Information for the length of the review period ............................................................... 88
6.4. Substitution effort taken by the Applicant if an authorisation is granted ........................ 88
7. References ..................................................................................................................... 89
8. Annex – Justifications for Confidentiality Claims ............................................................. 91
9. Appendixes .................................................................................................................... 92
9.1. Complementary elements of context ............................................................................... 92
9.1.1. The rationale behind the French industry of Defence: a concept embedded in the notion of
sovereignty ............................................................................................................................................. 93 9.1.2. The consequences of this model: the French State still has a central role to play in the
industry of defence ............................................................................................................................... 100 9.1.3. Defence companies are furthermore entrenched in a constrained European legal
environment ......................................................................................................................................... 106
9.2. Overview of France’s legal framework ............................................................................ 109
9.3. Inventory of the French ground army equipment .......................................................... 110
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T A B L E S
Table 1. Uses of the application for authorisation ................................................................................................ 10 Table 2. Scope of the AfA ...................................................................................................................................... 20 Table 3. Impact period of the AfA ......................................................................................................................... 20 Table 4. Inflation values taken into account in this dossier .................................................................................. 22 Table 5. Key figures of Nexter Systems and Nexter Mechanics for 2014 ............................................................. 30 Table 6. Lung cancer costs in France for the two first years after the diagnosis .................................................. 32 Table 7. Net year survival rate after lung cancer diagnosis in France ................................................................... 32 Table 8. Individual lung cancer costs during the review period, not taking into account the excess of risk for workers ................................................................................................................................................................. 33 Table 9. Total lung cancer costs during the review period, considering the total excess of risk for workers and the respiratory equipments .................................................................................................................................. 33 Table 10. Years of Life Lost (YLL) for Use-4 ........................................................................................................... 35 Table 11. Years of Life lived with Disability (YLD) for Use-4 .................................................................................. 36 Table 12. Synthesis of YLLs, YLDs and monetised damage of mortality and morbidity related to the excess cancer risk associated with lung cancer, Use-4 ..................................................................................................... 37 Table 13. Value of statistical life and willingness to pay to avoid cancer ............................................................. 38 Table 14. Incidence and mortality associated with lung cancer in France, in 2012 .............................................. 38 Table 15. Mortality and morbidity costs for Use-4, complementary analysis ...................................................... 39 Table 16. Overall impacts of the "applied for use" scenario, Use-4 ..................................................................... 39 Table 17. Overall impacts of the “applied for use” scenario, Use-4, complementary analysis taking into account a 4% discount rate................................................................................................................................................. 39 Table 18. Testing methodology for potential alternatives .................................................................................... 43 Table 19. Functional properties assessment for Use-4 ......................................................................................... 44 Table 20. Global loss of revenues, profits and order book over the review period for the AfA (cumulated for Use-1, 2, 3 and 4) .................................................................................................................................................. 60 Table 21. Description of the sensitivity of the employment of each subsidiary of the Nexter Group to Cr(VI) compounds concerned by the AfA ........................................................................................................................ 65 Table 22. Loss of employment, by use of the AfA ................................................................................................. 66 Table 23. Average individual social cost of an unemployed person in France, 2010 ............................................ 67 Table 24. Total cost of the loss of employment for Use-4 .................................................................................... 68 Table 25. Global direct loss of employment and associated costs for the AfA (cumulated for Use-1, 2, 3 and 4) 68 Table 26. Availability of various equipments in the French army ......................................................................... 74 Table 27. Uncertainty analysis for mortality and morbidity, Use-4 ...................................................................... 79 Table 28. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario ................ 79 Table 29. Uncertainty analysis for the loss of profits, based on the upper and lower bounds of the values of revenues impacted by each use for 2015, 2016 and 2017. .................................................................................. 80 Table 30. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario ................ 81 Table 31. Synthesis of the monetised impacts of the “non-use” scenario ........................................................... 84 Table 32. Other impacts of the “non-use” scenario .............................................................................................. 85 Table 33. Global elements of France’s long-term defence strategy ..................................................................... 94 Table 34. Share of the total employees of the defence industry in France and share of the industrial employees by region, in 2012. Source: Conseil économique de défense ............................................................................... 96 Table 35. Verification & validation approach ...................................................................................................... 102 Table 36. French types of licenses for export operations in the context of defence .......................................... 108 Table 37. Overview of France’s legal framework ................................................................................................ 110 Table 38. Inventory of the French Land Army equipment. ................................................................................. 118
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F IG U R E S
Figure 1. Examples of weapons concerned by Use-4 currently in use within the French armed forces .............. 12 Figure 2. VBCI ........................................................................................................................................................ 13 Figure 3. JAGUAR (left) & GRIFFON (right) ............................................................................................................ 14 Figure 4. Haffroy machine for spraying treatment ............................................................................................... 27 Figure 5. Synthesis of the conversion coating processes concerned by the AfA .................................................. 28 Figure 6. Supply chain ........................................................................................................................................... 29 Figure 7. Synthesis of the impact categories of the “applied for use” scenario ................................................... 31 Figure 8. Data searches for Alodine 1200 alternatives ......................................................................................... 42 Figure 9. Global implementation timeline of Alternative 1 .................................................................................. 46 Figure 10. Global implementation timeline of Alternative 2 ................................................................................ 48 Figure 11. Global implementation timeline of Alternative 4 ................................................................................ 50 Figure 12. Global implementation timeline of Alternative 5 ................................................................................ 52 Figure 13. Synthesis of the impact categories of the “non-use” scenario ............................................................ 57 Figure 14. Annual revenues concerned by Use-4, over the 2015-2017 period, M€ ............................................. 59 Figure 15. Orders concerned by Use-4, over the 2015-2017 period, M€ ............................................................. 60 Figure 16. Net book value of investments in relation with Use-4, M€ ................................................................. 61 Figure 17. Detail of Nexter’s involvement in the manufacture of the French land army equipment and the impacts of this AfA’s four uses .............................................................................................................................. 71 Figure 18. French army field operations, July 2015 .............................................................................................. 73 Figure 19. Uncertainty analysis of the costs associated with mortality and morbidity, in € ................................ 82 Figure 20. Uncertainty analysis of the loss of profits and the costs associated with the loss of employment, in € .............................................................................................................................................................................. 83 Figure 21. "Three circles” model of the statuses of defence technologies and competences. ............................ 98 Figure 22. The five roles of the French State as regards the defence industry ................................................... 100 Figure 23. Lifecycle steps of French armament programs. ................................................................................. 101 Figure 24. Share of revenues per geographic zone, for Nexter, Thales, Dassault Aviation & Safran ................. 104
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LIST OF ABBREVIATION S
AfA Application for Authorisation
B Billion (€)
CAESAR CAmion Equipé d'un Système d'ARtillerie - Truck equipped with an artillery system
CETIM Centre Technique des Industries Mécaniques - French European Centre for
Mechanical Industries
CMIC Critical Military Industrial Capabilities
Cr(III) Trivalent chromium
Cr(VI) Hexavalent chromium
CTWS Cased Telescoped Weapon System
DALY Disability-Adjusted Life Years
DARES
Direction de l’Animation de la Recherche, des Etudes et des Statistiques
Directorate for Research, Studies and Statistics, Minister of Social Affairs and
Employment
DGA Direction Générale de l’Armement
French Armament Procurement Agency - French Ministry of Defence
EBRC Engin Blindé de Reconnaissance et Combat (JAGUAR)
Reconnaissance Tracked Armoured Vehicle
FReD Fonds pour la restructuration de la défense
Supporting funds for the restructuration of the defence industry
INSEE Institut National de la Statistique et des Études Économiques
National Institute for Statistics and Economics Studies
K Thousand (€)
M Million (€)
MOC Maintenance in Operating Conditions
MoD Ministry of Defence - British government department of defence
NATO North Atlantic Treaty Organization
PV Present Value
SGA Secrétariat Général pour l’Administration
General Secretariat for Administration - French Ministry of Defence
STANAG NATO’s Standardised Agreement
TRL Technology Readiness Level
VBMR Véhicule Blindé Multi-Rôles (GRIFFON) - Multi-Role Armoured Vehicle
WTO World Trade Organisation
YLD Years lived with disability
YLL Years of Life Lost due to premature mortality
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1. SUMMARY
C ON T E XT
Nexter Systems and Nexter Mechanics are two subsidiaries of the Nexter Group, a
French industrial manufacturer of armament systems and military equipments for
ground, air-land, naval and naval-air combat, which key figures for 2014 include:
TURNOVER WORKFORCE ORDER BOOK
Nexter Systems € 739M 1,806 € 691 M
Nexter Mechanics € 30.4M 114 € 19.3 M
Under Use-4, chromium trioxide is used by Nexter Systems and Nexter Mechanics in
the form of a mixture for the chromate conversion coating of structural and auxiliary
aluminium parts of armoured vehicles. The mixture used, known as Alodine 1200™ is
a trademark of the HENKEL Surfaces Technologies company.
S U B S T A NC E F U N CT IO N
The main sought-after functional properties under Use-4 notably include:
- electrical conductivity,
- corrosion resistance and,
- paint adhesion.
These functional properties are defined by the DGA and the French Ministry of
Defence, according to the expression of needs of the army; they are directly related
to the severe conditions of use of the armament systems and the need for grounding
of electrical and electronic devices of the armament systems.
I DE NT IF I CAT IO N O F AL T E R NAT I V E S
Given the strategic aspect of the equipments concerned by Use-4, a significant work
of research for alternatives for both chromium trioxide and dichromium
(tris)chromate was carried out by Nexter since 2001.
Nexter process of research for alternatives has led to identify five potential
acceptable alternative technologies for Use-4: SurTec 650 (Alternative 1), BONDERITE
6500 (Alternative 2), Gardobond C4749 + Ardrox 1768 (Alternative 3), INTERLOX 338
(Alternative 4) and LANTHANE 613.3 (Alternative 5). These solutions are respective
trademarks of the SurTec, Henkel Surface Technologies, Chemetall, ATOTECH and
COVENTYA companies.
These solutions have yet to be thoroughly in-depth tested, validated and
implemented and, due to certification delays, will not be industrially operational
before 2024 and therefore not available for Nexter after the chromium trioxide
sunset date.
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“ NO N - U SE” SC ENA RI O
Taking into account the central role played by Use-4 for Nexter’s armament systems,
the most likely "non-use" scenario entails a cease of activity of Nexter Mechanics and
strongly jeopardises the activity of Nexter Systems.
The impact of the banning of Use-4 will also greatly impede France’s sovereignty in
terms of operational capabilities and export potential, as well as the activity of
Nexter’s industrial partners.
I M P ACT S OF G RA NT I NG A UT HO RI S AT ION
Monetised impacts of the “applied for use” scenario include costs related to the
medical treatment, morbidity and mortality associated with the excess of risk of
cancer arising from the exposure to chromium trioxide of workers over the review
period.
The total monetised impacts of the “applied for use” scenario amount to € 23.
Monetised impacts of the “non-use” scenario include the loss of profits, loss of
investments and loss of employment related to the denial of an authorisation and
thereby the cessation of use of Cr(VI) compounds.
The total monetised impacts of the “non-use” scenario amount to
[€ 100-1,000M](#1a).
Based upon the present assessment, the socio-economic benefits outweigh the risks
arising from the use of the substance by a factor of approximately
[1,000,000-10,000,000](#1b).
As a complement, the “non-use” scenario involves the unavailability of the
concerned equipments for French armies, thereby impacting France’s operational
capabilities and sovereignty. The “non-use” scenario also impacts other foreign
armies, relying on Nexter for the supply of armament systems as well as Nexter’s
industrial partners involved in the development, production and support of the
equipments concerned by Use-4.
C ON C L U SI ON S
Based on the argument put forward, and in order to develop, implement and
qualify an alternative solution for Use-4, Nexter Systems and Nexter Mechanics
apply for a 7-year review period.
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2. AIMS AND SCOPE OF TH E ANALYSIS
The aim of the present document is to provide a comprehensive analysis of both
the Analysis of Alternatives and Socio-Economic Analysis parts of Nexter’s Use-1
Application for Authorisation (AfA), i.e:
- Provide a comprehensive understanding of the context of the AfA;
- Describe Nexter’s research works for alternatives, potential alternatives and
substitution strategy ;
- Provide a comparative assessment of the monetised impacts of the pursued
use of the substances (“applied for use” scenario) and the impacts of the
denial of an authorisation (“non-use” scenario).
As described hereafter, several entities are involved in this AfA: Nexter
Mechanics and Nexter Systems. In the following, “Nexter Group” will refer to the
whole Nexter Systems group (which includes Nexter Mechanics) and “Nexter
Systems” will refer to Nexter Systems’ own activities.
For the sake of clarity, it is reminded that this document is part of a broader AfA.
Nexter’s authorisation dossier is indeed composed of four uses that are described
below:
Hard chromium plating
Use-1
Industrial use of a mixture of chromium trioxide for the hard chromium plating of military armament steels parts which are thermomechanically stressed and in contact with oxidizing gas at high temperature, so as to ensure a thermal barrier with high melting point, resistance to wear and oxidation associated with weapons as well as resistance to impact and atmospheric corrosion.
Nexter Systems is a French industrial armament group manufacturing
military equipment for ground, air-land, naval and naval-air combat. From
the point of view of the REACh regulation, the Applicant must be considered
as a downstream user of chromic acids generated from chromium trioxide
for the chromate conversion coating of structural and auxiliary parts of
vehicles and armament systems.
Chromate conversion coating (Use-4), which is the object of this AfA
through the use of chromium trioxide in the form of the Alodine 1200™
mixture, ensures these parts comply with military requirements in terms of
electrical conductivity, atmospheric corrosion resistance and paint adhesion.
As a consequence, the level of performance provided by the chromate
conversion is an essential condition to the competitiveness of Nexter
Mechanics and Nexter Systems; economic impacts of its banning from the
market will affect the entire Group.
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Use-2
Industrial use of a mixture of chromium trioxide for the hard chromium plating of military armament parts in order to ensure surface hardness, resistance to atmospheric corrosion, abrasive wear resistance and friction coefficient for parts in relative movement.
Black chromium plating
Use-3
Industrial use of a mixture of chromium trioxide for the black colour hard chromium plating of exterior surface of steel weapon barrel designed for military use, to ensure, during the whole gun barrel service life, stealth, erosion, corrosion and high temperature resistances in the condition of uses.
Chromate conversion coating
Use-4
Industrial use, of a qualified mixture of chromium trioxide by spraying or immersion, and of a qualified mixture of dichromium tris(chromate) by pen application, for the chromate conversion coating of welded mechanical structures of armoured vehicles and associated parts made of high mechanical properties aluminium alloys for military use, and requiring a maintained electrical conductivity after severe climatic environments, atmospheric corrosion. resistance and paint adhesion
Table 1. Uses of the application for authorisation
This document focuses on Use-4. However, and where relevant, the reader will
be informed of the potential synergies and crossed impacts between the uses.
Scope in a nutshell
With € 1B of revenues, € 1.2B of order book and 3,378 employees for 2014, the
Nexter group (ex-GIAT) is a French government-owned industrial armament
manufacturer of military equipment for ground, air-land, naval and naval-air combat.
Nexter Mechanics, co-Applicant of this AfA for Use-4, is a specialist in mechanical and
hydraulics equipment. Key figures for Nexter Mechanics in 2014 include: 114
employees, a € 30.4M turnover and a € 19.3M order book
Under Use-4, chromium trioxide and dichromium tris(chromate) are used by
Nexter Systems and Nexter Mechanics in the chromate coating of structural and
auxiliary parts of armoured vehicles in order to provide electrical conductivity,
corrosion resistance and paint adhesion to the treated parts.
Please note that chromium trioxide is used in aqueous form (chromic acids): in the
present document, “chromium trioxide” therefore refers to “chromic acids”. The
reader can refer to the CSR for a more detailed explanation.
Criticality of performances in a nutshell
The specificity of Use-4, as compared to the majority of the uses of chromate
conversion coating, is to require electrical conductivity in addition to corrosion
resistance and paint adhesion properties. Electrical conductivity has to be
maintained during the whole lifetime of the armament parts, which notably
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includes potential damages due to the corrosion of aluminium alloys and may
generate insulating salts.
Given their implementation in defence applications, electrical conductivity is
essential to the grounding of electrical and electronic devices over the aluminium
alloy structural parts and therefore directly conditions the survivability and the
operational worthiness of the equipments concerned.
As of today, the only conversion treatment process on aluminium alloys
qualified by Nexter Systems is the Alodine 1200™, a trademark of the Henkel Surface
Technology company. This powerful corrosion inhibitor contains hexavalent
chromium and allows a good corrosion protection as well as slows down the
formation of electrical insulators hydroxyl-oxides of aluminium resulting of the
corrosion of the alloy. Alodine 1200™ furthermore shows very good properties in
terms of paint adhesion.
In addition to aluminium-based structural parts (vehicles bodies), Use-4
potentially concerns auxiliary aluminium parts (doors, partition walls,
complementary armouring, etc.), used in Nexter armoured vehicles and armament
systems and for which the requirements in terms of electrical conductivity, corrosion
resistance and paint adhesion are similar to structural parts.
Use-4 not only concerns products of the current Nexter portfolio but also future
programs, such as JAGUAR and GRIFFON, of major importance for Nexter future
activity.
Chromate converted parts ensure the compliance of Nexter armament systems
with the levels of performances required by its clients and users.
It has to be understood that these parts are absolutely critical for the armament
systems they constitute the structure. More specifically, should the level of
performance currently obtained with Use-4 not be achieved, the overall armament
systems they are mounted on would be unable to fulfil their function or ensure their
own protection and would be rendered unusable.
As a consequence, any disruption of supply of Nexter armament systems
concerned by Use-4 to the armed forces would severely endanger the State’s military
capabilities and sovereignty.
Use-4 is at the heart of the performances of Nexter’s armament systems and
directly conditions the competitiveness of Nexter Systems as well as Nexter
Mechanics, with a direct or knock-on effect on the bigger part of the Group
revenues.
Moreover, any threat to Nexter capabilities of manufacturing armament
systems would jeopardise the very identity of the Nexter group: the
competitiveness and added value of the Nexter Group in the defence sector lie in
its expertise in the field of armament.
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2.1. Equipments concerned and applications
Given its applications in the surface treatment of armament systems structural
and auxiliary parts, Use-4 is critical for a large number of the Nexter armament
systems portfolio.
Use-4 mainly concerns ground armoured equipments designed in aluminium
alloys, examples of which currently in use in the French army are given in Figure 1
below:
Figure 1. Examples of weapons concerned by Use-4 currently in use within the French armed forces
From a more global point of view, Nexter is directly involved in the manufacture
of the majority of the French army armament equipments. A comprehensive
inventory of the French land army’s equipments, Nexter’s involvement in their
manufacture as well as the impact of this AfA’s four uses are provided in Appendix
9.1. A synthesis can be found in section 5.5.
In what follows, and given the quantity and diversity of the concerned
equipments, it was chosen to only detail two representative examples of applications
concerned by Use-4.
Representativeness was determined as follows:
- Criticality for the French army: these equipments are currently – or will be in
a foreseeable future – deployed during field operations and will be operated
by French militaries on a daily basis;
- French sovereignty: these equipments were designed and manufactured in
France, according to requirements of the French Ministry of Defence and are
mainly in operation within the French army;
- Technical requirements: the technical requirements and development
processes of these equipments are similar to those of the other equipments
concerned by Use-4;
- Long development processes: the examples below illustrate the extremely
long development cycles that are related to defence applications;
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- Specificities in terms of application: all the equipments concerned are very
specific in terms of service rendered and cannot be interchanged with a
competing alternative;
- Export potential: as for many of other equipments concerned by Use-4,
these equipments present very strong export potentials.
2.1.1. VBCI
Figure 2. VBCI
VBCI1 is an infantry fighting vehicle in use within the French army since 2008. Its
8x8 wheel configuration allows excellent mobility, making the VBCI suited to assist
the Leclerc main battle tanks on the field of operations. It is also used as the main
protected vehicle for infantry in operations.
VBCI weights around 25 tons and can transport up to 12 persons. Its main
armament system is Nexter’s 25mm gun on the Tarask turret, which is otherwise
concerned by this AfA’s Use-3.
Please note that for foreign prospects, VBCI is proposed with the 40mm gun
from CTA International, which is otherwise concerned by the AfA’s Use-1.
VBCI was specifically designed and developed to be transportable by the Airbus
A400M, which constitutes a very strict condition in terms of size and weight to its
potential replacement with competing companies’ equipments.
With more than 600 units in use2, VBCI represents a key armament system of
the French operational capabilities and was notably deployed during France’s field
operations in Afghanistan and Mali.
VBCI boasts a strong export potential: negotiations are ongoing with the United
Arab Emirates for 700 units3 and other countries also expressed interest for the
vehicle.
The development of VBCI took 8 years and its delivery to the regiments was
delivered in 2015. VBCI is expected to remain in service during 40 years. The overall
1 In French: “Véhicule Blindé de Combat d'Infanterie” – “Armoured vehicle for infantry combat”
2 Source: DGA
3 Challenges, Commande militaire de blindés par l'armée des Emirats Arabes Unis: Nexter Systems de
nouveau dans la course, 2012
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investments of the VBCI program amount to € 3B, not taking into account auxiliary
investments and staff training4.
VBCI’s aluminium structure provides a superior mobility, as compared to other
vehicles on theatres of operation. Its density to ballistic behaviour ratio and global
weight make aluminium a material for vehicle body shells and such performances
could not have been achieved with a steel-based structure. The electrical
grounding of the vehicle solely relies on the properties provided by Use-45.
Electrical grounding and corrosion protection, and therefore VBCI’s
operational worthiness, are directly related to the functional properties provided
by the chromium conversion of its aluminium structural and auxiliary parts.
2.1.2. JAGUAR and GRIFFON
Figure 3. JAGUAR (left) & GRIFFON (right)
The EBMR market was notified in December 2014 to a consortium bringing
together Nexter Systems, Renault Trucks Defence and Thales Communications &
Security for the development, production and support of the GRIFFON armoured
multirole vehicles6 and the JAGUAR reconnaissance and combat vehicle7.
2.1.2.1. JAGUAR
The JAGUAR reconnaissance and combat vehicles will replace both the AMX10
RC light reconnaissance vehicles and ERC90 six-wheeled armoured all-terrain vehicles
currently in use for most of the field operations in which France is actively involved.
The performances of AMX10 RC and ERC90 vehicles are essential to the success of
field operations and troop protection.
Both these vehicles have been in service for 40 years and reach their end-of-life.
Their replacement with JAGUAR in 2020 is critical to the France’s capabilities of
4 Source: DGA
5 Ibid. 4
6 In French: “Véhicule Blindé Multi-Rôles”
7 In French: “Engin Blindé de Reconnaissance et de Combat”
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 15
projection in external theatres of operation. As for AMX10 RC and ERC90, JAGUAR
will need to be supported during a 40 years period of time.
The main armament of the JAGUAR is the 40 mm Cased Telescoped Weapon
System (CTWS), manufactured by CTA International, an equal share joint-venture
held by Nexter Systems and BAE Systems (British multinational defence, security and
aerospace company).
A total of 248 JAGUARs have been ordered by the DGA, which are planned for
delivery in 2020.
