ANALYSIS OF ALTERNATIVES & SOCIO-ECONOMIC ANALYSIS
Public version
Legal name of Applicant(s): Nexter Mechanics
Submitted by: Nexter Mechanics
Substance: Chromium trioxide, EC 215-607-8 and CAS 1333-82-0
Use title: 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.
Use number: 2
Analysis of Alternatives – Socio-Economic Analysis
CONTENTS
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. CAESAR ...... 14 2.1.2. RAFALE ...... 16 2.1.3. Leclerc ...... 17 2.2. Elements of context...... 18 2.2.1. Focus: Maintenance in Operational Conditions (MOC) ...... 19 2.3. General methodology ...... 20 2.3.1. Scope of the AfA ...... 21 2.3.2. An argument partly based on representative examples for the French army ...... 22 2.3.3. Actualisation ...... 23 2.3.4. Confidentiality ...... 25 2.4. Substitution strategy ...... 25 2.5. Definitions of the “applied for use” and “non-use” scenarios ...... 25 2.5.1. “Applied for use” scenario ...... 25 2.5.2. “Non-use” scenario ...... 26 3. “APPLIED FOR USE” SCENARIO ...... 27 3.1. Analysis of substance function ...... 27 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 ...... 31 3.4.1. Medical cancer treatment ...... 32 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 ...... 40 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 ...... 41 4.1.2. Data searches ...... 42 4.2. Identification of known alternatives ...... 45 4.2.1. Other publicly available potential alternatives ...... 47 4.3. Assessment of shortlisted alternatives ...... 47 4.3.1. Alternative 1 ...... 48 4.3.2. Alternative 2 ...... 50 4.3.3. The most likely “non-use” scenario ...... 52
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5. IMPACTS OF GRANTING AN AUTHORISATION ...... 56 5.1. Economic impacts ...... 57 5.1.1. Loss of revenues, profits and orders ...... 57 5.1.2. Lost investments ...... 60 5.1.3. Contractual penalties ...... 60 5.2. Human health or Environmental impact ...... 61 5.3. Social impact...... 61 5.3.1. Impact on employment...... 61 5.3.2. Territory vulnerability ...... 66 5.3.3. Indirect employment ...... 67 5.4. Wider economic impact ...... 68 5.5. Distributional impact ...... 68 5.5.1. Impact on operational availability of armament systems ...... 70 5.5.2. Impacts on Maintenance in Operating Conditions of equipments ...... 73 5.5.3. Loss of investments for the French State ...... 74 5.5.4. Impact on France’s sovereignty ...... 74 5.5.5. Impact on Nexter’s industrial partners ...... 76 5.6. Uncertainty analysis for both the “applied for use” and the “non-use” scenario ...... 76 5.6.1. “Applied for use” scenario ...... 76 5.6.1. “Non-use” scenario ...... 78 5.6.1. Synthesis ...... 80 5.6.2. Conclusion...... 82 5.7. General conclusion on the impacts of granting an authorisation ...... 82 6. CONCLUSIONS...... 84 6.1. Comparison of the benefits and risks ...... 84 6.2. AoA-SEA in a nutshell ...... 84 6.3. Information for the length of the review period ...... 86 6.4. Substitution effort taken by the Applicant if an authorisation is granted ...... 86 7. References ...... 87 8. Annex – Justifications for Confidentiality Claims ...... 89 9. Appendixes ...... 90 9.1. Complementary elements of context ...... 90 9.1.1. The rationale behind the French industry of Defence: a concept embedded in the notion of sovereignty ...... 91 9.1.2. The consequences of this model: the French State still has a central role to play in the industry of defence ...... 98 9.1.3. Defence companies are furthermore entrenched in a constrained European legal environment ...... 104 9.2. Overview of France’s legal framework ...... 107 9.3. Inventory of the French ground army equipment ...... 108
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TABLES Table 1. Uses of the application for authorisation ...... 10 Table 2. Scope of the AfA ...... 22 Table 3. Impact period of the AfA ...... 22 Table 4. Inflation values taken into account in this dossier ...... 23 Table 5. Key figures of Nexter Systems and Nexter Mechanics for 2014 ...... 30 Table 6. Annual tonnages for Use-1 and Use-2 ...... 30 Table 7. Lung cancer costs in France for the two first years after the diagnosis ...... 32 Table 8. Net year survival rate after lung cancer diagnosis in France ...... 33 Table 9. Individual lung cancer costs during the review period, not taking into account the excess of risk for workers ...... 34 Table 10. Total lung cancer costs during the review period, considering the total excess of risk for workers and the respiratory equipments...... 34 Table 11. Years of Life Lost (YLL) for Use-2 ...... 36 Table 12. Years of Life lived with Disability (YLD) for Use-2 ...... 37 Table 13. Synthesis of YLLs, YLDs and monetised damage of mortality and morbidity related to the excess cancer risk associated with lung cancer ...... 38 Table 14. Value of statistical life and willingness to pay to avoid cancer ...... 38 Table 15. Incidence and mortality associated with lung cancer in France, in 2012 ...... 39 Table 16. Mortality and morbidity costs for Use-2, complementary assessment ...... 39 Table 17. Overall impacts of the "applied for use" scenario, Use-2 ...... 39 Table 18. Overall impacts of the “applied for use” scenario, Use-2, complementary analysis taking into account a 4% discount rate ...... 40 Table 19. Nexter-involving research programs ...... 42 Table 20. Functional requirements for Nexter armament systems, Use-2 ...... 43 Table 21. Short-listed potential alternatives for Use-2 ...... 44 Table 22. Testing methodology for short-listed potential alternatives ...... 