2.1.2.2. GRIFFON
The GRIFFON armoured multirole vehicles will replace the VAB armoured
vanguard vehicles which have been deployed in virtually all theatres where French
infantry troops were present, notably Kuwait, Côte d'Ivoire, Yugoslavia, and Chad.
As for AMX10RC and ERC90, VAB is at the very core of France’s operational
capabilities. VAB has been in service within the French army since 1976 and
therefore reaches its end-of-life and is due to replacement with GRIFFON as of 2018.
A total of 1,722 GRIFFONs in 6x6 version have been ordered by the DGA8.
Focus: the SCORPION programme
The development of two new vehicles, GRIFFON and JAGUAR as part of the SCORPION
programme represents the future of the French Army’s equipment, together with
renovated Leclerc battle tanks and SICS combat information system.
This new generation of armoured vehicles will enable the Army to enhance its
operational capabilities in urban and high-intensity combat with the latest generation
of protection, innovative armament systems (remotely operated turrets, 40mm
weapons and missiles). In addition, enhanced IT systems will provide connectivity
between vehicles and with command centres, fitted with the latest generation of
Command and Control IT Systems.
One feature of the SCORPION programme is that it will be a “system of systems” with
the aim of speeding up operations and increasing troops protection. The ability to
communicate, to exchange information and images between the various systems of
the Battlegroup – armoured vehicles, artillery, infantry, etc. – is the purpose of the
enhanced IT functions provided by the SCORPION programme.
The “response time” between threat detection and its neutralisation is thus reduced
to a minimum and connectivity between Battlegroup systems enables collaborative
combat, selecting the best suited system to provide a response. Tactical situation
awareness enables manoeuvres and combat engagement with maximum
effectiveness whilst minimising the risk of friendly fire incidents.
GRIFFON and JAGUAR are two critical components of the SCORPION programme and
their unavailability for the armed forces would jeopardise the whole programme
8 La Voix du Nord, Programme Scorpion: des "Griffons" et des "Jaguars" pour moderniser l'armée de
terre, 2014
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 16
and therefore France’s future military capabilities.
2.1.2.3. Impacts in the context of the AfA
The overall investment of the EBMR market is estimated to € 5B9. Taking into
account both the companies involved in the project (Nexter, Renault Trucks Defence
and Thales) and their subcontractors network, it is estimated that a total of 1,700
highly qualified employs on France’s territory are directly concerned by the
manufacture of JAGUAR and GRIFFON10.
JAGUAR and GRIFFON also represent a very strong export potential: as an
illustration, more than 5,000 units of the VAB armoured vanguard vehicle have been
exported since 1976. A similar export potential can be foreseen for JAGUAR and
GRIFFON.
For the same reasons than for VBCI, the body shells of these equipments are
designed in aluminium alloys.
Use-4 concerns the surface treatment of the JAGUARs’ and GRIFFONs’ bodies
and ensures their compliance with military requirements in terms of electrical
conductivity, corrosion resistance and paint adhesion. Use-4 is therefore absolutely
critical for the safety and operational capabilities of both these vehicles.
2.2. Elements of context
Three main characteristics place Nexter’s AfA in a particular context:
1
Parts or components concerned by Use-4 are absolutely
critical to the armament systems they are integrated into.
Without these parts, and the level of performance provided
by chromate conversion coating, these equipments are
considered of no operational worthiness.
2
The level of performances required for parts concerned by
Use-4 is defined by DGA, based on operational needs of the
Ministry of Defence and specific engagement scenarios.
Applications of parts concerned by Use-4 are therefore
directly related to National Defence matters.
3
France’s sovereignty directly depends on the equipments
concerned by Use-4, both to guarantee operational
capabilities as well as to secure export opportunities.
9 Le Point, L'armée de Terre dotée de nouveaux blindés à l'horizon 2018, 2014
10 Nexter, Attribution du marché Engin Blindé Multi-Rôles Scorpion à Nexter, RTD et Thales – Press
release, 2014
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 17
The criticality of Nexter for France’s operational capabilities and sovereignty is
acknowledged by the DGA and the Ministry of Defence11:
“Nexter has assets considered by France as strategic, allowing to have a large
autonomy in the production and the use of its weapons as well as its medium and
large calibre ammunition. The White Paper on Defence and National Security states
that “France strategic autonomy is based on national ownership of key capabilities
for defence and security." The State therefore exerts greater control over this area
and does not allow Nexter to transfer or outsource these activities abroad (except
occasionally for productions showing no sensitivity, such as non-complex mechanical
parts).”
The context of Nexter’s AfA is therefore very specific, as compared to
“standard”, market-driven private companies: it has to be taken into consideration
that sovereignty matters are at stake with this dossier even though they can hardly
be monetised, due to both the diversity of equipments concerned, the complexity of
the downstream supply chains impacted (in terms of specific financial and technical
organisation of the armies) as well as stringent confidentiality matters.
The local context is also particularly structuring for this AfA, since Nexter’s site of
Tulle is located in the Region Centre - Limousin, which is highly dependent on the
defence industry in terms of employment and economic activity, is further detailed
in section 5.3.1.
Please note that a comprehensive description of the specific elements of context
for the present AfA is provided in Appendix 9.1, specifically concerning:
- The notion of sovereignty,
- The relationship between the French State and defence industry companies,
- Legal constraints impacting defence industry companies.
2.2.1. Focus: Maintenance in Operational Conditions (MOC)
When a new armament program is launched, DGA signs a contract with the
industry covering the acquisition of the first years of Maintenance in Operating
Conditions (MOC). According to the French Cour des Comptes (French Court of
Auditors), “the rationale is to take into account the initial costs of MOC in the
decision to design an equipment, so as to facilitate future maintenance and have the
industry directly interested in the maintainability of the equipments it produces”12.
National budgetary lines are dedicated to these costs.
This decision also helps to adjust and anticipate the maintenance capacities available
to the State, which still owns several workshops and trains military maintenance
teams. From this point of view, the report of the Cour des Comptes stresses the fact
that this ‘choice depends on operational constraints, since armies need to be able to
fix their equipments on field, which necessitates trained military staff’. This is
11 Source: DGA
12 Cour des Comptes, Le maintien en Condition Opérationnelle des matériels militaires: des efforts à
poursuivre. Rapport public thématique, 2014
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 18
especially the case for land equipments (such as the ones provided by Nexter), that
‘need to be fixed on areas of operations, hence the presence of maintenance
regiments and the capacity of the State to send in military staff with spare parts’.
Costs associated with MOC are significant13,14:
- In 2012, MOC amounted to 15% of the defence budget (ca. € 6M) and
mobilised 45,000 agents;
- Costs associated with MOC increased by 22% between 2000 and 2014;
- Ownership is estimated to be more than twice the acquisition costs.
In France, three different “NTI”15 levels of maintenance were defined based on
the technical complexity of the operations:
- NTI 1 corresponds to simple actions, being carried out by operational
maintainers and that do not require heavy equipments;
- NTI 2 covers the operations that require specific testing installations or
technical visits and that are carried out in dedicated workshops;
- NTI 3 corresponds to operations that require industrial grade capabilities,
such as design offices or production units and are usually performed on
industrial sites.
Maintenance in Operating Conditions (MOC) is a critical activity for military
services since it is the key parameter of the operational availability of armament
systems.
2.3. General methodology
On the basis of the carcinogenic properties of Cr(VI) compounds for which it is
not possible to determine a threshold, and since it cannot be demonstrated that the
risk to human health or the environment from the use of the substance is adequately
controlled, the “socio-economic route” applies for the present application. The
socio-economic route applies where it can be demonstrated that the risk to human
health or the environment from the use of the substance is outweighed by the socio-
economic benefits and there are no suitable alternative substances or techniques
(Art. 60(4)).
As per ECHA’s guidance, the assessment of the socioeconomic component of the
present AfA will be based upon a cost-benefit analysis approach. A comparative
assessment will therefore be carried out, between the monetised impacts related to
the “applied for use” and the “non-use” scenarios.
In order to best reflect the consequences of both these scenarios, an effort has
been undertaken to place this AfA in the context of the realistic worst-case scenario.
Whenever possible:
13 Ibid. 12
14 Serfati, L’industrie française de la défense, La documentation Française, 2014
15 In French: “Niveau Technique d’Intervention” – “Technical levels of maintenance”
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 19
- Over-estimating hypothesis have been used to assess the impacts of the
“applied for use” scenario and, conversely, under-estimating hypothesis
have been used to assess the impacts of the “non-use” scenario;
- Representative examples have been provided and structuring hypothesis or
assertions have been justified either based on literature or institutional
sources.
When appropriate, complementary elements of analysis will be provided,
notably concerning:
- An alternative methodology of assessment of costs related to mortality and
morbidity;
- An alternative assessment of the costs of the “applied for use” scenario,
considering a 4% discount rate;
- An assessment of the impacts on the loss of profits and the loss of
employments for the overall AfA (all uses cumulated).
Furthermore, and so as to provide a comprehensive understanding of the limits
of the proposed assessment, an uncertainty analysis was carried out for both the
results of the “applied for use” and “non-use” scenarios. This analysis, carried out
both quantitatively and qualitatively, is provided in section 5.6.
2.3.1. Scope of the AfA
Key elements of the scope of the AfA are provided in Table 2 below:
SCOPE COMMENT
Temporal
boundary
7 years post sunset date: 2018-2024. See Table 3 for a description of the
triggering period for each impact.
Geographical
boundaries
Impacts mainly concern France:
- The use of the substance takes place in France;
- The French State and Ministry of Defence are Nexter’s main
customers.
Broader impacts concern foreign armies, with a worldwide scope.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 20
Economic
boundaries
Monetised damage of the impacts on human health of the “applied for
use” scenario includes:
- Medical treatment,
- Mortality and morbidity
Main impacts of the “non-use” scenario include:
- Economic impacts on Nexter’s activity include loss of revenues, lost
investments and contractual penalties;
- Social impacts related to the loss of employment;
- Distributional impacts include the unavailability of the concerned
equipments for French armies and impacts of France’s operational
capabilities and sovereignty. The “non-use” scenario also impacts
other foreign armies, relying on Nexter for the supply of armament
systems as well as Nexter’s industrial partners involved in the
development, production and support of the equipments concerned
by Use-4.
Tonnages - Quantities used: 0.5 tons per year
- Quantities on the final product: None
Table 2. Scope of the AfA
Focus on the temporal boundaries and the impact period:
SCENARIO IMPACT IMPACT PERIOD DISCOUNTING PERIOD
“Applied for use”
scenario
Medical treatment 7 yrs: 2018 - 2024 9 yrs: 2016 - 2024
Mortality and morbidity 7 yrs: 2018 - 2024 9 yrs: 2016 - 2024
“Non-use”
scenario
Loss of profits 7 yrs: 2018 - 2024 9 yrs: 2016 - 2024
Loss of investments 3 yrs: 2015 - 2017 2 yrs: 2016 - 2017
Loss of employment 1 yr: 2018(*)
3 yrs: 2016 - 2018
Table 3. Impact period of the AfA (*) Average unemployment period is considered to be 460 days, but was rounded here to 1 yr
Present value is set in 2015, at the date of drafting of this document.
Considering that the sunset date for chromium trioxide takes place in the end of the
year 2017, an assumption is made that impacts will take place in 2018. Similarly, the
discounting period is set to begin in 2016.
In order to ensure consistency of analysis between impacts of both scenarios,
and as recommended by ECHA’s guidance, it was chosen to consider a common
impact and discounting period for both the “applied for use” and “non-use”
scenarios. In order to remain as close as possible to the temporal scope of the AfA, it
was chosen to assume that the impact period and discounting period of both
scenario correspond to the review period of each use of the AfA.
This assumption can be justified as follows:
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 21
- The period of time covered by the review period of the uses of the AfA
comprises the period of time with the highest mortality rates after diagnosis,
thereby encompassing the majority of the impacts;
- By assuming that the discount period is in line with the review period, and
therefore assuming that the impacts will take place in a closer future than
what is realistically foreseeable, it is deliberately chosen to discount the
impacts of the “applied for use” scenario by a lower factor than if a more
realistic period of time was chosen, for example 20 or 30 years.
2.3.2. An argument partly based on representative examples for the
French army
Even though a large share of Nexter revenues derives from export markets (in
2014, 56% of orders came from export markets), the general methodology that
followed in this document focuses on the consequences of this Application for
Authorisation for Nexter’s activities and for the French army.
Three main arguments can be put forward to justify this approach:
- Nexter is the French State’s sole supplier of armed ground equipments for
greater than medium caliber armament systems: Nexter is directly involved
in the design and production of 100% of the main battle tanks, 71% of the
tracked armoured systems, 67%% of the artillery systems and 59% of the
helicopters of France’s land army16;
- The level of requirements as well as the development procedures of the
French army constitute a worldwide quality benchmark and are of strategic
importance for the development of Nexter’s equipments;
- France’s sovereignty depends on Nexter’s industrial capabilities, both for its
own supply in equipment and to the export potential they allow. It has also
to be taken in account that export is necessary to balance the books of
Nexter Systems.
16 Ministère de la Défense, Les chiffres clés de la défense – Edition 2014, 2014
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 22
2.3.3. Actualisation
All final monetised results of this document are expressed in present value (PV).
In this context, the following factors are used for the actualisation of past values
(correction for inflation) or future values (discounting).
2.3.3.1. Inflation
Given the type of values considered (health expenditures, social benefits), it was
chosen to rely on the Consumer Price Index to carry out actualisation according to
inflation. The choice of this statistical estimate is in line with
ILO/IMF/OECD/UNECE/Eurostat/The World Bank recommendations, stating17: “CPIs
are widely used for the index linking of social benefits such as pensions,
unemployment benefits and other government payments, and also as escalators for
adjusting prices in long-term contracts.”
Given the low variation of CPI in France over the year 2015, it was chosen to rely
on the average of the CPI value for the January to September 2015 period. This value
is considered as representative of year 2015, and therefore used for conversion of
past financial amounts to present value.
The following values will be used in the present document:
PERIOD INFLATION
2003 – 2015 18.25%
2008 – 2015 7.32%
2010 – 2015 5.60%
Table 4. Inflation values taken into account in this dossier18
2.3.3.2. Discounting
Comparing costs and benefits during different periods of time to present values
requires the use of discounting technique to translate future costs and benefits into
present-days values to account for the time value of money
The choice of discount rate is important since it can affect the cost-benefit results of
the analysis. The higher the discount rate is, the lower the future benefits and costs
values will be, as compared to present values.
In our methodology, we deliberately chose to use two different discount rates
depending on the type of future impacts evaluated.
Thus, future human health costs described in the “applied for use” scenario of this
dossier will be evaluated using a lower discount rate that the one used to consider
economic impacts in the “non-use” scenario. This difference is related to the
17 ILO/IMF/OECD/UNECE/Eurostat/The World Bank, Consumer price index manual: Theory and practice
Geneva, International Labour Office, 2004 18
OECD, Main economic indicators, Consumer Price Index – data and methods
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 23
different “nature” of these impacts and aims to reflect the society’s rate of time
preference with respect to health risks.
As per ECHA’s guidelines, the calculation of discounted values is performed on
an annualised basis, with the following formula:
Where:
- = future costs at year
- = annual discount rate
- = last annuity of the discount period
Discounting of health impacts
A 3% discount rate was used in this dossier for health impacts. This choice is in
line with WHO19, stating: “For many years, a discount rate of 5% per annum has been
standard in many economic analyses of health and in other social policy analyses, but
recently environmentalists and renewable energy analysts have argued for lower
discount rates for social decisions. The World Bank Disease Control Priorities study
and the GBD project both used a 3% discount rate, and the US Panel on Cost-
Effectiveness in Health and Medicine recently recommended that economic analyses
of health also use a 3% real discount rate to adjust both costs and health outcomes.”
Please note that, in order to ensure a complete consistency of the values with
ECHA’s requirements, a complementary assessment is provided for the “applied for
use” scenario in section 3.4.4 considering a 4% discount rate.
General discounting
Based on ECHA’s recommendation20, a 4% discounting rate is used to assess the
future cost/benefits values for impacts not related to health matters.
2.3.4. Confidentiality
In order to preserve the confidentiality of strategic data of the present AfA,
confidential business information were blanked out in this public version of the AoA-
SEA document.
In what follows, such figures will be indicated as follows: [€ 10-100M](#1a).
Please refer to section 8 for a justification of confidentiality claims.
19 World Health Organisation, Environmental Burden of Disease Series, No. 1 - Introduction and
methods, Assessing the environmental burden of disease at national and local levels, 2003 20
ECHA, Guidance on the preparation of socio-economic analysis as part of an application for
Authorisation, 2011
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 24
2.4. Substitution strategy
Given the strategic aspect of the equipments concerned by Use-4, a significant
work of research of alternatives was carried out by Nexter since 2001. From 2001 to
2012, many alternatives to Alodine 1200™ have been tested at the laboratory scale
but have not achieved Nexter’s level of requirements. New potential alternatives
have been developed in the laboratories of the main surface treatment
manufacturers as of 2012-2013.
Nexter process of research for alternatives has led to identify five potential
acceptable alternative technologies for Use-4, with the following formulations:
SurTec 650 (Alternative 1), BONDERITE 6500 (Alternative 2), Gardobond C4749 +
Ardrox 1768 (Alternative 3), INTERLOX 338 (Alternative 4) and LANTHANE 613.3
(Alternative 5). These solutions are respective trademarks of the SurTec, Henkel
Surface Technologies, Chemetall, ATOTECH and COVENTYA companies.
These solutions have yet to be thoroughly in-depth tested, validated and
implemented and, due to certification delays, will not be industrially operational
before 2024 and therefore not available for Nexter after the chromium trioxide
sunset date.
2.5. Definitions of the “applied for use” and “non-use”
scenarios
2.5.1. “Applied for use” scenario
Under the “applied for use” scenario, Nexter will pursue the use of chromium
trioxide for the surface treatment of parts concerned by Use-4 for the period of time
necessary to develop, qualify and implement an alternative process, thereby
securing the supply of critical equipments and armament systems for the French and
foreign armed forces.
Main impacts of the “applied for use” scenario concern operator’s health and
monetized damage includes costs associated with medical treatment, mortality and
morbidity.
Risks and impacts of the “applied for use” scenario are respectively detailed in
sections 3.3 and 3.4.
2.5.2. “Non-use” scenario
The most likely “non-use” scenario is the following: with the ban on the use of
Cr(VI) compounds and therefore the cessation of the chromate conversion treatment
of armament systems bodies, Nexter will have to cease the manufacture and the
maintenance in operational conditions of the armament systems concerned by Use-
4. It is reminded that such armament systems constitute the very core of Nexter’s
current and future portfolio. This scenario therefore entails the cease of Nexter
Mechanics’ activity and jeopardises the activity of the Nexter Group as a whole.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 25
Given the fact (a) that there are extremely strong impediments to the purchase
of armament systems outside France and (b) that direct alternative armament
systems are not available or at the very least would need a 5 to 10 years period for
adaptation of the armament-platform interface, testing and qualification of such
alternative, France’s armed forces will be unable to secure the supply of armament
systems that are the backbone of their capacities in field operations.
Impacts of the denial of an authorisation would mainly have economic, social
and distributional dimensions:
- Economic impacts on Nexter’s activity will include loss of profits, lost
investments and contractual penalties;
- Social impacts mainly consists of impacts on employment;
- Distributional impacts include the unavailability of the concerned
equipments for French armies and impacts of France’s operational
capabilities and sovereignty. The “non-use” scenario also impacts other
foreign armies, relying on Nexter for the supply of armament systems and
Nexter’s industrial partners involved in the development, production and
support of the equipments concerned by Use-4.
Impacts of the “non-use” scenario are detailed in section 5.
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Use-4 Nexter Systems - Nexter Mechanics 26
3. “APPLIED FOR USE” SCE NARIO
3.1. Analysis of substance function
Chromate conversion treatments form a very thin conductive
chromium-containing layer of aluminium oxides and hydroxides on the surface of the
parts. The chromate substances included in this layer are strong corrosion inhibitors.
Alodine 1200™ is a mixture containing chromium trioxide. This patented mixture
is used by Nexter Systems and Nexter Mechanics to perform the chromate
conversion coating of armament systems bodies and auxiliary parts.
Composition of the conversion bath is the following:
- Water ;
- Liquid Alodine 1200: 10 mL/L ;
- Activator: 5 mL/L.
Conversion coating is either applied by spraying or immersion, according to the
typology of treated parts:
- Spraying treatment is carried out by Nexter Systems in its plant of Roanne,
France, on the Haffroy machine. This spraying cabin is unique in dimension
and allows the coating of large parts (vehicles or turret bodies) up to
3.5x2x7.5m and 15.5 tons. It was specifically developed for Nexter and is
particularly critical for its products since it concerns structural parts at the
core of military armoured vehicles in structural aluminium alloys. It has to be
stressed that, for ballistic reasons, body shells of armament systems have to
undergo chromate conversion once put together and welded. This
constitutes a significant difference with applications of the aviation industry,
where parts are individually treated and then put together.
- Immersion treatment is carried out by Nexter Mechanics in Tulle, France,
and concerns auxiliary parts with shorter dimensions than the
abovementioned large parts.
Chromium trioxide is here used in Alodine 1200™ mixture on two sites
and applied by spraying (Roanne, Rhône-Alpes, France) and immersion
(Tulle, Limousin, France).
Chromate conversion with Alodine 1200™ provides electrical
conductivity, atmospheric corrosion resistance and paint adhesion properties
to structural and auxiliary parts of Nexter armoured vehicles and armament
systems.
Use-4 is supported by Nexter Systems and Nexter Mechanics and is of
wider interest for the Nexter Group as a whole.
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Use-4 Nexter Systems - Nexter Mechanics 27
Taking into account the similarities between the two processes in terms of products
used, functional requirements and workers operations, both treatment processes
have been aggregated into one single use.
Figure 4. Haffroy machine for spraying treatment
Dichromium tris(chromate) is also used by Nexter Systems in a qualified mixture,
under the brand name Alodine 1132™ Touch-n-prep, for the exact same properties
than Alodine 1200™. In what follows, these two uses will be considered as identical.
Chromate conversion coating ensures the following properties to the parts, so as to
comply with military functional requirements:
- Electrical conductivity:
Electrical connection to the mass of the hull of the vehicles is a critical
functional requirement as it directly impacts the safety of the crew. Un-
grounded electrical devices may disrupt on-board equipments, making the
vehicle unreliable and therefore unsuited for its mission. It has to be
stressed that these conductive areas are not to be re-treated during the life
time of the vehicle and the electrical conductivity has to be maintained all
along this period.
- Atmospheric corrosion performance:
Armoured vehicles and armament systems being potentially deployed in
severe environments and operated in all type of conditions, corrosion
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 28
resistance is necessary to ensure their maintenance in operational
conditions. Corrosion protection is of utmost importance for Use-4, not
only for structural protection of the parts, but also to prevent the formation
of aluminium oxides, which insulating properties would jeopardize the
conductivity of the surfaces.
- Paint adhesion:
Stealth and durability of the weapon systems during their operational
deployment inter alia imply a perfect adhesion of the paint layer over the
painted surfaces. Requirements for paint adhesion are twofold: the first
paint layer has to properly adhere over treated parts as well as to ensure
good adhesion for the other paint layers and allow a camouflage finish that
is compliant with those of the different theatres of operations the
equipment is to be deployed. Except for electrical grounding areas, all
surfaces are painted.
Parts treated with these two processes being functionally associated within the
vehicles or armament systems, surface treatment performances have to precisely
match for both spraying and immersion treatments.
These levels of performance come from the DGA’s requirements that are
specified during the development of the concerned armament systems, according to
foreseen field use needs and Maintenance in Operating Conditions needs all along
their operational deployment. The level of performance provided by Use-4 is of vital
interest for the activity of Nexter, but also for France military capabilities and
sovereignty.
3.2. Market and business trends including the use of the
substance
Conversion bath is formulated and supplied to Nexter by Henkel Surfaces
Technologies under the trademark Alodine 1200™.
As shown in the previous section, chromate conversion coating is carried out by
Nexter Systems and Nexter Mechanics:
PROCESS TYPE OF PARTS NEXTER ENTITY SITE
Spraying Large structural parts (vehicles or turret bodies) up to 3.5x2x7.5m and 15.5 tons
Nexter Systems Roanne, France
Immersion Auxiliary parts Nexter Mechanics Tulle, France
Figure 5. Synthesis of the conversion coating processes concerned by the AfA
Nexter group is composed of several legal entities. Nexter Systems is submitting
Applicant and Nexter Mechanics is co-Applicant for the Authorisation dossier.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 29
The supply chain is synthesised in Figure 6 below and can be described as follows:
- HENKEL is the supplier of Alodine 1200™;
- Nexter Mechanics uses Alodine 1200™ for the conversion coating of auxiliary
parts by immersion;
- Nexter Systems uses Alodine 1200™ for the conversion coating of structural
parts by spraying. Nexter Systems is also the design authority for final
requirements on conversion treatment;
- Subcontractors are not concerned by the present AfA since their activity will
be internalised by Nexter Mechanics before the Cr(VI) compounds’ sunset
date.
- DGA is the French Ministry of Defence’s administrative institution in charge
of the development of armament solutions, based on the Etat-Major’s
expression of needs and in collaboration with the defence industry.
Figure 6. Supply chain
Dependency links of Figure 6 above can be described as follows:
- Functional dependency refers to an indirect relationship between entities,
based on functional requirements. E.g. the exact implementation of surface
treatment by Nexter Mechanics is directly conditioned by the design of the
armament systems by Nexter Systems;
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 30
- Business dependency refers to a direct business relationship. E.g. Nexter
Systems orders manufacturing operations to Nexter Mechanics;
- Design authority refers to the role of design authority and production
process;
- Customer requirements include the requirements in terms of performances
of Nexter’s customers.
Along with Nexter Mechanics and Nexter Systems, the substance is used by Nexter’
subcontractors. As already mentioned, subcontractors are not covered by this AfA.
As a consequence, all the parts currently outsourced for hard chromium plating will
be internalised by Nexter Mechanics and its activities will cover all the armament
parts that fall under the use described in this document. The increase of activity
foreseen in the context of the internalisation of the subcontracting activities was
considered via the increase in workers exposed and directly taken into account in the
exposures and the excess risk of cancer derived in the CSR.
Use-4 therefore directly concerns Nexter Mechanics and Nexter Systems. The
different entities and their key figures are presented in the following table:
TURNOVER WORKFORCE
ORDER PORTFOLIO
Nexter Systems
€ 739M 1,806 € 691 M
Nexter Mechanics
€ 30.4M 114 € 19.3 M
Table 5. Key figures of Nexter Systems and Nexter Mechanics for 2014
3.2.1. Annual tonnage
Annual tonnage of chromium trioxide used by Nexter in the context of Use-4 is
0.6 ton.
3.3. Remaining risks of the “applied for use” scenario
As described in the CSR, the “applied for use” scenario only presents a risk for
workers dedicated to the surface treatment and to the cleaning of the workshop, as
well as for laboratory workers. It can therefore be stated that risks for general
population are negligible. The handling of the mixture containing the substance is
well managed with general and personal protection equipments as well as safety
procedures and training of the operators.
3.4. Human health impacts and monetised damage of the
“applied for use” scenario
Monetised damage of the impacts on human health of the “applied for use” scenario
includes medical treatment, mortality and morbidity.
A synthesis of the impacts of the “applied for use” scenario is given below:
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 31
Figure 7. Synthesis of the impact categories of the “applied for use” scenario
When relevant, and in order to offer a comprehensive understanding of the
amounts at stake, it was chosen to supplement values taking into account the total
excess risk of cancer with values based on the individual excess of risk of cancer.
In what follows:
- Individual values refer to values based on the individual excess risk of
cancer, thereby related to one worker;
- Total values refer to values based on the total excess risk of cancer, thereby
related to all the workers concerned by the use.
3.4.1. Medical cancer treatment
Different studies evaluate the global cost of lung cancer treatment including,
depending on the study, hospitalisation costs, medicine costs but also other
associated costs such as in-house care21,22,23,24.
For the following analysis, it was chosen to rely on data provided in a recent
study25 which compares the cost of medical treatments associated with lung cancer
in France, UK and Germany based on regional or national administrative databases.
This study is only based on NSCLC (Non Small-Cell Lung cancer) which represents
approximately 80% of the lung cancer without considering the others forms as SCLC
21 Mc Guire, Treatment cost of non-small cell lung cancer in three European countries: comparisons
across France, Germany, and England using administrative databases, Journal of Medical Economics Vol. 18, No. 7, 2015, 525–532 22
Simrova et al, The costs and reimbursements for lung cancer treatment among selected health care providers in the Czech Republic, 2014 23
Chouaïd et al, Economics of the clinical management of lung cancer in France: an analysis using a Markov model, British Journal of Cancer (2004) 90, 397–402. doi:10.1038/sj.bjc.6601547 24
Braud et al, Direct treatment costs for patients with lung cancer from first recurrence to death in France, Pharmacoeconomics. 2003;21(9):671-9. 25
Ibid. 22
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 32
(Small-Cell Lung cancer). Nevertheless, a previous study in France26 shows that the
costs associated with other forms are 50% lower than those of NSCLCs and the
combined cost is nearest the cost associated with the NSCLC. In order to remain in
the context of the realistic worst-case scenario, it was therefore considered that
100% of lung cancers are NSCLC form.
In a 2-year follow-up after diagnosis approach, the different costs associated to
lung cancer in France are listed in the table below:
YEAR 1 YEAR 2
Hospital in-patient € 11,667 € 5,916
Hospital out-patient € 2,313 € 676
Medicines € 3,542 € 321
Other € 502 € 126
Total € 18,024 € 7,039
2-year total € 25,063
Table 6. Lung cancer costs in France for the two first years after the diagnosis27
Two main comments can be made concerning the above table data:
- The costs of the first-year care are higher than for the following year;
- The highest cost is attributable to the hospitalisation.
Regarding this information, it was also considered the net survival rate by
country at 1 year, 5 years and 10 years in order to monetise health impacts.
In a recent study28 the lung cancer survival rate at 5 years has been calculated
for France and data for 1 and 10 years after diagnosis was identified by the French
Institute for Cancer:
YEARS AFTER DIAGNOSIS SURVIVAL RATE
1 year 42.0 %29
5 years 13.6 %30,31
10 years 9.0 %32
Table 7. Net year survival rate after lung cancer diagnosis in France
26 Allemani, Global surveillance of cancer survival 1995–2009: analysis of individual data for 25 676 887
patients from 279 population-based registries in 67 countries (CONCORD-2), Lancet, 385: 977–1010, 2015 27
Ibid. 22 28
Ibid. 26 29
Institut National du Cancer, Prévalence et survie nationales du cancer du poumon, 2015 30
Ibid. 26 31
Ibid. 29 32
Ibid. 26
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 33
In order to monetise the damage on human health, it was considered the
likelihood of occurring of a lung cancer on workers. This probability corresponds to
the excess of risk of lung cancer.
The individual lung cancer costs are synthesised listed in Table 8 below, taking
into account the cost of lung cancer treatment by year after diagnosis (we consider
that the cost per year after the year 2 is the same as for year 2), the net survival rates
at 1 year, 5 years and 10 years and the requested review period of 7 years but not
considering the excess of risk.
In order to conform to the realistic worst-case scenario, it was chosen to apply
the survival rate of the upper bound of each year after diagnosis range:
- Survival rate during the first year after diagnosis is supposed to be 100% ;
- Survival rate between year 2 and year 5 after diagnosis is supposed to be
42% ;
- Survival rate for more than 6 years after diagnosis is supposed to be 13.6%.
A 3% discount rate was applied to the costs in order to take into account time
preference and express the cost in current value.
YEARS AFTER DIAGNOSIS OVERALL COSTS
0 to 1 year € 18,024
1 to 5 years € 11,826
5 to 7 years € 1,915
Individual lung cancer costs € 31,764
Individual lung cancer costs,
taking into account a 3% discount rate
until the end of the review period
€ 28,041
Table 8. Individual lung cancer costs during the review period, not taking into account the excess of risk for workers
The following table synthesises the lung cancer costs per worker, taking into
account the total excess of risk for Use-4 (2.50 x 10-5):
YEARS AFTER DIAGNOSIS OVERALL COSTS
0 to 1 year € 0.45
1 to 5 years € 0.30
5 to 7 years € 0.05
Total of lung cancer costs € 0.79
Total of lung cancer costs,
taking into account a 3% discount rate
until the end of the review period
€ 0.70
Table 9. Total lung cancer costs during the review period, considering the total excess of risk for workers and the respiratory equipments
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 34
3.4.2. Mortality and morbidity
Several summary measures of population health have been devised, including
the Quality-Adjusted Life Year (QALY), the Disability-Adjusted Life Expectancy and the
Healthy Life Year33,34,35,36. The benefits and challenges of these measures have been
examined in several publications37,38,39,40.
According to the WHO recommendations41 and since it has been widely used, it
was chosen to assess the impacts of both mortality and morbidity associated with an
excess risk of cancer through one combined measure: the Disability-Adjusted Life
Years or DALY.
The DALY method is recommended by ECHA for the assessment of mortality and
morbidity impacts42,43.
3.4.2.1. General methodology
The following methodology is based on the general WHO methodology for the
calculation of DALYs44.
DALY is a combined measure of the period of time lived with disability and the
period of time lost due to premature mortality:
Where: YLL = years of life lost due to premature mortality and YLD = years lived with
disability.
In such an approach, time is used as a common currency for non-fatal health states
and years of life lost. Disability weights are thus used to formalize and quantify social
33 Weinstein, Stason, Foundations of cost effective analysis for health and medical practices. New
England Journal of Medicine, 296:716-721, 1977 34
Murray, Rethinking DALYs. In: Murray, Lopez, eds. The global burden of disease. Geneva, World Health Organization, Harvard School of Public Health, World Bank, 1996 35
Hyder, Rotllant, Morrow, Measuring the burden of disease: healthy life years. American Journal of Public Health, 88:196-202, 1998 36
Murray, Salomon, Mathers, A critical examination of summary measures of population health. Bulletin of the World Health Organization, 8(8):981-994, 2000 37
Anand, Hanson, Disability-adjusted life years: a critical review. Journal of Health Economics, 16:695-702, 1997 38
Williams, Calculating the global burden of disease: time for a strategic reappraisal? Health Economics, 8:1-8, 1999 39
Murray, Lopez, Progress and directions in refining the global burden of disease approach. Geneva, World Health Organization (GPE Discussion Paper No 1), 1999b 40
Murray, Salomon, Mathers, Lopez, Summary measures of population health: concepts, ethics, measurement and applications. Geneva, World Health Organization, 2002 41
World Health Organisation, Environmental Burden of Disease Series, No. 1 - Introduction and methods, Assessing the environmental burden of disease at national and local levels, 2003 42
ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008 43
ECHA, Applying socio-economic analysis as part of restriction proposals under REACH - Workshop proceedings, Helsinki, 21-22 October 2008 44
Mathers, Stein, Fat et al, Global Burden of Disease 2000: Version 2 methods and results, Global Programme on Evidence for Health Policy Discussion Paper No. 50: World Health Organization, 2002
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 35
preferences for different states of health, measured as number on a 0-1 scale,
where: “0” is assigned to a state of ideal health and “1” to a state comparable to
death.
3.4.2.2. Years of Life Lost due to premature mortality
The basic formula for calculating the years of life lost (YLL) metric is the following:
Where: N = number of deaths and L = standard life expectancy at age of death (in
years).
The number of deaths (N) is supposed to be the total excess risk of cancer. Life
expectancy at age of death (L) is calculated by subtracting the standard life
expectancy (82.4 years in France45,46) and the average age of death in France (68
years in France47).
A 3% discount rate was applied to YLL in order to take into account time
preference and express the cost in current value.
YLL and intermediate data are detailed in Table 10 below.
PARAMETERS VALUES
Standard life
expectancy 82.4 years
Mean age of lung cancer
death 68 years
Number of years lost 14.4 years
Site Roanne Tulle
Population Main workers Substitute
workers Main workers
Laboratory
workers
Individual excess of lung
cancer risk 6.65 x 10
-6 1.09 x 10
-6 4.70 x 10
-6 1.31 x 10
-7
Individual YLL(*)
8.0 x 10-5
years 1.3 x 10-5
years 5.7 x 10-5
years 1.6 x 10-6
years
Total excess of lung
cancer risk 2.50 x 10
-5
Total YLL(*)
3.0 x 10-4
years
Table 10. Years of Life Lost (YLL) for Use-4 (*)
: considering a 3% discount rate until the end of the review period
45 Eurostat, Mortality and life expectancy statistics, June 2015
46 This value is furthermore in line with the WHO recommendations for calculation of DALYs and
corresponds to the upper end of the life expectancy range to be considered. 47
INSERM, INVS/CépiDC, 2012. In: Institut National du Cancer, Mortalité nationale des cancers, 2015
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 36
3.4.2.3. Years Lived with Disability
The calculation of the years of life with disability (YLD) is based on the following
formula:
Where: t = total time lived with disability, DW = disability weight.
In the case of lung cancer, the value of 0.772 was used for DW48 and the total
time lived with disability was estimated by multiplying the average number of years
lived with disability, with the excess risk of cancer for workers. The average number
of years lived with disability was obtained by subtracting the mean age of death (68
years49) and the mean age of diagnosis (66 years50) associated with lung cancer.
A 3% discount rate was applied to YLD in order to take into account time
preference and express the cost in current value.
YLD and intermediate data are detailed in Table 11 below.
PARAMETERS VALUES
Mean age of
lung cancer death 68 years
Mean age of
lung cancer diagnosis 66 years
Number of years
with disability 2 years
Site Roanne Tulle
Population Main workers Substitute
workers Main workers
Laboratory
workers
Individual excess of
lung cancer risk 6.65 x 10
-6 1.09 x 10
-6 4.70 x 10
-6 1.31 x 10
-7
Individual YLD(*)
8.6 x 10-6
years 1.4 x 10-6
years 6.1 x 10-6
years 1.7 x 10-7
years
Total excess of
lung cancer risk 2.50 x 10
-5
Total YLD(*)
3.2 x 10-5
years
Table 11. Years of Life lived with Disability (YLD) for Use-4 (*)
: considering a 3% discount rate until the end of the review period
48 Migrin, A Review and Meta-Analysis of Utility Values for Lung Cancer, U.S. EPA
49 Institut National du Cancer, Cancer du Poumon – Quelques chiffres, Les cancers en France en 2014
50 Ibid. 49
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 37
3.4.2.4. Synthesis of the monetised damage related to mortality and
morbidity
Monetised damage related to YLLs and YLDs was calculated using the central
value of life year lost recommended by ECHA51 and based on the NewExt study52:
€ 55,800 (in 2003 price levels). This value is in line with Desaigues53, which estimated
the central value of life year to € 50k, based on a survey of French residents and with
EurovaQ study54, proposing a value per life year of € 45,064.
Correction for inflation was applied based on the change in consumer price
index: 18.25% on average over the 2003-2015 period55.
Final YLLs, YLDs and monetised damage are synthesised in the following table:
PARAMETERS VALUES
YLL 3.0 x 10-4
years
YLD 3.2 x 10-5
years
DALY = YLL + YLD 3.3 x 10-4
years
Value of life year lost(*)
€ 65,985
Total cost for mortality and morbidity
(present value) € 22.1
Table 12. Synthesis of YLLs, YLDs and monetised damage of mortality and morbidity related to the excess cancer risk associated with lung cancer, Use-4
(*): considering a 18.25% inflation rate over the 2003-2015 period
3.4.2.5. Complementary assessment
Since the costs associated with mortality and morbidity constitute the main
monetised damage of the “applied for use” scenario, and in order to validate the
previous calculation, another estimate methodology was used, based on the value of
a statistical life and the willingness to pay to avoid a cancer case as provided in
ECHA’s SEA guidance:
51 ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008
52 NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003
53 Desaigues, Rabl, Ami, Boun My Kene, Masson, Salomon, Santoni, 2007a. Monetary Value of a Life
Expectancy Gain due to Reduced Air Pollution: Lessons from a Contingent Valuation in France. Revue d’Economie Politique 117 (5), 675–698, 2007 54
EurovaQ, European Value of a Quality Adjusted Life Year, Final Publishable Report, 2010 55
Ibid. 18
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 38
VALUE OF STATISTICAL LIFE
WILLINGNESS TO PAY
TO AVOID A CANCER CASE
Initial value € 1,052,000
(2003 price levels)
€ 400,000 per non-fatal case
(supposed 2008 price levels)
Inflation 18.25%
over the 2003-2015 period
7.32%
over the 2008-2015 period
Present value € 1,244,022 € 429,268
Table 13. Value of statistical life and willingness to pay to avoid cancer56
Please note that the value of € 400,000 per non-fatal case for the willingness to
pay to avoid a cancer case is not referenced in ECHA’s guidelines. It was nevertheless
used in this complementary analysis since it is in line with the value of € 395,656
calculated by Alberini and Ščasný57.
Mortality rate was derived from incidence and mortality data:
PARAMETERS VALUES
Lung cancer incidence 39,495
Lung cancer fatal cases 29,949
Mortality rate 76%
Survival rate 24%
Table 14. Incidence and mortality associated with lung cancer in France, in 201258
Based on the parameters previously put forward, the overall impacts of cancer,
as calculated with this methodology are synthesised below:
56 ECHA, Guidance on the preparation of socio-economic analysis as part of an application for
authorisation, Version 1, January 2011 57
Alberini and Ščasný, Stated-preference study to examine the economic value of benefits of avoiding selected adverse human health outcomes due to exposure to chemicals in the European Union, FD7. Final Report - Part III: Carcinogens, Charles University in Prague (Environment Center), September 2014. 58
Institut National du Cancer, Incidence nationale du cancer du poumon, 2015
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 39
PARAMETER VALUE COMMENT
Mortality
Number of fatal cancer
cases over the review period 1.9 x 10
-5
Taking into account: the total
excess risk of cancer and the
average mortality rate of lung
cancer in France
Subtotal: costs of mortality € 19.8 Discounted until the end of the
review period
Morbidity
Number of non-fatal cancer
cases over the review period 6.0 x 10
-6
Taking into account: the total
excess risk of cancer and the
average survival rate of lung
cancer in France
Subtotal: costs of morbidity € 2.2 Discounted until the end of the
review period
Total € 22.0 Present value
Table 15. Mortality and morbidity costs for Use-4, complementary analysis
The results of this complementary assessment (€ 22.0) validate the results
obtained with the DALY approach (€ 22.1).
3.4.3. Synthesis of the monetised damage of the “applied for use”
scenario
The overall monetised impacts of the “applied for use” scenario can be
summarised as follows:
IMPACTS COSTS
Medical treatment € 0.7
Mortality and morbidity € 22.1
Total € 22.8
Table 16. Overall impacts of the "applied for use" scenario, Use-4
3.4.4. Complementary elements of analysis: values taking into account a
4% discount rate
In order to ensure a complete consistency of the values with ECHA’s
requirements, monetised impacts of the “applied for use” scenario are also provided
considering a 4% discount rate:
IMPACTS COSTS
Medical treatment € 0.7
Mortality and morbidity € 20.9
Total € 21.5
Table 17. Overall impacts of the “applied for use” scenario, Use-4, complementary analysis taking into account a 4% discount rate
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 40
3.5. Environment and man-via-environment impacts and
monetised damage of the “applied for use” scenario
3.5.1. Environment impacts and monetised damage
The assessment of environmental impacts is not the main consideration for this
application for authorisation focused on SVHC properties of chromium trioxide, as
stated in column 2 of entry 16 and 28 in annex XIV of REACh (Commission Regulation
(EU) No 125/2012).
Environmental considerations, possible release and risk for general population are
nevertheless discussed and analysed in the CSR; the conclusion of the CSR is that the
risk related to the potential release due to the use of chromium trioxide and
dichromium tris(chromate) is considered as negligible.
3.5.2. Man-via-environment impacts and monetised damage
As presented above, possible release and risk for general population are
discussed in the CSR.
The conclusion of the CSR is that the risk for general population due to the use of
chromium trioxide and dichromium tris(chromate) is considered as negligible.
3.6. General conclusion on the impacts and monetised
damage of the “applied for use” scenario
In the context of the present AfA, impacts and monetised impacts of the
“applied for use” scenario can be equated to the figures detailed in section 3.4.3.
The overall monetised damage of the “applied for use” scenario for Use-4 over
the review period amounts to € 22.8.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 41
4. SELECTION OF THE “NON-USE” SCENARIO
Please note that the present Analysis of Alternatives covers the use of chromium
trioxide and dichromium (tris)chromate. This can be justified as follows:
- Both substances are used under Use-4 in the chromate conversion coating of
structural and auxiliary parts of armoured vehicles and armament systems;
- Dichromium (tris)chromate is only used by pen application if needed, for
adjustments, on the parts already treated with chromium trioxide by
spraying and in order to provide similar functional properties than those of
chromium trioxide;
- Potential alternatives solutions are presented for the two main processes (by
spraying or immersion) which involve the use of chromium trioxide. Since
dichromium (tris)chromate is used for adjustments, as part of the spraying
process, the application of alternatives solutions presented for chromium
trioxide will also substitute the use of dichromium (tris)chromate linked to
this process (alternative solutions would have to be formulated for pen
applications). Thus, the alternatives solutions are presented for the whole
process and concern both Cr(VI) compounds.
4.1. Efforts made to identify alternatives
It has to be stressed that the majority of aluminium alloys parts treated by
Nexter for its armament parts are 7000 series alloys. The 7000 family alloys are
among the best performers in terms of mechanical and ballistic properties. They are,
however very sensitive to corrosion.
Well-known Cr(VI)-free conversion processes used in other industries (e.g. in the
building sector) cannot be used for Use-4 applications, since these industries mainly
use 5000 and 6000 series alloys, which show lower sensitivity to corrosion than 7000
series.
A significant work of research was carried out by Nexter since 2001,
which lead to identify five potential acceptable alternative technologies:
SurTec™ 650 (Alternative 1), BONDERITE 65000™ (Alternative 2),
Gardobond™ C4749 + Ardrox™ 1768 (Alternative 3), INTERLOX 338™
(Alternative 4) and LANTHANE 613.3 (Alternative 5).
As of today, these alternatives appear promising in terms of technical
and economic properties but their implementation within the Nexter
production chain is yet a long-term solution as they have to undergo several
testing, validation and implementation steps.
None of these alternatives will be industrially available for Nexter
before the chromium trioxide sunset date.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 42
4.1.1. Research and development
Given the importance of Use-4 for Nexter’s and its customers’ activities, a
significant work of research, testing and benchmarking of potential alternatives was
carried out by Nexter Mechanics and Nexter Systems over the last 15 years.
As of today, Nexter relies on a joint workgroup with CETIM dedicated to identify
Cr(VI)-free Alodine1200TM alternative surface treatment solutions.
4.1.2. Data searches
Data searches for Cr(VI)-free Alodine 1200 TM alternatives were based on both
bibliographic research, benchmarking and laboratory testing. These works can be
summarised as follows:
PHASE TIME FRAME RESEARCH TOPIC
Phase 1
2001-2002 Replacement of Cr(VI)-based treatments for aluminium
alloys protection – replacement of Alodine 1200
2003-2005 Cd substitutes and Cr(VI)-based treatments for steel and
aluminium alloys – 2003 and 2005 state of the art
2007 State of the offer for chromium conversion on aluminium
alloys (Alodine 1200) on Nexter equipments
2009
CETIM / Nexter Systems national surface treatment study:
substitution of Alodine 1200
Assessment of conductivity and saline mist resistance of
alternative solutions
2010 2010 state of the art for the replacement of Alodine 1200
by SurTec 650
Phase 2 2011- 2012 Summary note – VBCI Export works – Alodine
replacement
Phase 3 2012-2014
Performance assessment of reference Alodine 1200
Performance assessment of Coventya chromium
conversion solutions
Performance assessment of Chemetall chromium
conversion solutions
Performance assessment of Atotech chromium
conversion solutions
Performance assessment of Henkel chromium conversion
solutions
Presentation of the REACh 2014 works
Replacement of Alodine 1200 and SurTec 650
Selection of Alodine 1200 alternative
Figure 8. Data searches for Alodine 1200 alternatives
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 43
Only phases 2 and 3 have given promising results. Phase 2 was dedicated to a
confidential export project and the process studied cannot be widely transferred on
all parts concerned by Use-4. Phase 3, as said before, concerns the study of new
conversion solutions which seem to be more appropriated for the requirements of
Use-4.
Comprehensive data searches carried out by Nexter include:
Inventory of the specific functional requirements for each part
An inventory of the specific functional requirements for different conversion
coated parts of the Nexter production was carried out. This inventory allowed
identifying parts for which the combination of electric conductivity, standard
corrosion and paint adhesion is needed. Thus the exact functional scope of Use-4 is
defined according to this inventory.
Bibliographic research and selection of alternatives
Based on a preliminary inventory, a selection was carried out in order to
short-list potential alternatives meeting a maximum of Nexter parts functional
requirements.
Preliminary testing of the basic functional performances of
alternatives
The testing methodology for the basic functional performances of the
shortlisted potential alternatives is the following:
TEST TYPE STANDARD REFERENCE COMPLIANCE CRITERIA
Aspect Visual control Compliance criteria: lack of stains,
discoloration and scratches
Adhesion Adhesive peel test SCOTCH
3M ref 2525
No stain to appear on the adhesive,
except for zones with sharp angles
Corrosion
resistance NF EN ISO 9227
Required: no pitting after 168 h
exposure
Expected: few pits after 360 h exposure
Conductivity
Nexter Systems protocol:
surface conductivity and
assembly conductivity
-
Table 18. Testing methodology for potential alternatives
4.2. Identification of known alternatives
Five potential alternatives to Use-4 have been shortlisted: SurTec 650
(Alternative 1), BONDERITE 65000 (Alternative 2), Gardobond C4749 + Ardrox 1768
(Alternative 3), INTERLOX 338 (Alternative 4) and LANTHANE 613.3 (Alternative 5).
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 44
These solutions are respective trademarks of the SurTec, Henkel, Chemetall,
ATOTECH and COVENTYA companies.
These alternatives do not show the same maturity level: Alternative 1 has
entered industrial stabilisation stage whereas Alternatives 3 to 5 are relatively new
formulations and alternative 2 was demonstrated for the first time on February
2015, therefore lacking industrial hindsight.
As exposed in the previous section, potential alternatives have undergone
laboratory testing, with the following results:
ELECTRICAL
CONDUCTIVITY
CORROSION
RESISTANCE PAINT ADHESION
Alternative 1
SurTec 650 OK
(1) OK(1)
OK
Alternative 2
BONDERITE 6500
Assessment in
progress
Assessment in
progress
Assessment in
progress
Alternative 3
Gardobond C4749
+ Ardrox 1768
OK(2)
OK(2)
Assessment in
progress
Alternative 4
INTERLOX 338 OK
(2) OK
(2)
Assessment in
progress
Alternative 5
LANTHANE 613.3 OK
(2) OK
(2)
Assessment in
progress
Table 19. Functional properties assessment for Use-4 (1)
: with reproducibility issues; (2)
: at laboratory scale
4.3. Assessment of shortlisted alternatives
All five short-listed alternatives appear to likely offer a similar or improved level
of performance over Use-4’s functional requirements for conductivity and corrosion
resistance; paint adhesion has yet to be further investigated for all alternatives.
It has also to be stressed that the level of requirement and the treatment
processes carried out both by immersion and aspersion are very specific among
other industries. Nexter Systems and Nexter Mechanics therefore constitute a niche
market for the treatment mixtures formulators, which may not legitimate a specific
development of products specifically adapted to those specific needs in case
standard solutions do not appear to be appropriate.
Moreover, Alodine 1200TM is currently widely used in armament and aeronautical
industries; the network of subcontracting is thus well developed. The choice of an
alternative will thus be indirectly conditioned by the aeronautical industry
qualification choices and the evolution of the industry toward one solution.
It is unlikely that 3 or 4 conversion treatments will be implanted in the
subcontracting network. Nexter has therefore to be vigilant about which solution will
be qualified by the aeronautical industry, due to their leadership on this market. For
this reason, Nexter pursues the studies of four alternatives and one as backup
option.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 45
4.3.1. Alternative 1
4.3.1.1. Substance ID, properties, and availability
SurTec 650 is a trademark of the SurTec Company. It is a new treatment,
qualified for some industrial applications, but currently under assessment for 7000
and 2000 aluminium series alloys in aeronautical and armament industries.
This treatment is based on Cr(III) and zirconium salts as corrosion inhibitors.
SurTec meets or exceeds MIL-DTL-81706B and MIL-DTL-5541F class 1 for bare
corrosion and class 3 for contact electric resistance.
4.3.1.2. Technical feasibility of Alternative 1
Alternative 1 is at an industrial stabilisation stage.
Preliminary assessment showed a strong dependency of the functional
performance of Alternative 1 with application mode. Testing does not currently show
an acceptable reproducibility of results with aspersion and immersion processes.
As stated in section 3.1, consistency between immersion and spraying processes is a
critical parameter, as parts treated with these two processes may be functionally
assembled.
4.3.1.3. Economic feasibility and economic impacts of Alternative 1
A preliminary assessment shows that costs of Alternative 1 should be in line with
the current treatment process. It is, however, possible that the necessary chemical
surface preparation (degreasing and etching) before conversion necessitates
installing new tanks in the Nexter Mechanics plant. This would not be necessary in
the Nexter Systems plant of Roanne.
4.3.1.4. Availability of Alternative 1
An alternative solution is considered as available if validated through a multi-
step process. Each step of this process is to be individually considered and can be
time-lined. These steps can be described as follow:
1. Testing:
a. Research on alternative solution (already carried out)
b. Preliminary evaluation of alternative solutions (already carried out)
c. Functional validation of alternative solutions on a laboratory scale (already carried out)
d. Assessment of performance reproducibility in subcontracting processes
2. Pilot scale and industrialisation
3. Final DGA qualification
The overall process leading to the implementation of the potential alternative
solution is summarized as follows:
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 46
Figure 9. Global implementation timeline of Alternative 1
Even though basic testing has shown conclusive results, the implementations of
Alternative 1 within the Nexter production chain is yet a middle-term solution as it
has to undergo several testing, qualification and implementation steps:
Spraying process
- Performance assessment for spraying process on unpainted parts [1 yr
end 2015] ;
- Performance assessment for spraying process on painted parts [1 yr end
2015] and industrial subcontracting assessment for immersion process
(when available) [1 yr end 2017] ;
- Comparative analysis of the technical and economical assessment and
subcontracting availability, versus compatibility assessment with current
Nexter Systems’ Haffroy spraying cabin [1 yr end 2018] ;
- Industrialisation at Roanne, subcontracting deployment [1-2 yr 2020];
- Qualification on parts treated with alternative solutions [4 yrs 2024].
Immersion process
- Performance assessment for immersion process on unpainted parts [1 yr
end 2015] ;
- Performance assessment for immersion process on painted parts and
industrial subcontracting assessment for immersion process (when available)
[1 yr end 2017] ;
- Comparative analysis of the technical and economical assessment and
subcontracting availability, versus compatibility assessment with current
Nexter Systems’ Haffroy spraying cabin [1 yr end 2018] ;
- Industrialisation at Roanne, subcontracting deployment [1-2 yr 2020];
- Qualification on parts treated with alternative solutions [4 yrs 2024].
Alternative 1 will consequently not be available before the hexavalent chromium
sunset date on 2017/09/21.
It has to be stressed that, for DGA, substitution to an alternative surface
treatment process will be considered as a major change and therefore requires an in-
depth qualification of the alternative solution, including testing on weapons. This
point has to be taken in account to explain the long qualification time estimated for
the DGA qualification.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 47
4.3.1.5. Hazard and risk of Alternative 1
According to the Safety Data Sheet, SURTEC 650 contains no substances which
have to be declared. No further information is available
4.3.1.6. Conclusions on Alternative 1
Alternative 1 is a relatively mature process, as compared to other alternatives,
and is currently at an industrial stabilisation stage. Internal studies are in progress
to assess the performance reproducibility for spraying and immersion processes.
As developed in the following paragraphs, it has to be taken into account that
SURTEC 650 is only available for treating aluminium alloys. It is therefore
unsuitable to treat steels.
4.3.2. Alternative 2
4.3.2.1. Substance ID, properties, and availability
BONDERITE 65000 was presented at the Henkel Surface Technologies
“Innovative Day” in February 2015. No further information of the nature of this
process was provided.
4.3.2.2. Technical feasibility of Alternative 2
At this stage, preliminary assessments have been carried out for Nexter in the
laboratory of the French research centre of Henkel Surfaces Technologies. This
treatment is compliant with immersion and spraying processes.
4.3.2.3. Economic feasibility and economic impacts of Alternative 2
A preliminary assessment shows that costs of Alternative 2 should higher than
those of the current treatment. It is, however, possible that the necessary chemical
surface preparation (degreasing and etching) before conversion may necessitate
installing new tanks in the Nexter Mechanics plant; this should not be necessary in
the Nexter Systems plant of Roanne.
4.3.2.4. Availability of Alternative 2
An alternative solution is considered as available if validated through a multi-
step process. Each step of this process is to be individually considered and can be
time-lined. These steps can be described as follow:
1. Testing:
a. Research on alternative solution (already carried out)
b. Preliminary evaluation of alternative solutions (currently in progress)
c. Functional validation of alternative solutions on a laboratory scale
d. Assessment of performance reproducibility in subcontracting processes
2. Pilot scale and industrialisation
3. Final DGA qualification
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 48
The overall process leading to the implementation of the potential alternative
solution is summarized as follows:
Figure 10. Global implementation timeline of Alternative 2
Even though basic preliminary testing has shown conclusive results, the
implementations of Alternative 2 within the Nexter production chain is yet a middle-
term solution as it has to undergo several testing, qualification and implementation
steps:
Spraying process:
- Performance assessment for spraying process on unpainted parts [1 yr
end 2015] ;
- Performance assessment for spraying process on painted parts [1 yr end
2016] ;
- Industrial subcontracting assessment for spraying process (if available) [1 yr
end 2016] ;
- Comparative analysis of the technical and economical assessment, versus
compatibility assessment with current Nexter Systems’ Haffroy spraying
cabin [1 yr end 2018] ;
- Industrialisation at Roanne, subcontracting deployment [1-2 yr 2020];
- Qualification on parts treated with alternative solutions [4 yrs 2024].
Immersion process
- Performance assessment for immersion process on unpainted parts and
painted parts [2 yr end 2016] ;
- Industrial subcontracting assessment for immersion process (if available) [1
yr end 2017] ;
- Comparative analysis of the technical and economical assessment and
subcontracting availability, versus compatibility assessment with current
subcontracting [1 yr end 2018] ;
- Subcontracting deployment and qualification on parts treated with
alternative solutions [6 yrs 2024].
Alternative 2 will consequently not be available before the hexavalent chromium
sunset date on 2017/09/21.
It has to be stressed that, for DGA, substitution to an alternative surface
treatment process will be considered as a major change and therefore requires an in-
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 49
depth qualification of the alternative solution, including testing on weapons. This
point has to be taken in account to explain the long qualification time estimated for
the DGA qualification.
4.3.2.5. Hazard and risk of Alternative 2
Hazard and risk of Alternative 2 are not yet known.
4.3.2.6. Conclusions on Alternative 2
A shown in 4.3.2.1, there is a lack of hindsight about Alternative 2. It has,
however, two main interests for Nexter:
- It is proposed by Henkel Surface Technologies which is the inventor of the
Alodine 1200™ and an historical partner of Nexter (Henkel has built and
developed the processes of the HAFFROY machine);
- This treatment could be capable of the conversion of aluminium alloys as
well as of steels. It has to be noticed than the HAFFROY machine is currently
able to treat these two kinds of substrates with two different treatments. A
process able to treat both aluminium alloys and steel is of highest interest
for Nexter.
4.3.3. Alternative 3
Gardobond C4749 + Ardrox 1768 has been tested at laboratory scale. No further
studies are planned on this process and it is kept as a backup solution for two main
reasons:
- Performance levels are lower than those offered by Alternative 4 and
Alternative 5;
- Alternative 3 is a two-step process, which induces the need for a second tank
to be installed in the Nexter Mechanics plant.
4.3.4. Alternative 4
4.3.4.1. Substance ID, properties, and availability
INTERLOX 338 is a conversion developed by ATOTECH. As for others conversions
processes, it is Cr(III)-based with zirconium salts as additive corrosion inhibitors
substances.
4.3.4.2. Technical feasibility of Alternative 4
At this stage, first tests have been carried out at laboratory scale. Since the
results appeared very promising, a second study was carried out in spraying
conditions in the plant of Roanne, confirming the results of the first study.
An in-depth assessment is currently performed at laboratory scale to
demonstrate the performance reproducibility of both immersion and spraying
processes with selected subcontractors or laboratories as well as the painting
capabilities.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 50
4.3.4.3. Economic feasibility and economic impacts of Alternative 4
A preliminary assessment shows that costs of Alternative 4 should be in line with
the current treatment. It is, however, possible that the necessary chemical surface
preparation (degreasing and etching) before conversion may necessitate installing
new tanks in the Nexter Mechanics plant. This would not be necessary in the Nexter
Systems plant of Roanne.
4.3.4.4. Availability of Alternative 4
An alternative solution is considered as available if validated through a multi-
step process. Each step of this process is to be individually considered and can be
time-lined. These steps can be described as follow:
1. Testing:
a. Research on alternative solution
b. Preliminary evaluation of alternative solutions
c. Functional validation of alternative solutions on a laboratory scale
d. Assessment of performance reproducibility in subcontracting processes
2. Pilot scale and industrialisation
3. Final DGA qualification
The overall process leading to the implementation of the potential alternative
solution is summarized as follows:
Figure 11. Global implementation timeline of Alternative 4
Even though basic testing has shown conclusive results, the implementations of
Alternative 4 within the Nexter production chain is yet a middle-term solution as it
has to undergo several testing, qualification and implementation steps:
Spraying process:
- Performance assessment for spraying process on unpainted parts [1 yr
end 2015] ;
- Performance assessment for spraying process on painted parts [1 yr end
2016] ;
- Industrial subcontracting assessment for spraying process (if available) [1 yr
end 2016] ;
- Comparative analysis of the technical and economical assessment, versus
compatibility assessment with current Nexter Systems’ Haffroy spraying
cabin [1 yr end 2018] ;
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 51
- Industrialisation at Roanne, subcontracting deployment [1-2 yr 2020];
- Qualification on parts treated with alternative solutions [4 yrs 2024].
Immersion process
- Performance assessment for immersion process on unpainted parts and
painted parts [2 yr end 2016] ;
- Industrial subcontracting assessment for immersion process (if available) [1
yr end 2017] ;
- Comparative analysis of the technical and economical assessment and
subcontracting availability, versus compatibility assessment with current
subcontracting [1 yr end 2018] ;
- Subcontracting deployment and qualification on parts treated with
alternative solutions [6 yrs 2024].
Alternative 4 will consequently not be available before the hexavalent chromium
sunset date on 2017/09/21.
It has to be stressed that, for DGA, substitution to an alternative surface
treatment process will be considered as a major change and therefore requires an in-
depth qualification of the alternative solution, including testing on weapons. This
point has to be taken in account to explain the long qualification time estimated for
the DGA qualification.
4.3.4.5. Hazard and risk of Alternative 4
According to its Safety Data Sheet, INTERLOX 338 contains no substances which
have to be declared.
4.3.4.6. Conclusions on Alternative 4
As for Alternative 2, Alternative 4 is of major interest for Nexter since it is
adapted to the conversion of aluminium alloys as well as of steels and therefore
compliant with the HAFFROY machine capabilities of treating such substrates.
4.3.5. Alternative 5
4.3.5.1. Substance ID, properties, and availability
LANTHANE 613.3 is a conversion process developed by COVENTYA. As for the
other processes described above, conversion process is Cr(III)-based with organic
additive corrosion inhibitors substances. No lanthanum salts are involved in the
formulation.
4.3.5.2. Technical feasibility of Alternative 5
At this stage, first tests have been carried out at laboratory scale. Since the
results appeared very promising, a second study was carried out in spraying
conditions in the plant of Roanne, confirming the results of the first study.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 52
An in-depth assessment is currently performed at laboratory scale to
demonstrate the performance reproducibility of both immersion and spraying
processes with selected subcontractors or laboratories as well as the painting
capabilities.
4.3.5.3. Economic feasibility and economic impacts of Alternative 5
A preliminary assessment shows that costs of Alternative 5 should be in line with
the current treatment. It is, however, possible that the necessary chemical surface
preparation (degreasing and etching) before conversion may necessitate installing
new tanks in the Nexter Mechanics plant. This would not be necessary in the Nexter
Systems plant of Roanne.
4.3.5.4. Availability of Alternative 5
An alternative solution is considered as available if validated through a multi-
step process. Each step of this process is to be individually considered and can be
time-lined. These steps can be described as follow:
1. Testing:
a. Research on alternative solution
b. Preliminary evaluation of alternative solutions
c. Functional validation of alternative solutions on a laboratory scale
d. Assessment of performance reproducibility in subcontracting processes
2. Pilot scale and industrialisation
3. Final DGA qualification
The overall process leading to the implementation of the potential alternative
solution is summarized as follows:
Figure 12. Global implementation timeline of Alternative 5
Even though basic testing has shown conclusive results, the implementations of
Alternative 4 within the Nexter production chain is yet a middle-term solution as it
has to undergo several testing, qualification and implementation steps:
- Performance assessment for spraying process on painted and unpainted
parts [1 yr end 2015] ;
- Industrial subcontracting assessment for immersion process (when available)
[1 yr end 2016] ;
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 53
- Comparative analysis of the technical and economical assessment and
subcontracting availability, versus compatibility assessment with current
Nexter Systems’ Haffroy spraying cabin [1 yr end 2018] ;
- Industrialisation at Roanne, subcontracting deployment [1-2 yr 2020];
- Qualification on parts treated with alternative solutions [4 yrs 2024].
Alternative 4 will consequently not be available before the hexavalent chromium
sunset date on 2017/09/21.
It has to be stressed that, for DGA, substitution to an alternative surface
treatment process will be considered as a major change and therefore requires an in-
depth qualification of the alternative solution, including testing on weapons. This
point has to be taken in account to explain the long qualification time estimated for
the DGA qualification.
4.3.5.5. Hazard and risk of Alternative 5
According to its Safety Data Sheet, LANTHANE 613.3 contains no substances
which have to be declared?
4.3.5.6. Conclusions on Alternative 5
As for Alternatives 2 & 4, Alternative 5 is of major interest for Nexter since it is
adapted for the conversion of aluminium alloys as well as of steels and is therefore
compliant with the HAFFROY machine capabilities of treating such substrates.
Moreover, this treatment is also proposed to substitute sulphuric anodising
sealed with Cr(VI) salts by sulphuric anodising sealed with LANTHANE 613.3 and
then with water. A “Cr(VI) substitution in surface treatment of ammunitions” study
is currently engaged by Nexter Munitions. An economy of scale may therefore be
achieved in case LANTHANE 613.3 can be used for several aluminium alloys surface
treatments processes within the Nexter Group.
4.3.6. The most likely “non-use” scenario
As described above, potential alternatives have been identified for Use-4. Taking
into account their current level of maturity, the needs for development, adaptation
and industrialisation as well as the long period of time needed for internal validation
and qualification of the applications by the DGA, these alternatives will only be
operationally available in 2024.
4.3.6.1. Potential “non-use” scenarios
With the prohibition to use Cr(VI) compounds, two potential situations can be
foreseen for Nexter: downgrade of performances and relocation of Nexter’s surface
treatment activity outside the EU. These two scenarios are explored in what follows.
A potential complementary “non-use” scenario for the French army is also regarded:
the purchase of armament systems from foreign suppliers instead of Nexter.
The downgrade of performances hypothesis
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Use-4 Nexter Systems - Nexter Mechanics 54
The notion of performance is critical in the definition of armament systems’
specifications, since it directly reflects the expression of an operational need of the
Ministry of Defence. Attainment of such performance requirements is not only a
contractual liability but it is also of the DGA’s duty, in collaboration with Nexter, to
ensure it is operationally achieved.
Performance levels associated with the use of chromium conversion under
Use-4, (electrical conductivity, resistance to atmospheric corrosion and paint
adhesion) directly participate in the proper functioning and lifespan of parts and
therefore the survivability of the armament systems concerned.
More critically, such a decrease in electrical conductivity properties of
armament system’s bodies would jeopardise the armies’ capabilities to conform to
predefined engagement scenarios defined by the Ministry of Defence. Engagement
scenarios define “generic mission profiles”, specifically calibrated to respond to
potential threat types and entail the protection of the armament system based on
the electric grounding and resistance to corrosion of their vehicles bodies. Failing to
comply with such engagement scenarios, implies that armed forces cannot play their
full part in the current geostrategic and geopolitics context.
It has to be mentioned that, given the fact that the parts concerned by Use-4
constitute the very structure and body of armoured vehicles, the replacement of
such parts cannot be considered in case of downgrade of performances over time.
The relocation of conversion coating treatment outside France
hypothesis
According to the DGA59, the relocation of the surface treatment activity in a foreign
country, be it inside or outside the EU, would present several risks, all related to
France’s sovereignty:
- Loss of know-how in France, for the manufacture but also for the conception
of armament systems ;
- Risk of potential blackmail threats from governments which would not
support France’s field operations;
- Risks of total cease of manufacturing activities associated with the low
economic value that would be remaining on France’s territory;
- Management and quality controls are a major issue with foreign
manufacturers;
- Risks regarding the capabilities to meet the export demands, in case of
difference in commercial interests with the potential foreign country in
which production would be relocated.
Moreover, it is demonstrated in section 9.1.3 of this AfA that the French and
European legal frameworks significantly limit or even forbid relocation outside
France, both from the point of view of corporate law applicable to public owned
companies and the law on export and import of weapons.
59 Source: DGA
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Use-4 Nexter Systems - Nexter Mechanics 55
For these reasons, relocation of the surface manufacturing activities outside the
European territory is not deemed a credible scenario.
The procurement of armament systems outside Nexter hypothesis
With the disruption of supply of Nexter’s Use-4 armament systems, it could be
considered that the French armed forces may have the possibility to purchase and
use armament systems from foreign countries. Such purchases already exist, as it
was the case recently for the renewal of the P4 market (a light armoured vehicle
produced by Peugeot) that saw the US Ford Ranger won the bid.
Several issues nevertheless strictly limit such a situation for Nexter and the
equipments impacted by Use-4:
- Same arguments as for relocation of conversion coating surface treatment
outside France apply (as developed above) in terms of State independence
and sovereignty;
- Nexter’s equipments concerned by Use-4 have been specifically developed
according to the DGA requirements and the specific needs of the French
army. As a consequence, no direct alternative can be found in other foreign
manufacturers’ portfolio since Nexter is the French army’s only
manufacturer of qualified armoured and armed ground vehicles (VBCI,
ARAVIS, JAGUAR, GRIFFON…)
Consequently, it can be considered that there are very strong impediments to
the procurement of armament systems from foreign manufacturers, both at a
political, strategic and technical level as well as in terms of availability. In case such
impediments could be overcome, a complete reworking of the vehicle would be
necessary, thereby involving re-development from scratch of the armament systems.
In this context, testing and qualification imperatives would, no matter what, delay
their actual operational deployment by 5 to 10 years60.
4.3.6.2. The most likely “non-use” scenario
The main arguments put forward in the previous sections can be summarised
as follows:
- (a) equipments concerned by Use-4 are key for Nexter’s portfolio,
- (b) there is no available alternative to chromate conversion for the
requirements of Use-4,
- (c) a downgrade of armament systems’ performances (i.e. withdrawal of
conversion coating) would threaten France’s operational capabilities to a
point where some field operations could not be assumed,
- (d) relocation of production outside France would pose major geopolitics
and legal issues with a risk to jeopardise France’s sovereignty and,
60 See testing and qualification delays associated with the development of the examples of equipments
developed in section 2.1.
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Use-4 Nexter Systems - Nexter Mechanics 56
- (e) no alternative is offered by foreign manufacturers that would cover the
DGA’s and the French Ministry of Defence’s operational needs and
qualification requirements for their ground forces.
Based on these arguments, the most likely “non-use” scenario is the following:
with the prohibition to use of Cr(VI) compounds and therefore the ban of chromium
conversion treatment, Nexter will have to cease the manufacture and the
maintenance in operational conditions of the armament systems concerned by
Use-4. As such armament systems are strategic for Nexter’s current and future
portfolio, this scenario entails the cease of Nexter Mechanics’ activity and would
severely endanger Nexter Systems’.
Given the fact (a) that there are extremely strong impediments to the purchase
of armament systems outside France and (b) that direct alternative armament
systems are not available or at the very least would need a 5 to 10 years period for
adaptation of the armament-platform interface, testing and qualification of such
alternative, France’s armed forces will be unable to secure the supply of armament
systems that constitute the backbone of their operational capabilities in field
operations.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Systems - Nexter Mechanics 57
5. IMPACTS OF GRANTING AN AUTHORISATION
Impacts of the denial of an authorisation would mainly have economic, social
and distributional dimensions:
- Economic impacts on Nexter’s activity will include loss of revenues, lost
investments and contractual penalties;
- Social impacts mainly consist of loss of employment;
- Distributional impacts include the costs related to the unavailability of the
concerned equipments for French armies and the impacts on France’s
operational capabilities and sovereignty. The “non-use” scenario also
impacts other foreign armies, relying on Nexter for the supply of armament
systems as well as Nexter’s industrial partners involved in the development,
production and support of the equipments concerned by Use-4.
A synthesis of the main impacts taken into account in this AfA is given below:
Figure 13. Synthesis of the impact categories of the “non-use” scenario
Given the strategic aspect of armament systems concerned by Use-1 for
Nexter, the “non-use” scenario entails strong impacts for Nexter (loss of
profits and investments) but as well as for the French State (loss of
employment), the French armed forces and Nexter’s industrial partners.
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Use-4 Nexter Systems - Nexter Mechanics 58
A vast majority of the impacts of Nexter’s “non-use” scenario will affect the
French armed forces capabilities as well as the State’s sovereignty. In order to obtain
an as detailed and as realistic description of these impacts, a formal consultation of
the DGA was carried out.
The objectives of this consultation were to:
- Better define the impacts for the armies should Nexter’s supply of the
equipments concerned by uses 1 to 4 be disrupted and
- Obtain representative examples of the impacts for specific armament
systems.
As a consequence, part of the description of the impacts for the French armed
forces will refer to this consultation. Due to clear confidentiality issues, the content
of the consultation is used in the present AfA (and sourced as “DGA” in footnotes)
but the exhaustive source document to this consultation cannot be provided.
5.1. Economic impacts
5.1.1. Loss of revenues, profits and orders
5.1.1.1. Loss of revenues, profits and orders for Use-4
Loss of revenues and profits
The assessment of the share of revenues impacted by Use-4 was carried out by
Nexter on the basis of an inventory of the equipments impacted by the “non-use”
scenario and the revenues associated with these equipments, for the 2015-2017
period. The choice of this period of reference can be justified as follows: this period
offers the most accurate view on the evolution of Nexter activities, from a financial
standpoint.
It has to be noted that the revenues taken into consideration for the assessment only
concern Nexter Systems, thereby under-estimating the overall results by not taking
into account the impacts for other subsidiaries of the group.
Figure 14 below presents the forecast revenues associated with equipments
concerned by Use-4 between 2015 and 2017.
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Use-4 Nexter Systems - Nexter Mechanics 59
Figure 14. Annual revenues concerned by Use-4, over the 2015-2017 period, M€
Revenues directly generated by armament systems concerned by Use-4 are
forecasted to respectively represent (#2a), (#2b) and (#2c) of the total Nexter
Systems’ revenues for 2015, 2016 and 2017.
The 3-year average of the annual revenues impacted by Use-4 (€ [100-
1,000M](#2p)) will be used as a calculation basis for the assessment of the overall
loss of revenues foreseen over the review period. Despite the downward trend of
the revenues for the 2015-2017 period, this hypothesis is justified by the cyclical
patterns observed for the armament programs: the average of the above values
appears to better represent the situation over the review period than the downward
trend that can be observed for 2015-2017.
In order to remain in the context of the realistic worst-case scenario, the
assessment of the overall loss of revenues induced by the “non-use” scenario is
based on the hypothesis of a null growth over the review period. This hypothesis,
although not realistic per se, provides under-estimated figures for the impacts of the
“non-use” scenario.
Please not that values taking into account growth of revenues over the review period
is discussed in section 5.6.
The cumulated loss of revenues assuming a zero growth rate and a 4%
discount rate until the end of the review period amount to € [1-10B](#2d).
Loss of profits associated with the aforementioned loss of revenues have been
deduced based on the average operating margin for the Nexter Group over the
2012-2014 period (13.1%61) and amounts to € [100-1,000M](#2e).
61 Nexter, Etats financiers au 31 décembre 2014 – en norme IFRS
#3a
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Use-4 Nexter Systems - Nexter Mechanics 60
Loss of orders
Finally, the loss in terms of order book related to the “non-use” scenario was
estimated on the basis of the order book forecasts over the 2015-2017 period:
Figure 15. Orders concerned by Use-4, over the 2015-2017 period, M€
Orders directly concerned by Use-4 of the present AfA are forecasted to respectively
represent (#2f), (#2g) and (#2h) of the total orders for Nexter systems for 2015, 2016
and 2017.
Based on the following hypotheses: average value of the 2015-2017 period as a
reference, zero growth and 4% discount rate until the end of the review period (i.e.
same as for the assessment of revenues loss), the total loss of orders triggered by
the “non-use” scenario amounts to € [1-10B](#2i).
5.1.1.2. Complementary elements of analysis
Global loss of revenues, profits and orders for the AfA
As a complement to the values obtained for Use-4, an assessment of the global
loss of revenues, profits and orders foreseen for the “non-use” scenario for the
overall AfA (i.e. cumulated for Use-1, 2, 3 and 4) was also carried out, with the
following results:
PARAMETER VALUE
Loss of revenues € [1-10B](#1c)
Loss of profits € [100-1,000M](#1d)
Loss of order book € [10-100B](#1e)
Table 20. Global loss of revenues, profits and order book over the review period for the AfA (cumulated for Use-1, 2, 3 and 4)
#3b
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Use-4 Nexter Systems - Nexter Mechanics 61
Actual impacts of the “non-use” scenario for the activity of the
Nexter Group
Figures of the loss of revenues, profits and orders associated with the “non-use”
scenario have been provided in the previous sections.
It has, however, to be noted that the actual impacts of the “non-use” scenario entail
a cease of activity of Nexter Mechanics and several subsidiary of the Nexter Group
that directly depend on Nexter Mechanics’ activities as well as a strong loss of
activity for Nexter Systems.
Dependency of each subsidiary of the Nexter Group on Cr(VI) compounds is further
developed in section 5.3.1.1 from the point of view of the loss of employment.
5.1.2. Lost investments
An assessment of the investments made aimed at Use-4 applications over the
2015-2017 period aimed was carried out, with the following results:
Figure 16. Net book value of investments in relation with Use-4, M€
Taking into account a 4% discount rate for the values of 2016 and 2017, the
investments directly related to Use-4 that are considered as lost in the context of the
“non-use” scenario amount to: € 3.6M over the 2015-2017 period. These
investments concern machinery or facilities, and more specifically cutting machines
related to the manufacture of armoured vehicles bodies.
5.1.3. Contractual penalties
Given the criticality of final performance for military equipments, contracts for
defence armament systems stipulate high penalties in case of non-compliance with
initial requirements. Exact terms and conditions of such contracts are confidential
but an illustration of the order of magnitude of such penalties can be found in the
contract with the United Arab Emirates for the supply of Leclerc main battle tank in
the early 1990s.
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In 1993, a contract was signed with the United Arab Emirates for the supply of 390
Leclerc battle tanks, 46 recovery tanks and ammunitions for a total amount of $ 3.2B.
Several difficulties caused an interruption of supply in 2000, which led to losses of
$ 1.3B for GIAT Industries62.
Even though this example is only an illustration, the amount of the penalties
and damages resulting from the cease of supply by Nexter for all the equipments
concerned by Use-4 – and therefore of non-compliance with contractual
agreements – can be estimated to several tens of billions of Euros.
It has to be further mentioned that contractual agreements concerning the
equipments of the SCORPION programme (notably: JAGUAR and GRIFFON) include
commitments in terms of operational availability. Over the next 15 years, penalties
will be applied to Nexter in case the actual operational availability of these
equipments does not meet the pre-defined objectives63.
5.2. Human health or Environmental impact
No impacts on human health or the environment are foreseen in the context of
the “non-use” scenario.
5.3. Social impact
In what follows, impacts of the “non-use” scenario will be assessed on a
quantitative basis, based on the foreseen number of job losses and the average cost
of an unemployed person for the French State.
In addition, territory sensitivity as well as the consequences on indirect employment
will also be discussed.
5.3.1. Impact on employment
5.3.1.1. Loss of employment
Given (a) the large scope of activities of the Nexter Group, (b) the criticality of
the uses concerned by the present AfA for a vast majority of the Group’s activities
and (c) the strong linkage and interrelationship between each use and each
subsidiary of the Group, it was chosen to estimate the impacts of the “non-use”
scenario on employment on the basis of the dependency of each subsidiary on Cr(VI)
compounds. The scope used for this assessment covers the overall AfA’s four uses.
62 Assemblée Nationale, Rapport d’information déposé en application de l’article 145 du Règlement par la Commission de la Défense Nationale et des Forces Armées sur la situation de Giat Industries et présenté par MM. Yves FROMION et Jean Diébold, December 2002 63
Les Echos, Un trio pour mener la modernisation de l’armée de terre, 27/10/2015
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Please note that the assessment of the percentage of employees impacted by
the “non-use” scenario was carried out on the basis of an analysis of the activity of
each subsidiary of the Nexter Group.
The following table was obtained:
Analysis of Alternatives – Socio-Economic Analysis
Use-4 64
"NON-USE" SCENARIO
SUBSIDIARY NB OF
EMPLOYEES ACTIVITY DEPENDENCY ON Cr(VI)
ACTIVITIES CONCERNED
% OF EMPLOYEES IMPACTED
NB OF EMPLOYEES IMPACTED
JUSTIFICATION
Nexter Systems
1,806 Main contractor and design authority for armament systems
High Virtually all armament systems produced and placed on the market by Nexter Systems are concerned by the "non-use" scenario
- Support functions - Productive functions
80% 1,445 Direct impact of the "non-use" scenario
Nexter Munitions
594
Produces on behalf of its customers, French and foreign Forces, a complete range of Tank, Artillery and Medium-Calibre ammunition.
Low Only impact would be indirect for telescoped munitions, in case the production of the CT40 gun is aborted in the context of the "non-use" scenario
- Productive functions 15% 90 Indirect impact of the "non-use" scenario
Nexter Training
10
Specialist in educational engineering using the GVT® (Generic Virtual Training) VR training software developed and marketed by the company
Low Training is directly related to the equipments produced by Nexter Systems
- Productive functions 20% 2 Strong indirect impact of the "non-use" scenario
Nexter Robotics
6
Specialised in the design and marketing of land and air-land robots for defence and security applications
Low Not directly impacted by the equipments concerned by the AfA
None 0% 0 No impact of the "non-use" scenario
Nexter Electronics
107 Specialised in embedded electronic systems engineering
High Nexter Electronics' electronic systems are intended to be embedded on Nexter Systems' armament systems concerned by the "non-use" scenario
- Support functions - Productive functions
80% 86 Strong indirect impact of the "non-use" scenario
Nexter Mechanics
114 Specialised in manufacturing mechanical and hydraulics equipment
High Virtually all the components and equipments manufactured by Nexter Mechanics are intended to be implemented in armament systems concerned by the AfA
- Support functions - Productive functions
50% 57 Direct impact of the "non-use" scenario
Analysis of Alternatives – Socio-Economic Analysis
Use-4 65
NBC-Sys 59
Produces equipments dedicated to detection (chemical and biological threats), personal protection (gas masks, filter cartridges, etc.), group protection (air treatment, climate control and filtration systems for vehicles and buildings) and decontamination (of aircraft, vehicles, sensitive equipment and personnel)
High The NBC systems produced by NBC-Sys are intended to be implemented on armament systems concerned by the "non-use" scenario
- Support functions - Productive functions
80% 48 No impact of the "non-use" scenario
Optsys 30 Specialist in the field of optical and protected vision equipment for armoured vehicles
High The optical systems produced by Optsys are intended to be implemented on armament systems concerned by the "non-use" scenario
- Support functions - Productive functions
80% 24 Strong indirect impact of the "non-use" scenario
Euro-Shelter 44
Designs, qualifies, produces and supports sustainable mobile solutions based on light, rigid structures built with sandwich panels
Low Not directly impacted by the equipments concerned by the AfA
None 0% 0 Strong indirect impact of the "non-use" scenario
CTA International
52 Manufacturer of the CT40 gun High The CT40 gun is concerned by the "non-use" scenario as the main armament of JAGUAR
- Support functions - Productive functions
100% 52 Direct impact of the "non-use" scenario
Mecar 381 Designer and manufacturer of ammunition
Low None 0% 0 No impact of the "non-use" scenario
Simmel Difesa
175 Designer and manufacturer of ammunition
Low None 0% 0 No impact of the "non-use" scenario
TOTAL 3,378 - - - - 1,804 -
Table 21. Description of the sensitivity of the employment of each subsidiary of the Nexter Group to Cr(VI) compounds concerned by the AfA (*) whose jobs are directly or indirectly related to the use of Cr(VI) compounds concerned by the AfA and will be lost in the context of the “non-use”
scenario
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In order to remain in the context of the realistic worst-case scenario, it was
chosen:
- To only take into account the direct loss of employment: 1,586 jobs for the
global scope of the AfA (Use-1, 2, 3 & 4).
- To estimate the loss of employment related to each use of the AfA on the
basis of the share of each use in terms of revenues loss, as described in
section 5.1. This assumption indeed under-estimates the employment loss
foreseen for each use, since it does not takes into account the fact that one
employee may be impacted by several uses of the AfA.
The results of this assessment are provided in the following table:
PARAMETER VALUE
Total direct employment loss 1,554 jobs
Uses of the AfA Use-1 Use-2 Use-3 Use-4
Revenue loss per use(*)
€ 201M € 1,628M € 649M € 1,110M
Share of revenue loss per use 6% 45% 18% 31%
Number of job lost per use, based
on the share of revenue loss per use 87 705 281 481
Table 22. Loss of employment, by use of the AfA (*) as provided in section 5.1.1.1 of the AoA-SEA documents for each use of the AFA
The total loss of employment (direct and indirect) expected in the context of the
“non-use” scenario is discussed in section
5.3.1.2. Individual cost of unemployment
The costs of an unemployed person for the State can be estimated, based on the
costs of social welfare payments:
- DARES64 provides the key figures of the State’s employment-oriented
expenditures and notably the cost of unemployment compensations for the
year 2011: € 28.02B65,66;
- 2,173,500 unemployed persons received a compensation for the same
year67.
The average annual cost of an unemployed person for the French State can therefore
be estimated to € 12,89168.
64“ Direction de l’animation de la recherche, des études et des statistiques” – “Directorate for Research,
Studies and Statistics”, Minister of Social Affairs and Employment 65
Dares, Les dépenses en faveur de l’emploi et du marché du travail en 2011, Analyses n°18, Février 2014 66
Unemployment compensations represent 60% of the “targeted expenditures” (“dépenses ciblées”) global amount of € 46,7B 67
Pôle Emploi, Chômage indemnisé ou non indemnisé (Situation au 31 décembre 2011), October 2 2012 68
28.02x109 / 2,173,500
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This figure is globally in line with Idea Consult69, estimating the annual cost of an
unemployed person related to the payment of unemployment benefits to € 10,686.
In order to provide a more accurate picture of the costs associated with
unemployment, auxiliary costs have also been taken into account, in terms of
guidance and administrative costs as well as potential loss of revenue for the State:
TYPE OF COSTS AMOUNT
Public
intervention
Unemployment benefits € 10,686
Guidance and administrative costs € 1,641
Subtotal for public intervention € 12,327
Potential loss
of public
revenues
Loss in social contribution of employers € 10,172
Loss in social contribution of workers € 3,294
Loss in direct taxation € 1,888
Loss in indirect taxation € 1,057
Subtotal for potential loss of revenue € 16,411
Total average annual cost of an unemployed person € 28,737
Table 23. Average individual social cost of an unemployed person in France, 201070
In what follows, the value of € 28,737 will be used to monetise the costs of
unemployment, with the following adjustments:
- Adjustment of inflation for change in consumer price index (5.60% on
average over the 2010-2015 period71);
- Correction for the average duration of unemployment in France: 460 days
for workers during the 2nd semester of 201472.
Taking these corrections into account, the final average individual present
value of unemployment is € 38,245.
5.3.1.3. Total cost of the loss of employment for Use-4
The overall cost of unemployment, in relation with the actual number of job
losses foreseen in the context of the “non-use” scenario and the individual cost of
unemployment are synthesised in the following table:
69 Idea Consult, on behalf of European Federation for Services to Individuals (EFSI), Why invest in
employment? A study on the cost of unemployment, 2012 70
Ibid. 69 71
Ibid. 18 72
Pôle Emploi, l’ICDC augmente de nouveau, Indicateurs et statistiques, October 1st
, 2014
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PARAMETER VALUE
Number of jobs lost (directly related to the AfA) 481 jobs
Individual cost of unemployment € 38,245
Total costs of unemployment € 18.4M
Total cost of unemployment, discounted(*)
€ 16.3M
Table 24. Total cost of the loss of employment for Use-4 (*)
: considering a 4% discount rate until 2018
5.3.1.1. Complementary element of analysis: total cost of the loss of
employment for the AfA
As a complement to the values obtained for Use-4, an assessment of the global
loss of employment in the context of the “non-use” scenario for the overall AfA (i.e.
cumulated for Use-1, 2, 3 and 4) was also carried out, with the following results:
PARAMETER VALUE
Number of jobs lost 1,554 jobs
Total cost of unemployment € 59.4M
Total cost of unemployment, discounted(*)
€ 52.8M
Table 25. Global direct loss of employment and associated costs for the AfA (cumulated for Use-1, 2, 3 and 4)
(*): considering a 4% discount rate until 2018
5.3.2. Territory vulnerability
The site of Roanne, upon which is carried out the chromate conversion of
structural parts (spraying process), is located on a relatively sensitive territory
toward employment. According to INSEE73, the Roanne territory is characterised by
an ageing population and a relatively strong dependency on industrial employment74.
Use-4 is also partially carried out (for the immersion process) on the site of
Tulle75, which is classified by INSEE as a “class 3” employment zone, meaning it is
characterised by an ageing population and subject to industrial change76. Tulle’s
territory is therefore very dependent on industrial activities, whose recent decline
increased the overall territory’s socio-economic vulnerability.
Tulle is moreover the main employment area of the Corrèze department and
Nexter Mechanics is the second largest industrial employer of Tulle’s territory.
73 “Institut national de la statistique et des études économiques” – “National Institute for Statistics and
Economics Studies” 74
INSEE, Le pays Roannais: le vieillissement de la population fait naître un double enjeu pour l’avenir du pays roannais – La Lettre Analyses, N° Spécial 1, June 2010. 75
For associated parts treated by immersion process, as stated in section 3.1 76
INSEE Centre, Les zones d’emploi en région Centre – Les Dossiers n°20, February 2014
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Industry represents 8% of the employment of Tulle’s territory, which already
declined by 53% between 1999 and 200977.
Even though a quantitative assessment is complex and was not carried out, the
loss of employment foreseen in the “non-use” scenario would contribute to
endanger an already vulnerable territory.
5.3.3. Indirect employment
A quantitative assessment of indirect employment impacted by the “non-use”
scenario is complex to achieve. It is however reminded that industrial relationships
involve partners all along the supply chain and are therefore based on a network of
suppliers and subcontractors.
A study78, based on data issued by the Belgian State79 estimates to 1.83 the
multiplicative coefficient for indirect employment in the armament industry sector.
In other words, based on this study, it can be estimated that, on average, one job in
the armament industry triggers 0.83 indirect jobs.
Even though not directly representative of Nexter’s industrial context, several
studies by INSEE have provided an assessment of induced employment:
- A study80 showed that aviation industry in Midi-Pyrénées directly employs
52,400 employees and directly or indirectly induces 55,000 complementary
jobs, hence suggesting a multiplicative coefficient of 1 for indirect
employment;
- Another study81 showed that of the 20,400 global employees related to the
PSA Sochaux car manufacturing activity, 11,800 were direct jobs and 8,600
were induced and indirect jobs, hence suggesting a multiplicative coefficient
of 1.7 for indirect employment.
Given that the aforementioned sources do not directly relate to the context of
this AfA, no monetised assessment was carried out. Impacts of the AfA on indirect
employment are only mentioned on a qualitative basis: along with a loss of
employment for the Nexter Group subsidiaries, a loss of employment for the up- and
downstream value chain is foreseen.
77 Direction Départementale des Territoires de la Corrèze, Diagnostic territorial de la communauté
d’agglomération de Tulle, September 2013 78
GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Les rapports du GRIP – Répertoire des entreprises du secteur de l’armement en Belgique, 2014. 79
Bureau Fédéral du Plan, Les multiplicateurs de production, de revenu et d’emploi 1995-2005 – Une analyse entrées-sorties à prix constants, September 2013 80
INSEE, En Midi-Pyrénées, plus de 55 000 emplois salariés sont liés à l’industrie aéronautique – 6 pages de l’INSEE, October 2007 81
INSEE, L'influence de PSA Sochaux se concentre dans le « Nord Franche-Comté », May 2009
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Indirect impacts on the employment for the overall Nexter’s value chain have
to be taken into account in the analysis of the impacts of the “non-use” scenario.
5.4. Wider economic impact
No wider economic impacts (international trade, competition and economic
development) are considered in this AfA, even though consequences on the overall
territory’s dynamism and attractiveness are to be foreseen, as stated in section 5.3.1.
5.5. Distributional impact
The “non-use” scenario, and more specifically the disruption of supply of
Nexter’s equipments to the French armed forces, will directly impact the availability
of military equipments. In this scenario, major losses of investments are foreseen
and France’s sovereignty is endangered. Foreign armies, relying on Nexter’s
armament systems for their supply as well as Nexter’s industrial partners will also be
impacted by the “non-use” scenario.
From a global point of view, Nexter is a strategic armament systems
manufacturer for the French army, since it supplies the majority of the French army
ground combat equipments, Nexter being involved in the manufacture of:
- 100% of the main battle tanks,
- 71% of the tracked armoured systems,
- 67% of the artillery systems and
- 59% of the helicopters of France’s land army82.
The reader can refer to Appendix 9.1 for a comprehensive view of the French land
army’s equipments by category, Nexter’s involvement in their manufacture and the
impact of the AfA’s four uses. The same dependence of the French army on Nexter’s
manufacture capabilities can be observed in the French air force and navy.
82 Ibid. 12
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Figure 17. Detail of Nexter’s involvement in the manufacture of the French land army equipment and the impacts of this AfA’s four uses
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A comprehensive inventory of the equipments concerned for the land army is
available in Appendix 9.1.
A strong economic threat, such as the one considered in the “non-use” scenario
would not only jeopardise the supply of the equipments directly concerned by Use-4
but would also strongly impact Nexter’s capabilities to manufacture and supply other
armament systems on which the French army relies on a daily basis during field
operations.
Complementarily, it is reminded the crucial role played by Nexter armament system
within the SCORPION programme (see dedicated focus in section 2.1.2). The “non-
use” scenario would therefore have broader impacts than the loss of availability of
the French army equipments, but would also entail the failure of its future strategic
military capabilities and command system.
Taking into account the quantity and diversity of equipments concerned by this
AfA, and as justified in section 2.3.2, it was therefore chosen to use representative
examples of equipments and key figures (global programs’ investment costs, unit
costs of equipments) to support the argumentation. This methodology, as it only
focuses on the representative examples chosen, does present an under-estimated
assessment of the overall costs concerned by the AfA.
5.5.1. Impact on operational availability of armament systems
Availability of military equipments is a key parameter of the State’s capability of
projection in external theatres of operation as well as on the French territory.
As of July 2015, around 7,000 French militaries are deployed in Iraq, Lebanon,
Mali, Central African Republic and the Sahel-Saharan strip (Figure 18). These
deployment capabilities constitute a key pillar of France’s defence and sovereignty
policy and are only available to few countries in the world.
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Figure 18. French army field operations, July 201583
Main strategic objectives in terms of armament systems’ operational availability
for the armed forces are the following84:
- Guarantee an operational availability rate greater than 90% for field
operations and adapt availability rate in mainland France, each regiment
having threshold levels;
- Program maintenance operations of naval vessels in order to permanently
ensure nuclear dissuasion capabilities and to dispose of sufficient units to
carry out recurring missions;
- For aeronautic equipments, priority is given to operational availability for
field operations and dissuasion missions.
Such availability rates, and notably the 90% availability rate for ground equipments,
are considered to be critical to maintain France’s defence capabilities.
83 French Ministry of Defence -
http://www.defence.gouv.fr/operations/rubriques_complementaires/carte-des-operations-exterieures 84
CTA International, Analyse d’impact de la règlementation REACh sur le chromage du tube du 40 CT, Impact analysis of the REACh regulation for the chrome plating of the barrel of the 40 CT cannon, 2014
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From this point of view, it should be noted that resources of the various Army corps
are scarce. As a matter of fact, latest data on this matter show how sensitive this
availability is to any further change:
1997 2000 2008 2011 2012 2013
Aircrafts 65% 56% 60% 59% 43% 41%
Submarines 70% 43% 40% 56% 60% 58%
Armoured vehicles 82% 72% 68% 51% 56% 62%
Table 26. Availability of various equipments in the French army85
In order to accommodate this low level of availability (62%) with the 90% required
for field operations, the land army pools its equipments so as to guarantee
equipments are sufficiently available in the right place, at the right moment. This
policy, implemented since 2008, is called PEGP (Politique d’Emploi et de Gestion de
Parcs – Policy of Use and Management of the Fleet). Vehicles are thus organised in 4
categories:
- Warning fleet used in case of emergency ;
- Service fleet for prepared operations ;
- Training fleet, positioned in training camps ;
- Management fleet, destined to support the three other fleets ;
The 90% availability for field operations therefore implies low levels for the other
fleets. Moreover, figures are aggregated and conceal variable level of availability,
depending on the equipments: if the VBCI and CEASAR have excellent levels of
availability, older equipments such as the VAB (Forward Armoured Vehicle) or the
AMX10 RC (10 tones Armoured Vehicles) are in a much more degraded situation.
Finally, it has to be stressed that the equipments concerned by Use-4 are
equipments on which the French armed forces rely on a daily basis to fulfil their
mission (e.g. VBCI armoured vehicle) and therefore occupy a strategic position in
France’s field operation capabilities.
In this context, and taking into account the unavailability of alternative surface
treatment process, the disruption of supply of both new and spare parts for Nexter’s
armament systems in case of the denial of an authorisation would strongly affect
France’s ground, air and naval military capabilities.
Given the diversity of equipments and armed forces concerned by Use-4, a precise
estimation of the monetised impacts of the unavailability of such armament systems
cannot be provided. However, it can be outlined a series of consequences of the
denial of an authorisation for the French Ministry of Defence in terms of
unavailability of equipments:
- Inability to unilaterally decide, organise and carry out field operations,
strongly affecting France’s sovereignty and geostrategic position;
- Inability to maintain effectives and workforces in the armed forces;
85 Ibid. 12
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- Inability to maintain the local establishment of the armed forces over
France’s territory.
Complementarily, an estimation of the monetised impacts of the “non-use”
scenario for the French Ministry of Defence due to the unavailability of equipments
is developed in section 5.5.3, from the point of view of the lost investments.
5.5.2. Impacts on Maintenance in Operating Conditions of equipments
Besides technical challenges, MOC implies a very strong organisation in terms of
anticipation of the production of spare parts and logistics for the dispatching on the
theatres of operation.
As stated in section 9.1.1, the management of downgraded armament systems
would entail extremely complex issues:
- Manufacture works scheduling is incompatible with the increase on
production which would be necessary to absorb the additional manufacture
needs related to spare parts;
- Logistics issues for the projection of spare parts on the theatres of operation
would imply high additional costs;
- The field operators’ workforce and training would have to be re-scaled to
sustain such increase in MOC activity.
The combination of these impacts would pose a severe burden for Nexter’s
manufacture capacities as well as for the armed forces’ logistics and MOC
capacities. Given the financial context, this increase in ownership cost would have
to be carried while maintaining the overall Ministry of Defence budget and would
therefore impact both employment and operational capacities of other sections of
the French army.
5.5.3. Loss of investments for the French State
One of the main impacts of the fact that Nexter’s Use-4 equipments are
rendered partially to completely unusable by the disruption of the chromium
conversion treatment is the loss of investments for armament programmes that are
rendered useless.
It has to be reminded that Use-4 concerns structural and auxiliary parts, which
are critical parts for armament systems. Without such parts, armament systems are
rendered useless since they cannot ensure their own security or comply with the
predefined engagement scenarios.
As a consequence, investments made over time for development, testing and
manufacture of such equipments would be considered as lost. Even though a
comprehensive picture of all the investments made for all the armament systems
concerned by Use-4 cannot be realistically outlined and that most of these data are
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confidential, it is reminded that the overall investments for the VBCI programme are
estimated to € 2.9B86.
5.5.4. Impact on France’s sovereignty
As described in section 9.1.1, sovereignty is a key pillar of French State’s policy.
The denial of an authorisation would strongly affect the State’s sovereignty, at least
on three significant dimensions: (a) loss of diplomatic independence, (b) inability to
unilaterally decide, organise and carry out field operations and (c) strong
impediment of Nexter’s export potential.
5.5.4.1. Loss of diplomatic independence
On the basis of the arguments put forward in section 4.3.2.1, disruption in the
manufacture and supply of Nexter’s Use-4 armament systems would jeopardise
France’s diplomatic independence, notably by affecting France’s defence industry
capacities as well as generating technological and scientific backwardness.
5.5.4.2. Field operations capabilities
France’s capacity to unilaterally put together field operations and therefore not
depend upon either allies or international organisation is a key pillar of the State’s
sovereignty and doctrine. An example of this independence can be found in the
recent Operation “Serval” in Mali or Operation “Barkhane” in Sahel87.
With the denial of an authorisation, key armament systems for such field
operations (VBCI, Aravis) would be rendered unusable. As a consequence, France
would not have the capacity to participate to such field operations.
5.5.4.3. Impediment of export potential
From a global point of view, armament exports amount to around one third of
the overall activity of the defence sector over the last ten years88.
As developed in section 9.1.3, export of French armament systems to foreign
armed forces represents a key component of France’s sovereignty, since it provides
sufficient production volumes to ensure the profitability of the manufacturing
industry and therefore secures France’s military development and capabilities on a
long-term basis.
It has to be understood that compliance with DGA requirements and the use of
armament within the French army constitute two absolute prerequisites to the
purchase of equipments by foreign armies. The non-compliance of Nexter’s
equipments with DGA requirements would therefore strongly jeopardise the export
86 Le JDD, Défense: commande de 117 blindés à Nexter, 2007
87 Operation Serval was a French military operation in Mali, taking place in 2013 and 2014, which goal
was to oust Islamic militants in the north of Mali. It was followed by Operation Barkhane launched in 2014 to fight Islamic forces in Sahel. 88
Source: DGA - http://www.defence.gouv.fr/dga/la-dga2/missions/presentation-de-la-direction-generale-de-l-armement
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potential of such equipments and therefore endanger both France’s sovereignty and
defence industry.
As of today, foreseen export potential the main equipments concerned is the
VBCI armoured vehicle: negotiations are ongoing with the United Arab Emirates for
700 units and other countries also expressed interest for the vehicle. VBCI’s unit cost
is estimated to € 3.2M89.
A rough estimate, based on data detailed above for only one armament
system impacted by Use-4, leads to an overall amount of € 2.2B of expected export
sales that would be jeopardised under the “non-use” scenario.
Although this value is to be interpreted with a great deal of caution90, it
illustrates the range of monetary amounts related to the export of French armament
systems.
Complementarily, Nexter strongly depends on export for its activity: around 56%
of the € 1.2B signed contracts in 2014 were with foreign countries.
5.5.4.4. Focus: VBCI
As of today, all VBCI bodies have been produced and the only parts produced for
the French army are for replacement parts, which represents costs of € 500k per
year.
As shown above, export proposals for VBCI amount between 100 and 700 vehicles.
Assuming that only one of these sales lead appears successful, it can be expected an
order of 250 vehicles on the period of time of this AfA’s review period. Taking into
account the average production cost of a “naked” VBCI body (€ 600k per unit), the
overall impact of the disruption of supply of VBCI amounts to around € 150M
(excluding VAT)91. This amount does not take into account the other impacts of such
a disruption of supply: electronic systems, armament systems, propulsion system,
etc.
5.5.5. Impact on Nexter’s industrial partners
Nexter is associated with several industrial partners for the development and
manufacture of its armament systems.
For example, Nexter directly collaborates with Renault Trucks Defense and for the
manufacture of the VBCI chassis as well as Renault Trucks Defence and Thales
Communications & Security for the manufacture of the JAGUAR and GRIFFON
vehicles.
89 Defense-aerospace.com, French Audit Report Reveals Weapon Prices, A400M Details, 2010
90 It will not, for example, be taken into account as such in the final monetised impacts of the “non-use”
scenario. 91
Source: DGA
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Given the volume of activity provided by these supply contracts, it can be
estimated that the “non-use” scenario will also strongly impact those companies in
terms of revenues and employment.
5.6. Uncertainty analysis for both the “applied for use” and
the “non-use” scenario
Even though an effort was made all along the document to outline a scenario
based on realistic worst-case hypotheses, the results obtained involve uncertainty. In
order to identify and quantify such incertitude, the following section discusses the
main assumptions of the socio-economic analysis.
5.6.1. “Applied for use” scenario
5.6.1.1. Preliminary observation: uncertainty of exposure and risk values
The assessment of exposure to Cr(VI) is mainly based upon ART modelling. In
order to reduce the uncertainty on these values, it was chosen to rely on values for
the 90th percentile.
Furthermore, the increase of activity foreseen in the context of the
internalisation of subcontracting (increase of the numbers of operators concerned)
has been integrated in the calculation of the exposures and the excess of risk.
The exposure data and therefore the excess of risk of cancer used all along this
AfA for the monetisation of impacts are considered to reflect the actual exposures of
workers; no further uncertainty analysis was carried out concerning these
parameters.
5.6.1.2. Uncertainty analysis of the Value of a Statistical Life-Year
Uncertainty analysis of the costs associated to mortality and morbidity was
carried out using the lower and upper bounds of the Value of a Statistical Life-Year
defined by NewExt 92: respectively € 27,240 and € 225,000. Please note that these
two values are considered as less robust than the central value used for the
assessment because they are based upon survey results derived from smaller sample
sizes.
Taking into account the correction for inflation over the 2003-2015 period, the total
costs associated to mortality and morbidity for these two values amount to:
92 Ibid. 52
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COSTS ASSOCIATED TO
MORTALITY AND MORBIDITY
Considering the upper bound of
Value of a Statistical Life-Year (€ 225,000) € 89.0
Considering the lower bound of
Value of a Statistical Life-Year (€ 27,240) € 10.8
Table 27. Uncertainty analysis for mortality and morbidity, Use-4
5.6.1.3. Other parameters: qualitative uncertainty analysis
A qualitative uncertainty analysis of the main hypothesis, assumptions and
parameters used for the assessment of the “applied for use” scenario is provided
below:
APPLICATION PARAMETER UNCERTAINTY ANALYSIS
Mortality and
morbidity
- Standard life expectancy
- Mean age of lung cancer
death
- Mean age of lung cancer
diagnosis
Low uncertainty: although data used are average and not directly representative of the population of workers concerned by the AfA, uncertainty is reduced by the use of specific data for the French population
- Disability weight Low uncertainty, since the value used is specific for lung cancer
Medical
treatment
- Costs of medical treatment Low uncertainty, since the value used is specific for lung cancer in France
- Survival rate Low uncertainty, since the values used are specific for lung cancer in France
Table 28. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario
5.6.1. “Non-use” scenario
5.6.1.1. Uncertainty analysis of the loss of profits
Uncertainty analysis 1: Growth of profits over the review period
As stated in section 5.3.1, the assessment of the loss of profits associated with
the “non-use” scenario is based on a zero growth hypothesis over the review period.
In order to carry out uncertainty analysis over this value, a secondary assessment
was carried out taking into account a positive growth rate of Nexter revenues over
the review period.
Given the high growth rate observed for the Nexter activity (+41% over the
2012-2014 period), it was chosen to rely on average figures for the defence sector to
carry out this assessment. The average value of +2.7% for the annual growth of
revenues for the aerospace and defence sector was used93.
93 Deloitte, 2015 global aerospace and defense industry outlook
Analysis of Alternatives – Socio-Economic Analysis
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Considering this hypothesis and a 4% discount rate, the overall loss of profits
foreseen over the review period amounts to € (#1f).
Uncertainty analysis 2 and 3: Lower and upper bounds of the
revenues lost over the 2015-2017 period
The fact that the assessment of the loss of revenues and profits is based on the
average of the revenues impacted by each use for the period 2015-2017 constitutes
a potential uncertainty. In order to better quantify this uncertainty, it was chosen to
carry out a complementary analysis, based on the upper bound (“Uncertainty
analysis 2”) and lower bound (“Uncertainty analysis 3”) of the revenues values
concerned by each use of the AfA for 2015, 2016 and 2017.
These hypothesis lead to the following results:
LOSS OF PROFITS
Upper bound of the revenue concerned by Use-4
over the 2015-2017 period (uncertainty analysis 2) € (#1g)
Lower bound of the revenue concerned by Use-4
over the 2015-2017 period (uncertainty analysis 3) € (#1h)
Table 29. Uncertainty analysis for the loss of profits, based on the upper and lower bounds of the values of revenues impacted by each use for 2015, 2016 and 2017.
5.6.1.2. Uncertainty analysis of the loss of employment
As stated in section 5.3.1, only direct job losses have been considered in the
assessment of the social impacts of the “non-use” scenario.
In order to provide an uncertainty analysis of this value, the global job losses have
also been assessed, taking into account both direct and indirect job losses for the
subsidiaries of the Nexter Group.
Considering this scope, the total job losses foreseen in the context of the “non-use”
scenario amount to 558 jobs. As a consequence, the cost of unemployment, taking
into account both direct and indirect job losses and a 4% discount rate until 2018,
amounts to € 19.0M.
5.6.1.3. Other parameters: qualitative uncertainty analysis
A qualitative uncertainty analysis of the main hypothesis, assumptions and
parameters used for the assessment of the “non-use” scenario is provided below:
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APPLICATION PARAMETER UNCERTAINTY ANALYSIS
Loss of
revenues,
profits and
orders
- Revenues and order
book impacted by the
uses of the AfA
Low uncertainty: the values used to estimate the loss of revenues are based on a comprehensive inventory of the armament systems concerned by the AfA and the associated revenues and orders
- Operating margin
Low uncertainty: the value used is based on the financial report of Nexter and is considered as representative of Nexter’s operating margin over the review period
Loss of
investments
- Net book value of
investments in relation
with the AfA
Low uncertainty: the values used derive from a financial analysis carried out by Nexter, based on the actual investments in the process of being depreciated.
In order to remain in the context of the realistic worst-case scenario, only the values for 2015, 2016 and 2017 have been considered (and neither previous nor future investments), thus underestimating the actual investments carried out or planned over time.
Loss of
employment
- Average individual cost
of an unemployed
person
Low uncertainty: the values used are specific for France
- Breakdown of job losses
per use, based on the
share of revenue loss for
each use
Potential high degree of uncertainty, since the change in loss of employment is not necessarily directly related to the change in loss of revenues.
This hypothesis, however, is considered as under-estimating the results since it does not take into consideration synergies between uses: one use may impact several employees
Table 30. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario
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5.6.1. Synthesis
Quantitative results of the uncertainty analysis for the “applied for use” and the
“non-use” scenarios are synthesised on figures below.
In what follows, “reference value” refers to values used in the dossier and
“uncertainty analysis” refers to values obtained using alternative parameters as
described in the foregoing sections.
5.6.1.1. “Applied for use” scenario
The following figure details the results of the uncertainty analysis for the costs
associated to mortality and morbidity:
Figure 19. Uncertainty analysis of the costs associated with mortality and morbidity, in €
5.6.1.2. “Non-use” scenario
The following figure details the results of the uncertainty analysis for the loss of
profits and the loss of employment:
22.1 €
89.0 €
10.8 €
- €
20 €
40 €
60 €
80 €
100 €
Reference value Uncertainty analysisUpper bound
Uncertainty analysisLower bound
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Figure 20. Uncertainty analysis of the loss of profits and the costs associated with the loss of employment, in €
(#1i)
Analysis of Alternatives – Socio-Economic Analysis
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84
5.6.2. Conclusion
The results of both the quantitative and qualitative uncertainty analysis
presented above do not seem to invalidate the overall results of the AfA: the
variability for the parameters assessed does not call into question the order of
magnitude of the risk-benefits ratio for the AfA.
5.7. General conclusion on the impacts of granting an
authorisation
A synthesis of the monetised impacts of the “non-use” scenario is provided
below:
MONETISED IMPACTS
Economic impacts Loss of profits € [100-1,000M](#1j)
Lost investments € 3.6M
Social impacts Loss of employment € 16.3M
Total monetised impacts of the “non-use” scenario € [100-1,000M](#1k)
Table 31. Synthesis of the monetised impacts of the “non-use” scenario
As a complement, other impacts of the “non-use” scenario are synthesised in
the table below:
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85
IMPACTS ORDER OF MAGNITUDE
Economic
impacts Contractual penalties
Contractual duties of defence programs imply a very high level of final
performances of armament systems and include strong contractual penalties
in case equipments cannot be delivered to the armed forces.
Billions of Euros
Social impacts
Territory vulnerability Nexter Mechanics’ site of Tulle and geographic territory is very sensitive to
industrial employment. Not assessed
Indirect employment Along with direct loss of employment, indirect job losses (suppliers, sub-
contractors) are foreseen in the context of the “non-use” scenario. Not assessed
Distributional
impacts
Impact on operational availability
of armament systems
Equipments concerned by the AfA are considered as operationally unusable in
the context of the “non-use” scenario. These equipments constitute the very
backbone of the French current and future operational capabilities; a
disruption of supply of maintenance in operational conditions of these
equipments jeopardises France’s field operation capabilities.
Hundreds of thousands
to Billions of Euros
Loss of investments for the
Ministry of Defence
Defence programs impacted by the “non-use” scenario have been developed
based on significant investments of the French State. These investments will be
lost in case of unavailability of the equipments concerned.
Billions of Euros
Impact on France’s sovereignty
Equipments concerned by the AfA are considered as strategic for the French
Ministry of Defence and their unavailability for the armed forces would
endanger France’s sovereignty and France’s diplomatic independence.
Not assessed
Impact on Nexter’s industrial
partners
Nexter collaborates with several European industrial companies for the
manufacture of its equipments; the “non-use” scenario implied direct impacts
on their activities.
Not assessed
Table 32. Other impacts of the “non-use” scenario
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6. CONCLUSIONS
6.1. Comparison of the benefits and risks
Based upon the assessment carried out in sections 3.4 and 5, the socio-
economic benefits outweigh the risks arising from the use of the substance by a
factor of approximately [1,000,000-10,000,000](#1l).
6.2. AoA-SEA in a nutshell
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87
APPLICATION FOR AUTHORISATION
APPLICANT:
SUBSTANCE:
Nexter Mechanics
Chromium trioxide
USE: Use-4: Industrial use, by spraying or immersion, of a qualified mixture for the chromate conversion coating
of welded mechanical structures of armoured vehicles and associated parts made of high mechanical
properties aluminium alloys for military use, and requiring a maintained electrical conductivity after
severe climatic environments, atmospheric corrosion resistance and paint adhesion.
ANALYSIS OF ALTERNATIVES
Nexter process of research for alternatives has led to identify five potential acceptable alternative technologies for Use-4: SurTec 650 (Alternative 1), BONDERITE 6500 (Alternative 2), Gardobond C4749 + Ardrox 1768 (Alternative 3), INTERLOX 338 (Alternative 4) and LANTHANE 613.3 (Alternative 5). These solutions are respective trademarks of the SurTec, Henkel Surface Technologies, Chemetall, ATOTECH and COVENTYA companies.
Both these alternatives require several testing, development,
implementation and qualification steps in order to be deployed in
applications that will be put on the market:
As a consequence, no potential alternative will be available before hexavalent chromium sunset
date on 2017/09/21 and a review period of seven years is needed to achieve substitution.
SOCIO-ECONOMIC ANALYSIS
As per Art. 60(4) concerning the Socio-economic assessment route,
evidence was provided that the socio-economic benefits outweigh the
risks arising from the use of the substance by a factor of
Complementary impacts of the “non use” scenario involve the
unavailability of critical equipments for the French and foreign armies,
impacts on States’ operational capabilities and sovereignty, as well as
impacts on Nexter’s industrial partners .
AoA – SEA IN A NUTSHELL
Monetised impacts of the "non-use" scenario:
€Monetised impacts of the "applied for use" scenario:
€ 23
2014-2015
Performanceassessment
2018-2020
Pilot scale
2020-2024
DGAQualification
2015 – 2016
Subcontractingassessment
2016-2018
Comparative analysis
Medical treatment1 €
Mortality and morbidity22 €
Use-4
Loss of profits163,704,456 €
Loss of investments3,630,245 €
Loss of employment16,346,362 €
Use-4
(#1n)
[100-1,000M](#1m)
[1,000,000-10,000,000](#1o)
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Mechanics 88
6.3. Information for the length of the review period
Given the argument put forward, and in order to develop, implement and
qualify an alternative solution for Use-4, Nexter Systems and Nexter Mechanics
apply for a seven-year review period.
6.4. Substitution effort taken by the Applicant if an
authorisation is granted
If an authorisation is granted, Nexter Systems and Nexter Mechanics will pursue the
substitution project as described in section 4.3.
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Mechanics 89
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8. ANNEX – JUSTIFICATIONS FOR
CONFIDENTIALITY CLAIMS
In order to preserve the confidentiality of strategic data of the present AfA,
confidential business information was blanked out.
The following table provides a justification for confidentiality of the blanked out data
of this document.
BLANKED OUT
ITEM REFERENCE
PAGE
NUMBER JUSTIFICATION FOR CONFIDENTIALITY
#1a to #1o 8, 60, 80, 83,
84, 86
Strategic data: the blanking of these data is made
necessary by the blanking of data concerning the
loss of revenues (#2a to #2i below).
#2a to #2i 58, 59, 60
Strategic data: the forecasts of revenues, profits
and orders for 2016 and 2017, and conversely the
loss of revenues, profits and orders over the review
period constitute strategic business data and cannot
be disclosed for confidentiality reasons.
#3a to #3b 59, 60
Strategic data: detailed values of the revenues and
orders associated with each use of the AfA
constitute strategic business data for Nexter.
Please note that, wherever possible, and in order to not affect the
understanding of the application, an effort was made to provide range of values for
key confidential data. These data ranges are presented in square brackets, e.g.
[10-100].
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Mechanics 92
9. APPENDIXES
9.1. Complementary elements of context
With around 400,000 direct and up to 960,000 indirect jobs as well as revenues
estimated to € 96B for 2012, the defence sector is a key component of the European
industrial capabilities and competitiveness94. As stated by the report of the EU
Parliament of 30 October 2013, this industry is also necessary to achieve an
operational Common Security and Defence Policy95.
As a major European defence actor, France boasts the second largest defence
industry, right behind the United Kingdom. Key figures of the French defence
industry comprise96:
- € 17,5B of revenues for 2011, of which 35% from export;
- A positive balance of trade of € 2.7B where the national deficit is € 70.1B;
- A total of 165,000 of mainly highly qualified jobs;
- A dozen of world-class players (Airbus, Thales, DCNS, Dassault, Safran,
Nexter, MBDA…) and more than 4,000 small, medium and intermediate-sized
companies.
Altogether, France’s armament industry amounts to 7% of worldwide global
armament exports97 and to 32% of the European armament exports98.
It should be stressed that, unlike other traditional industrial sectors, matters of
sovereignty profoundly impact the defence industry’s organisation and choices,
especially in France. Nexter, as a supplier of critical technologies, is therefore subject
to significant specificities and constraints in its relation with the French
administration. These specificities are key to understanding this AoA and SEA and
also explain why a major focus is made on the French system.
Below considerations are therefore meant to provide the reader with first
elements of context necessary for the building of the “applied for use” and the
“non-use” scenarii. It will be shown that France created an idiosyncratic model of
defence industry, fuelled by the concept of sovereignty (9.1.1). A centralized system
stemmed from this model and contributed to limit the autonomy of Defence
companies (9.1.2). European law also impacts the companies’ international
strategies by framing the import/export of weapons (9.1.3).
94 European Commission, On defence - Towards a more competitive and efficient defence and security
sector - Commission staff working document, 2013 95
Report of the EU Parliament on the European Defence Technological and Industrial Base (2013/2125(INI)) of 30 October 2013: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0358+0+DOC+PDF+V0//EN 96
AACHEAR, Technologies et industries de défense et de sécurité. In: Géostratégie et armement au XXIème siècle, Collection Armement et Sécurité, 2014 97
AACHEAR, Quelle évolution pour l’industrie française de l’armement terrestre ? in: Géostratégie et armement au XXIème siècle, Collection Armement et Sécurité, 2014 98
Yves Fromion, Les exportations de défense et de sécurité de la France, 2006
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Mechanics 93
9.1.1. The rationale behind the French industry of Defence: a concept
embedded in the notion of sovereignty
9.1.1.1. From sovereignty to a fit for purpose French defence technological
and industrial base (DTIB)
Sovereignty à la française: a multifaceted concept
The defence industry is not at all times and under all circumstances a market
only. On a broader level, this industry is a system99 established between a State and
an industry, fuelled by History and idiosyncratic defence principles. By definition, this
relationship and its consequences will vary from one country to another, as it forms
an integral part of the country’s diplomacy and military power. It is also a part of the
notion of sovereignty.
Sovereignty is first and foremost a legal concept of international law that was
formalised by Jean Bodin in 1576 in the sixth volume of the “Livres de la République”
(books of the Republic). The currently accepted legal definition was stated by
Louis le Fur at the end of the 19th century: “Sovereignty is the right of the State to be
obliged or directed only by its own will within the limits of law, and according to the
purposes it is supposed to achieve”.
It is therefore different from the notion of independence, which is a de facto
concept that is variable (e.g. energetic or technological independence) and
contingent (i.e. which may possess several states from dependency to
independency). Based on its very own purposes, a State is therefore either sovereign
or it is not. This clear dichotomy is the result of the sensitivity of matters impacting
sovereignty (like major technological changes undergone by defence programs), any
change being likely to tilt the balance one way or the other.
As regards France, a definition of sovereignty was given by the “Livre blanc de la
défense et de la Sécurité” (French White Paper on defence and national security) of
2013. The following excerpts illustrate both the definition and the commitment of
the French State towards its sovereignty100:
- “The defence industry is a key component of France’s strategic autonomy. It
also contributes to coherent political, diplomatic and economic ambitions. It
alone can guarantee the secure supplying of equipment supporting our
sovereignty and of critical weapons systems and ensure that it matches
operational needs as defined by the Ministry of Defence”.
- “The President of the Republic has chosen to preserve all the critical
industrial sectors that make our industrial and technological base an
instrument for preserving France’s strategic autonomy and its sovereignty”.
- “France considers that the greater its autonomous capacity for initiative and
action, the greater will be its contribution to a collective response and its
99 AACHEAR (2014) Quelle évolution pour l’industrie française de l’armement terrestre? In Géostratégie
et armement au XXIème siècle - Collection Armement et Sécurité 100
Ministère de la Défense, French White Paper – Defence and national security, 2013
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ability to mobilise allies and partners. France therefore considers the principle
of strategic autonomy as the main pillar of its external intervention strategy”.
- “The French defence budget will continue to be the second largest military
budget in the European Union. It represents the price to be paid to maintain
France’s ambitions and preserve its strategic autonomy”.
The French national defence industry is a pillar of the country’s sovereignty.
The consequences of this concept in terms of acquisition of
equipments
France’s defence initiative is based on two pillars: a strategic analysis and an
active defence policy. Main components of these two pillars are detailed below.
STRATEGIC ANALYSIS (REFLEXION) DEFENCE POLICY (ACTION)
Operational prospective Military characterization of risks and threats Operational scenarios
Upstream technical studies
Geopolitics and geostrategic prospective Identification of potential threats
Procurement strategy and industrial strategy
Defence prospective Impacts of technologies on threats and risks
Definition of armed forces Operational contracts
Defence ambitions Doctrine
Alliance strategies Defence agreements
Budgetary parameters
Table 33. Global elements of France’s long-term defence strategy101
Acts of sovereignty like national purchase of defence equipments (as highlighted
in the above table) are driven by many factors, such as the necessity not to depend
on foreign supply. Even though transfers of defence-related products within the
Community have been greatly simplified thanks to the introduction of Directive
2009/43 of May, 6 2009, Member States still benefit from a safeguard provision
under article 15 of the Directive so as to suspend the effect of a transfer licence.
An example of such a risk, though anterior to this Directive, is given by the
United Kingdom and Belgium during the Gulf War. United Kingdom had chosen to
rely on Belgium for its ammunitions supply. During the Gulf War, Belgium did not join
the coalition and therefore refused to supply medium calibre ammunitions for its
infantry combat vehicles. The supply of such ammunitions was only obtained after
101 Projet de loi de finances pour 2013: Défense: environnement et prospective de la politique de
défense, 2013
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the United States used its diplomatic clout on a Swiss manufacturer that had also
initially refused to supply the UK102.
On a more global perspective (outside the scope of the EU), a recent example of
the stakes of sovereignty and procurement autonomy can be found in France’s
refusal to deliver a Mistral-class amphibious assault ship to the Russian Navy because
of the crisis in eastern Ukraine.
The constraints of sovereign military power therefore put pressure on States,
who need to decide between two strategies103:
- The acquisition strategy, based on the actual needs of the army. It aims at a
greater efficiency, achieving the best value for money and ensuring the
highest possible level of interoperability between allies;
- The national industry defence strategy, whose aim is twofold:
From the point of view of keeping a broad and well-functioning
industry of defence, its objective is to preserve jobs, foster R&D,
acquire competitive advantages, etc.
From the point of view of military effects, its objective is to secure
supply, develop better equipments than other armies and obtain a
greater support from industry in case of massive field operations.
These two strategies are very often conflicting. In the UK, priority is for instance
given to operational needs over industrial considerations in order to achieve the best
value for money104. In France, conversely, industrial manufacturing within the
country was often prioritised105. Procurement strategy and industrial capacities are
therefore intertwined.
The necessary construction of a national DTIB to support this
model
To support this model, France built a Defence Technological and Industrial Base
(DTIB) to help it prepare, acquire and implement armaments needed by its armed
forces and answer the priorities of its Government.
The DTIB is constituted of all the SMEs and large companies involved in the
defence industry. Nexter is one of its prominent actors. The DTIB is absolutely
necessary to ensure the availability, safe access, performance, evolution, supply of
consumables and maintenance of the equipments during the whole life of an
armament program106.
102 AACHEAR (2014) Technologies et industries de défense et de sécurité. In Géostratégie et armement
au XXIème siècle - Collection Armement et Sécurité 103
Sénat (4 juillet 2012) Rapport d'information: Les capacités industrielles souveraines / capacités industrielles militaires critiques, p. 28 104
MoD (February 2010) The defence strategy for Acquisition reform AND (February 2012) National Security through technology 105
Sénat, Rapport d’information - Les capacités militaires industrielles critiques 106
http://www.defense.gouv.fr/dga/industrie2/industrie-de-defense/maintenir-et-developper-la-base-industrielle-et-technologique-de-defense-francaise-et-europeenne
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The French institution for statistics (INSEE) is responsible for analysing the
economics and structure of the French industry of Defence via the statistical register
SANDIE107. This work helps fleshing out the very existence and nature of the DTIB and
making sure that all resources are present on the territory to guarantee a supply in
line with the interest of sovereignty.
From the very point of view of the territory, the DTIB also plays a major role in
terms of employment. The Ministry of Defence is indeed France’s second public
employer and its first recruiter.
From a local perspective, a strong historical context has dictated the
implementation of the defence industry companies in very specific areas of France’s
territory (usually far from the eastern border), as shown below:
REGION SHARE OF THE TOTAL EMPLOYEES OF THE DEFENCE INDUSTRY
SHARE OF THE INDUSTRIAL EMPLOYEES OF THE REGION
Île-de-France 28 % 12 %
Provence-Alpes-Côte d’Azur 15 % 20 %
Bretagne 9 % 10 %
Centre 9 % 10 %
Aquitaine 8 % 11 %
Pays de Loire 6 % 4 %
Midi-Pyrénées 6 % 7 %
Basse-Normandie 4 % 9 %
Table 34. Share of the total employees of the defence industry in France and share of the industrial employees by region, in 2012. Source: Conseil économique de défense
108
As an example, the defence industry amounts to 9% of the overall defence
industry employment and 10% of the regional industrial employment in the Centre
region. In this region, one third of the companies generate more than 25% of their
revenues in relationship with the defence industry109, demonstrating the sensitivity
of the territory to employment change in the defence industry sector.
On an intra-regional level, the defence industry sector represents the largest
industrial employer in cities such as: Bourges, Brest, Cholet, Fougères, Lorient,
107http://www.insee.fr/fr/insee-statistique-publique/default.asp?page=statistique-
publique/defense.htm 108
Mentioned in: Rapport d’information déposé en application de l’article 145 du Règlement par la Commission de la défense nationale et des forces armées en conclusion des travaux d’une mission d’information relatifs à une vue capacitaire des armées et présenté par MM. Yves Fromion et Gwendal Rouillard, Assemblée Nationale, n°1233, 10 juillet 2013, p41. 109
Serfati, L’industrie française de la défense, La documentation Française, 2014
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Roanne and Vendôme. Those areas are, therefore, extremely sensitive to any
modification in the defence industry activities110. A specific analysis of the territorial
sensitivity related to the Nexter’ site of Tulle is provided in section 5.3.2 of this AfA.
It has to be noted that both Nexter’ sites of Roanne and Bourges, mentioned
above, are also concerned by this AfA since they are directly dependent on Tulle’s
activity. For example, the JAGUAR’s cannon barrel is manufactured in Tulle but the
assembly of the vehicle, including its armament system, is carried out in Roanne.
As a global consequence of its strategic defence choices and implantations,
France is one of the only four countries in the world with the ability to design and
manufacture nearly all the armament systems necessary for its defence and
security, from rifles to missiles111.
9.1.1.2. A DTIB to guarantee Critical Industrial Military Capabilities (CIMP)
The different levels of equipments: from core equipments to
off-the-shelf equipments
The DTIB therefore produces industrial capacities, which are critical for the
conception, operation and support of “sovereign armament systems”, i.e. armament
systems that directly participate to France’s sovereignty.
Of course, not all the equipments supplied by the industry of defence are
absolutely strategic or vital for the preservation of France sovereignty. It is therefore
proposed to use the “three circles” model, as identified by the French National
Assembly in its reports, so as to define the status of defence technologies:
110 Cidef - L’industrie de la défense en 2012
111 Besson, L'industrie de l'armement, un atout majeur pour la France, Le Figaro, 19/02/2008
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Figure 21. "Three circles” model of the statuses of defence technologies and competences112
The three concentric circles represent:
1. Sovereign, “core team”: technologies or competences that are compulsory
to possess;
2. Partnership or purchase: technologies or competences that are essential,
but that could be outsourced or obtained via specific partners;
3. “Off the shelf” procurement: technologies or competences that are neither
sensitive nor necessary to possess internally.
The combination formed by sovereign armament systems and the industry
producing them is called CMICs, which stands for “Critical Military Industrial
Capabilities”.
Definition of CMIC and application to the case of Nexter
“Critical military industrial capabilities”113 (CMICs) regroup critical industrial
capacities, technologies that are part of the “core team” as well as materials and
human resources needed to allow the State’s strategic autonomy. The French
Ministry of Defence, as a tool to support the State’s sovereignty, carries out the
determination of CMICs.
It should be noted that the determination of CMICs differs from one country to
another. For example, if nuclear capabilities are clearly critical military industrial
capabilities for the French defence strategy, it is not the case for Germany, which did
not rely on nuclear deterrence for its sovereignty. As explained by Scheel114, such
112 Saulnier, Les oscillations de l’industrie française de défense: entre continuité régalienne et
transformations organisationnelles, 2010. In La Souveraineté, Prospective et stratégie, Association pour la Prospective et la Stratégie, 2010 113
In french: “Capacités industrielles militaires critiques” 114
Scheel, L’externalisation des fonctions opérationnelles et de soutien: une boîte de Pandore ? La tribune, n°28, p29-33, 2002
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strategic choices in the context of national sovereignty are no mere choices: they are
the expression of the State command.
Uses covered by this AfA impact both sovereign armament systems and a critical
defence industry. The Authorisation requested by the Applicant should therefore
be understood in the global technical, economic and strategic context attached to
CMICs.
Finally, the attention of the reader is drawn to the fact that, in an even more
stringent way than for other private sectors, confidentiality matters are at the core
of the defence industry’s development and production strategies.
Even though data concerning the global figures of defence, its equipments and
staff are available, detailed data about specific performance levels of the equipments
or on-board technologies remain strictly confidential.
In this context, an effort was made by the Applicant to disclose as many details
as possible concerning the processes implemented, the reflection on potential
alternatives and the stakes & requirements of the armed forces regarding the
applications. Limits of this initiative were nevertheless attained when addressing
three topics: the specific level of performance of the applications, the detailed
implementation and use by the armed forces as well as the specific impacts for the
army and the Ministry of Defence.
Weapon systems that are part of the CMICs cannot be compared to other
types of articles, since they directly participate to the sovereignty of a country.
It is the case for articles contemplated under this AfA and whose production
will be jeopardized should an authorisation not be granted. Because these
equipments are central to the achievement of the State’s policy in terms of
defence and assertion of sovereignty, moreover supporting a grassrooted
industry, a particular organisation was put in place.
As a complement, stringent confidentiality matters and an overall territorial
sensitivity to defence industry constitute key elements of this AfA.
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9.1.2. The consequences of this model: the French State still has a
central role to play in the industry of defence
The constraints applicable to the technological and economic strategies of
French defence companies cannot be understood without explaining the various
roles of the State in this matter. These roles can be described as follows115:
- The State is the main single customer of the French defence industry ;
- The State, by defining the strategic defence policy, influences the
development of armament programs and can therefore be seen as an
architect of these programs ;
- The State regulates the defence sector ;
- The State, as part of its diplomacy and in order to support the industry,
promotes the export of its industry ;
- The State is a major shareholder of the French defence industry companies.
Figure 22. The five roles of the French State as regards the defence industry
In the following paragraphs, it is therefore proposed to further explain the
implications of these roles.
9.1.2.1. The multipurpose State: Architect, Prime contractor and Promoter
The State as an architect of high performance armament
programs: from design to MOC (Maintenance in Operational
Conditions)
The strong involvement of the State in the definition, development and
implementation of Defence programs and the resulting specific requirements for the
defence industry - as opposed to “standard” private industries - can be illustrated by
France’s general instruction 25/EMA-1516/DGA of March 26, 2010 for the conduct
of armament operations.
115 Assemblée Nationale, Journal official de la République Française, Session ordinaire du 2014-2015,
Séances du jeudi 15 janvier 2015, Compte rendu intégral, 2015
Regulator
Promoter
Customer
Architect
Shareholder
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The French acquisition procedure can be presented as follows: the definition of
France’s policy toward armament is the responsibility of the President of the
Republic, as the supreme commander of the armed forces, within the Defence &
Security Council. The Ministry of defence, organized in investment committees, then
carries out the management. The Ministry of defence comprises military (Etat-
Major), administrative (Secrétariat Général pour l'Administration - SGA) and
technical-commercial (Direction Générale de l’Armement - DGA) government
agencies116.
Expression of needs is defined by the Etat-Major, notably based on geopolitics
and geostrategic works provided by the Delegation for Foreign Affairs117.
DGA, in its role of prime contractor, then ensures the implementation of such
expressed needs, based on the capabilities of the DTIB, the general “industrial
strategy” for defence and its own budgetary constraints. DGA’s annual expenditures
budget amounts to around € 16B.
The general steps defining the lifecycle of armament programs are the
following118:
Figure 23. Lifecycle steps of French armament programs.
Given their applications, the level of performance of defence applications is
subject to stringent requirements and assessment processes. Three formal
116 AACHEAR, Le management de l’Armement. In: Géostratégie et armement au XXIème siècle,
Collection Armement et Sécurité, 2014 117
“Délégations aux Affaires Etrangères” - DAT 118
Ministère de la Défense, Le déroulement et la conduite des opérations d’armement (Instruction générale 125/EMA-1516/DGA du 26 mars 2010), 2011
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assessment steps conducted by the State therefore ensure the initially defined level
of performance is attained, during the whole lifecycle of the programs119:
1. Technical tests, for the qualification of the equipments, to allow a transfer of
responsibility from the supplier to the State (DGA);
2. Evaluation, for adoption of the solution, to allow a transfer of responsibility
from DGA to the armed forces;
3. Experimentations, for entry into operational service, to finally validate
combat readiness of the equipments.
The validation steps are synthesized in the following table:
ACTOR DECISION ASSESSMENT OF COMPLIANCE…
AUTHORISATION…
DGA
Qualification … with technical requirements
… of production and support
Acceptance … with contractual terms … of property transfer of the equipments
Armed forces
Adoption … with military characteristics
… of implementation
Entry into operational service
… with conditions of use … of operational use
Table 35. Verification & validation approach120
Performance targets are specified in the contracts between DGA and the
manufacturers. Such targets may, for example, concern speed, autonomy, shooting
range or shooting rate, resistance to shocks or resistance to corrosion, precision of
armaments, etc. Penalties and compensations are usually stipulated in case of non-
attainment of such performance levels. General terms in contractual documents are
the following121,122:
“The holder has the responsibility to deliver a product in compliance with the
market’s requirements. The holder has to obtain the requested results with the
means it chooses and to provide a satisfactory visibility on the processes it
implements. The holder has the responsibility to implement an organisation, methods
or any means allowing the attainment of quality requirements for the supplied
products as well as their compliance with the requirements of the present market and
to produce evidence for it.”
Along with high performance requirements, the development of defence
applications is characterised by stringent testing and qualification requirements.
119 Ibid. 118
120 Ibid. 118 121
JM Oudot, Renégociations des contrats de défense: le rôle des aspects informels. In: Fondements économiques et industriels de la Défense, Innovations, Cahiers d’économie et de management de l’innovation. Numéro 42. 2013 122
Free translation
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Delays between the manufacture of the initial pre-production sample and the start
of industrial production are therefore much longer than those encountered in other
industries.
As an illustration, the period of time needed from the laboratory scale sample to
a qualified industrial process was of 3 years for the CT40 cannon barrel surface
treatment. Two more years were then needed for the qualification of the gun itself.
Finally, when a new armament program is launched, DGA signs a contract with
the industry covering the acquisition of the first years of MOC (maintenance in
operating conditions). According to the French Cour des Comptes (French Court of
Auditors), “the rationale is to take into account the initial costs of MOC in the
decision to design an equipment, so as to facilitate future maintenance and have the
industry directly interested in the maintenability of the equipments it produces”123.
National budgetary lines are dedicated to these costs (lines 146 and 148 of the
budget).
This decision also helps to adjust and anticipate the maintenance capacities available
to the State, which still owns several workshops and trains military maintenance
teams. From this point of view, the report of the Cour des Comptes stresses the fact
that this ‘choice depends on operational constraints, since armies need to be able to
fix their equipments on field, which necessitates trained military staffs’. This is
especially the case for land equipments (such as the ones provided by Nexter), that
‘need to be fixed on areas of operations, hence the presence of maintenance
regiments and the capacity of the State to send in military staffs with spare parts’124.
As a consequence, both from a budgetary and a staff point of view, the costs and
conditions of the MOC need to be controlled and can only be subject to minor
changes.
The contribution of the State to armament programs is therefore very strong,
both in terms of priorities (based on its own geopolitical needs) and definition of
the technological solution, at the start of the project and during its whole life
(because of the MOC constraints). This process is deemed moreover representative
for a majority of situations since the State is one of the prime contractors for its
industry of defence.
The State as one of the prime contractors of its industry of defence
France still represents the single biggest buyer for its industry of defence, even
though the share of export inside and outside the EU increases dramatically. From
this point of view, it should be noted that the proactivity of France as regards its
exports is fully part of its sovereignty politics: by ensuring export outlets, France
guarantees the sustainability of its model (i.e. one able to keep a strong DITB that
123 Cour des Comptes, Le maintien en Condition Opérationnelle des matériels militaires: des efforts à
poursuivre. Rapport public thématique, 2014 124
Ibid. 123
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safeguards CIMCs) in a context of budgetary restraint125. Below are presented the
share of France in the revenues of 4 of its main defence companies126:
Figure 24. Share of revenues per geographic zone, for Nexter, Thales, Dassault Aviation & Safran
It should be further noted that the preference given by a country to its national
industry, as it is the case for France with Nexter, is admitted to a certain extent
under European and French law. Indeed, and as provided by article 346 of the Treaty
on the Functioning of the European Union:
“1. The provisions of the Treaties shall not preclude the application of the following
rules:
(a) […];
(b) any Member State may take such measures as it considers necessary for the
protection of the essential interests of its security which are connected with the
production of or trade in arms, munitions and war material; such measures shall not
125 Rapport au Parlement 2015 sur les exportations d’armement de la France, p. 16 126
Calepin des entreprises internationales de défense, Edition 2014, DGA. Except for Nexter, only part of the revenues presented are dedicated to defence activities. In most cases, figures should therefore be much higher for the part dedicated to France. For instance, it was only recently that Dassault started to sell its Rafale aircraft abroad. Relative shares for the defence activities are the following: Dassault (31%); Thales (49%); Safran (9%).
24
76
Revenues per geographic zone (in %) Case of Nexter
France
Rest of the world
29
71
Revenues per geographic zone (in %) Case of Dassault aviation
France
Rest of the world
22
7
22 32
17
Revenues per geographic zone (in %) Case of Thales
France
Rest of the world
Europe
North America
Asia
29
11
20
10 5
7
14 4
Revenues per geographic zone (in %) Case of Safran
France
UK
Rest of Europe
North America
Australia and NZ
Saoudi Arabia and Middle East countries Asia
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adversely affect the conditions of competition in the internal market regarding
products which are not intended for specifically military purposes”.
This possibility was extensively used but is now framed and limited by Directive
2009/81/EC on the coordination of procedures for the award of certain works
contracts, supply contracts and service contracts by contracting authorities or
entities in the fields of defence and security. It was implemented in France by a Law
of June 22 2011. Section 3 of the Directive, titled “Excluded contracts”, limits this
exclusion to contracts listed under articles 12 and 13 whereby (art.13):
“This Directive shall not apply to the following:
(a) contracts for which the application of the rules of this Directive would oblige a
Member State to supply information the disclosure of which it considers contrary to
the essential interests of its security”;
Directive 2009/81/EC therefore does not preclude support given to national
champions.
In this context, and in spite of the numerous calls for a more integrated
European defence industry, Member States still have the possibility to favour their
national supply over foreign procurement when they deem it necessary. This
situation therefore creates a strong technical and commercial link with the State,
on top of the financial aspects already described.
Finally, the role of the State can clearly be seen in the action of the Ministry of
Defence to sell abroad weapons and vehicles.
Focus: Nexter-KMW (Krauss-Maffei Wegmann) merger
As indicated, though complicated, participations of foreign companies or mergers are
of course not impossible. This is the case for Nexter and KMW (a private German
company specialized in the production of military vehicles) whose merger, after
several years of negotiations, will create Europe first company for armoured vehicles
and ammunitions. The French State will hold 50% shares of this new company
(representing its 100% shares in GIAT industries) while the family shareholders of
KMW will have the other 50%.
The rationale for this merger is to increase the force of these companies on the
international market. Consequently, the first active step of this new company will be
to coordinate their commercial organization and benefit from the respective
implantations of Nexter and KMW around the world. However, it is not foreseen that
the merger will affect the activities contemplated under this AfA, nor it is the case for
other domestic defence programs.
Complementarily, it has to be mentioned that Nexter-KMW merger is based on a
strong synergy between both companies activities: KMW is specialised in vehicles
whereas Nexter’s field of expertise is about armament. The complementarity
between the vehicle and its armament are at the very core of the Nexter-KMW
merger: it has to be stressed that KMW does not produce gun barrels and armament
devices. From this point of view, if the authorisation is not granted, the synergy
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between the two companies would be weakened.
The State as one of the promoters of its defence industry
Selling weapons or equipments is no usual business. The responsibility attached
to it means that such sales cannot stem from occasional business but rather from a
durable relationship. For a State, it even has a diplomatic dimension
This is the reason why the COMED (Comité ministériel des exportations de
défense - Ministerial Committee for Defence Exports) that was set up in 2013 within
the Ministry of Defence, is in charge of coordinating the efforts of the Ministry, the
diplomatic posts and the Industry so as to foster exports of the defence industry.
The DGA and in particular its international bureau (DGA/DI) also intervenes
upstream to facilitate the participation of the French industry to international
showcases, as well as downstream, through its export directors (DOE) who sees the
execution of the contracts.
Finally, the EMA (Etat-Major des Armées – military staff) is also a key actor of
the export process: the fact that the French army uses the equipments gives a
guarantee of reliability (the so-called “Armée française” label), while its staff
participates to international showcase, perform demonstration, train foreign armies
(especially through DCI – Défense Conseil International) etc.
The presence of the State and its powers directly impact the French defence
companies, notably in terms of joint venture, partnership, change in the
products or export.
European law and the rules applicable to export also regulate these
possibilities.
9.1.3. Defence companies are furthermore entrenched in a constrained
European legal environment
Rules applicable to the import and export of defence-related products play a
major role in the production and commercial strategies of defence companies. The
ban of a substance placed in the Annex XIV of REACh will therefore trigger industrial
reflections taking into account these aspects.
9.1.3.1. Presentation of the EU and French frameworks
Several acts or regulations are applicable to the control of import and export of
weapons.
Firstly, the Council Common Position 2008/944/CFSP of 8 December 2008
defining common rules governing control of exports of military technology and
equipment list 8 criteria to evaluate the request for licenses. It also defines best
practices and creates a consultation and notification mechanism between Member
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States to inform each other of the refusal to grant licenses. In 2014, France notified
13 such refusals.
Secondly, Directive 2009/43/EC of the European Parliament and of the Council
of the European Union of 6 May 2009 simplifying terms and conditions of transfers
of defence-related products within the Community is the basic regulation for the
regime applicable to the import and export of weapons in the EU.
This system is here detailed for France but similar systems were implemented in the
EU Member States, based on the aforementioned directive.
In France, the directive was indeed implemented and complemented by various texts
destined to precise the procedure and follow up the compliance with the applicable
rules. An overview of this legal framework is given in Table 37.
9.1.3.2. Rules applicable to the export of defence-related products in France
An authorisation called license is required for export operations. From this point
of view, one needs to differentiate between two licenses, depending on whether the
equipments are transferred to EU or non-EU countries:
- Transfer Licenses are meant to accompany the transfer of a defence-related
product to a Member State of the EU ;
- Export Licenses are meant to accompany the transfer to a non EU country ;
These licenses can be accompanied by technical and / or legal conditions that are
notified by the Ministry of Defence to the company. Customs officers check
compliance with these conditions.
Moreover, 3 types of transfer and export licenses exist:
- Individual licenses: authorise the shipment of goods to one customer in one
or several instalments ;
- Global licences: authorise the shipment of goods to one or several
customers, for a limited duration but without any limitations in terms of
quantities or amount ;
- General licences: authorise export or transfer operations comprised in its
scope without having to ask an individual license for each operation. This
scope is however restrictively defined by a decree.
Finally and depending on the license needed, different procedures apply in
France:
- Individual and global licenses, both for transfer or export, are submitted to
DGA and are evaluated by the CIEEMG (Commission Interministérielle pour
l’Exportation de Matériels de Guerre – Inter-ministerial Commission missions
for the study of exports of war material) once a month. Authorisations are
granted by the Prime Minister after consultation of the CIEEMG and are then
notified to the Minister responsible for customs.
- The use of General licenses, both for transfer or export, are not subject to
the scrutiny of the CIEEMG since their scope has already been established. A
declaration must however be submitted by the French industrial operator to
the DGA who grant him a registration number.
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Types of licenses are summarised below:
CRITERIA PROCEDURE
Geographic
criteria
Transfer license
Towards EU
countries
Export license
Towards non-EU
countries
Operational
criteria
Individual licenses
1 customer
DGA
CIEEMG
Prime Minister and Minister
responsible for customs
Global licenses
1 or several customers for a limited
duration
General licenses
All operations in the restrictive scope of
the license
DGA who deliver once a
registration number
Table 36. French types of licenses for export operations in the context of defence
French companies must record all their operations and transmit twice a year
(1st March and 1st September of each year) a complete report to the Ministry of
Defence. These reports are subject to out-of-site supervision as well as on-site
supervision for the cases of global and general licenses.
These procedures are both costly and time consuming. They greatly influence
companies’ strategies as regards their production locations since any new site or any
new subcontractor outside the final equipment country of origin would subject the
weapon or the armament system to new licences request.
On top of these stringent export rules, importers are also subject to burdensome
procedures.
9.1.3.3. Rules applicable to the import in France of defence-related products
The import of defence-related products in the French territory requires an
Authorisation also called AIMG (Autorisation d’Importation de Matériels de Guerre –
import authorisation of defence-related products). The Ministry responsible for
customs grants it after consultation of other Ministers (Defence, Domestic or
International Affairs). This decision is essentially based on public safety and
international geopolitics considerations.
One recent example is given by Decision n° 2014/512/PESC of 31 July 2014 and
Regulation n° 833/2014 of 31 July 2014 imposing restrictions against Russia because
of the turmoil in eastern Ukraine. Based on this, the French customs have put on
hold more than 700 declarations and have conducted out-of-site and on-site
supervisions to ensure that the terms of the restrictions were applied, both for
import and export of defence-related products from and toward Russia.
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These rules are of primary importance in deciding where production will take
place. For instance, subcontracting in or outside the EU, as it could be the case
on a long term or temporary basis to overcome substitution difficulties created
by the Annex XIV of REACh, is far from being an easy solution. It would indeed
require for both companies to be granted licenses or authorisations for either
import or export, with possible risks of disruption depending on where
subcontracting is made.
9.2. Overview of France’s legal framework
TEXT SCOPE
Mili
tary
an
d a
ssim
ilate
d m
ate
rial
- Act No. 2011-702 of 22 June 2011 - Decree No 2012-901 of 20 July 2012
Export and import of military equipment and related materials and intra-Community transfers of defence-related products
Act No. 2012-304 of 6 March 2012 - Decree No 2013-700 of 30 July 2013
Plan of military materials, weapons and ammunition (classification of materials, organization and operation of AFCI, rules on the acquisition, holding, port, transport and transfer of arms)
Decree No. 2012-1176 of 23 October 2012 amending Decree No. 55-965 of 16 July 1955
Update of the Inter-ministerial Commission missions for the study of exports of war material (CIEEMG)
Decree of 27 June 2012 amended
List of war materials and assimilated subject to authorisation prior to export and products related to the defence subject to authorization prior to transfer
Decree of 30 November 2011 as amended relating to the corporate certification procedure wishing to be recipient of defence related products
Corporate certification procedure
Decree of 30 November 2011 amended establishing the organization of control out-of-site and on-site conducted by the Ministry of Defence under Article L2339-1 of the Defence Code
Obligations of exporters reporting transactions carried out; provisions of control in place; operation of the ministerial committee of the subsequent verification
Decree of 16 July 2012 concerning the accounts of imports carried out and transfers of war weapons and ammunition from Member States of the European Union materials
Obligations on account of the import / transfers from EU Member States
Analysis of Alternatives – Socio-Economic Analysis
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Decree of 14 April 2014 concerning the manner of request of individual licences and global export of war and assimilated equipment and manner of request of individual and global licenses of transfer of defence related products
Manner of declaration in respect of export restrictions
- Decrees of general transfer license of 6 January 2012 - Decree of general transfer license of 3 June 2013 - Decree of general export and transfer of 6 June 2013
General transfer/ export licenses
Spe
cifi
c re
stri
ctio
ns
app
lyin
g to
th
e e
xpo
rt, i
mp
ort
and
tra
nsf
er
of
cert
ain
go
od
s.
Decree No. 2014-62 of 28 January 2014 Export of firearms, ammunitions and its components
Decree No. 2011-978 of 16 August 2011 Export and import of certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment.
- Decree 2009-1140 of 23 November 2009 - Decree of 4 October 2007
Export, import and transfer of explosive substances and products (with the exception of explosives on the list of war and assimilated equipment)
Table 37. Overview of France’s legal framework127
9.3. Inventory of the French ground army equipment
The following table details the current equipment of the French ground Army
and specifically identifies the equipments manufactured by Nexter as well as those
concerned by the uses of this AfA.
127 Rapport au Parlement 2015 sur les exportations d’armement de la France – 2015 Report to the
Parliament for the export of French defence related products, Annexes 1, 2 and 3
Analysis of Alternatives – Socio-Economic Analysis
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CATEGORY EQUIPMENT MANUFACTURER QTY IN OPERATION (June 30
th, 2014)
128
CONCERNED BY USE OF THIS AfA
Main battle tanks Leclerc
129
- Nexter 200 Use-2
Tracked armoured systems
High mobility vehicles (VHM)
130
- Hägglunds 53 -
Tank recovery vehicles (DCL)
131
- Nexter 18 -
128 Ministère de la Défense, Les chiffres clés de la défense – Edition 2014, 2014
129 Author: Daniel Steger, Source: http://openphoto.net/gallery/image.html?image_id=11044
130 Author: AlfvanBeem. Source: https://fr.wikipedia.org/wiki/V%C3%A9hicule_%C3%A0_haute_mobilit%C3%A9#/media/File:VHM-1,_(V%C3%A9hicule_haute_mobilit%C3%A9),_French_army_licence_registration_%276932_0993%27_photo-2.JPG 131
Authori: David Monniaux. Source: https://fr.wikipedia.org/wiki/Char_de_D%C3%A9pannage_DNG/DCL#/media/File:Char_de_D%C3%A9pannage_DNG-DCL_14_juillet_2006.jpg
Analysis of Alternatives – Socio-Economic Analysis
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Battle tanks (AMX 30 D)
132
- Ateliers de construction d'Issy-les-Moulineaux
- Nexter 58 -
Demining systems (EBG & SDPMAC)
133
- Ateliers de construction d'Issy-les-Moulineaux
- Nexter 56 -
Wheeled armoured systems
Light reconnaissance vehicles
(AMX 10 RCR)
134
- Nexter 248 -
Wheeled armoured all-terrain vehicles (ERC 90
Sagaie)
135
- Panhard General Defense - Nexter
110 Use-2
132 Author: Davric. Source: https://fr.wikipedia.org/wiki/AMX-30#/media/File:AMX-30D-cote-droit.jpg 133
Author: Tiraden. Source: https://commons.wikimedia.org/wiki/File:V%C3%A9hicule_d%C3%A9tecteur_de_mines_du_syst%C3%A8me_d%27ouverture_d%27itin%C3%A9raire_min%C3%A9.JPG 134
Author: Davric. Source: https://fr.wikipedia.org/wiki/AMX-10_RC#/media/File:AMX-10-RC.JPG 135
Author: Pierre Delattre. Source: https://fr.wikipedia.org/wiki/ERC-90_Sagaie#/media/File:ERC-90_Sagaie_008_FR.JPG
Analysis of Alternatives – Socio-Economic Analysis
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Armoured vehicles for infantry combat (VBCI)
136
- Nexter 604 Use-3 Use-4
Troop transport vehicles (VAB)
137
- Renault Trucks Défense 3,135 -
Small protected vehicles (PVP)
138
- Panhard General Defense 1,183
Light armoured vehicles (VBL-VB2L)
139
- Panhard General Defense - Nexter*
1,470 Use-3*
136 Author: Daniel Steger. Source: http://openphoto.net/gallery/image.html?image_id=11058
137 Author: Tech. Sgt. H. H. Deffner. Source:
https://fr.wikipedia.org/wiki/Renault_Trucks_D%C3%A9fense_V%C3%A9hicule_de_l%27avant_blind%C3%A9#/media/File:French_VAB_APC_during_Operation_Desert_Shield.JPEG 138
Author: Selvejp. Source: https://fr.wikipedia.org/wiki/Petit_v%C3%A9hicule_prot%C3%A9g%C3%A9#/media/File:PVP_(Petit_v%C3%A9hicule_prot%C3%A9g%C3%A9)_(1).JPG 139
Author: Supercopter. Source: https://commons.wikimedia.org/wiki/File:VBL_RHP_Afghanistan.JPG
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Mechanics 114
Infantry mobility vehicles (Aravis)
140
- Nexter 14 Use-3 Use-4
Mine protected clearance vehicles
(Buffalo)
141
- Force Protection 4 -
Artillery
155mm cannon
142
- Nexter 121 Use-1 Use-2
Artillery observation vehicles (VOA)
- Ateliers de construction
d'Issy-les-Moulineaux - Nexter
90 -
Wheeled 155 mm gun-howitzers (CAESAR)
143
- Nexter 77 Use-1 Use-2
140 Author: Kevin.B. Source: https://commons.wikimedia.org/wiki/File:Nexter_Aravis_%C3%A0_Strasbourg,_2010_(3).jpg
141 Author: US government. Source: https://fr.wikipedia.org/wiki/Buffalo_(MPCV)#/media/File:Buffalo_mine-protected_vehicle.jpg
142 Author: Sgt. Alex C. Sauceda. Source: https://commons.wikimedia.org/wiki/File:F-1-Towed-Gun-howitzer.jpg
143 Author: Daniel Steger. Source: http://openphoto.net/gallery/image.html?image_id=11060
Analysis of Alternatives – Socio-Economic Analysis
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120mm mortars
144
- TDA Armements 140 -
Fighter’s equipment
Félin
145
- Sagem Défense Sécurité 18,242 -
Anti-tank systems
Milan
146
- MBDA 549 -
Hot
147
- MBDA 30 -
144 Author: Tech. Sgt. H. H. Deffner. Source: https://commons.wikimedia.org/wiki/File:French_MO-120-RT-
61_and_V%C3%A9hicule_de_Tracte_Mortier_120_during_Operation_Desert_Shield.JPEG 145
Author: Daniel Steger. Source: https://commons.wikimedia.org/wiki/File:FELIN-openphotonet_PICT6047.jpg 146
Author: David Monniaux. Source: https://commons.wikimedia.org/wiki/File:Milan_501607_fh000004.jpg 147
Author: Jwnabd. Source: https://commons.wikimedia.org/wiki/File:Long_Range_Anti-tank_Weapon_HOT_3_-_ILA2002-clean.jpg
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Mechanics 116
Eryx
148
- MBDA 678 -
Javelin
149
- Raytheon & Lockheed Martin 76 -
Helicopters
Gazelle
150
- SNIAS 127 -
Tigre
151
- Airbus Helicopters - Nexter
49 Use-2 Use-3
148 Author: davric. Source: https://commons.wikimedia.org/wiki/File:ERYX-2ndFrInReg_2.jpg
149 Author: Gary L. Kieffer, USA, CIV. Source: https://commons.wikimedia.org/wiki/File:FGM-148_Javelin_-_ID_061024-A-0497K-004.JPEG
150 Author: Eric Gaba. Source: https://commons.wikimedia.org/wiki/File:Gazelle_SA342M.jpg
151 Author: David Monniaux. Source: https://commons.wikimedia.org/wiki/File:Eurocopter_Tiger_p1230203.jpg
Analysis of Alternatives – Socio-Economic Analysis
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Cougar
152
- Aérospatiale - Nexter*
24 Use-2* Use-3*
Puma
153
- Aérospatiale - Nexter*
88 Use-2* Use-3*
Caracal
154
- Airbus Helicopters - Nexter*
8 Use-2* Use-3*
Caïman
- NHIndustries - Nexter*
13 Use-2* Use-3*
152 Author: Arnaud Gaillard. Source: https://commons.wikimedia.org/wiki/File:Cougar_heli_ag1.jpg
153 Author: davric. Source: https://commons.wikimedia.org/wiki/File:SA340_Puma.JPG
154 Author: Dmitry A. Mottl. Source: https://commons.wikimedia.org/wiki/File:Eurocopter_EC-725_Cougar_MkII.jpg
Analysis of Alternatives – Socio-Economic Analysis
Use-4 Nexter Mechanics 118
Ground-to-air armament
systems Mistral
155
- MBDA - Nexter
126 -
Table 38. Inventory of the French Land Army equipment. * depending on configurations
155 Author: Adrian. Source: https://commons.wikimedia.org/wiki/File:Lansarea_unei_rachete_MISTRAL.jpg