45 Table 23. Functional properties assessment for Use-2 ...... 46 Table 24. Global loss of revenues, profits and order book over the review period for the AfA (cumulated for Use-1, 2, 3 and 4) ...... 59 Table 25. Description of employment sensitivity of each subsidiary of the Nexter Group to Cr(VI) compounds concerned by the AfA ...... 63 Table 26. Loss of employment, by use of the AfA ...... 64 Table 27. Average individual social cost of an unemployed person in France, 2010 ...... 65 Table 28. Total cost of the loss of employment for Use-2 ...... 66 Table 29. Global direct loss of employment and associated costs for the AfA (cumulated for Use-1, 2, 3 and 4)...... 66 Table 30. Availability of various equipments in the French army ...... 72 Table 31. Uncertainty analysis for mortality and morbidity, Use-2...... 77 Table 32. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario ...... 77 Table 33. 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...... 78 Table 34. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario ...... 79 Table 35. Synthesis of the monetised impacts of the “non-use” scenario ...... 82 Table 36. Other impacts of the “non-use” scenario ...... 83 Table 37. Global elements of France’s long-term defence strategy ...... 92 Table 38. 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 ...... 94 Table 39. Verification & validation approach ...... 100 Table 40. French types of licenses for export operations in the context of defence ...... 105
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Table 41. Overview of France’s legal framework ...... 108 Table 42. Inventory of the French Land Army equipment ...... 116
FIGURES
Figure 1. Examples of armament systems concerned by Use-2 currently in use within the French armed forces ...... 13 Figure 2. CAESAR ...... 14 Figure 3. RAFALE (left) and 30M791 cannon (right) ...... 16 Figure 4. Leclerc main battle tank ...... 17 Figure 5. Supply chain ...... 29 Figure 6. Synthesis of the impact categories of the “applied for use” scenario...... 31 Figure 7. Detail of the 170 pre-identified processes for hard chromium alternatives, by type of process ..... 43 Figure 8. Global implementation timeline of Alternative 1 ...... 49 Figure 9. Global implementation timeline of Alternative 2 ...... 51 Figure 10. Synthesis of the impact categories of the “non-use” scenario...... 56 Figure 11. Annual revenues concerned by Use-2 over the 2015-2017 period, M€ ...... 57 Figure 12. Orders concerned by Use-2, over the 2015-2017 period, M€ ...... 58 Figure 13. Net book value of investments in relation with Use-2, M€ ...... 60 Figure 14. Detail of Nexter’s involvement in the manufacture of the French land army equipment and the impacts of this AfA’s four uses ...... 69 Figure 15. French army field operations, July 2015 ...... 71 Figure 16. Uncertainty analysis of the costs associated with mortality and morbidity, in € ...... 80 Figure 17. Uncertainty analysis of the loss of profits and the costs associated with the loss of employment, in € ...... 81 Figure 18. "Three circles” model of the statuses of defence technologies and competences...... 96 Figure 19. The five roles of the French State as regards the defence industry ...... 98 Figure 20. Lifecycle steps of French armament programs...... 99 Figure 21. Share of revenues per geographic zone, for Nexter, Thales, Dassault Aviation & Safran ...... 102
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LIST OF ABBREVIATIONS
AfA Application for Authorisation B Billion (€) CAmion Equipé d'un Système d'ARtillerie CAESAR Truck equipped with an artillery system Centre Technique des Industries Mécaniques CETIM 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 Direction de l’Animation de la Recherche, des Etudes et des Statistiques DARES Directorate for Research, Studies and Statistics Minister of Social Affairs and Employment Direction Générale de l’Armement DGA French Armament Procurement Agency - French Ministry of Defence Fonds pour la restructuration de la défense FReD Supporting funds for the restructuration of the defence industry Hard Chromium by Tri Chromium HCTC Industrial consortium for feasibility study of hard chromium coating obtained with trivalent chromium salts Institut National de la Statistique et des Études Économiques INSEE National Institute for Statistic and Economics Studies k Thousand (€) M Million (€) MOC Maintenance in Operating Conditions Ministry of Defence MoD British government department of defence NATO North Atlantic Treaty Organization PV Present Value Secrétariat Général pour l’Administration SGA General Secretariat for Administration - French Ministry of Defence STANAG NATO’s Standardised Agreement TRL Technology Readiness Level WTO World Trade Organisation YLD Years lived with disability YLL Years of Life Lost due to premature mortality
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1. SUMMARY
CONTEXT Nexter Mechanics is a French industrial manufacturer of armament systems and military equipment for ground, air-land, naval and naval-air combat which key figures for 2014 include: 114 employees, a € 30.4M turnover and a € 19.3M order book. Under Use-2, Nexter Mechanics is a downstream user of chromium trioxide for the hard chromium plating of mechanically stressed armament parts. The parts concerned by Use-2 are critical to maintain the proper functioning of the majority of the equipments of Nexter portfolio as well as the French army inventory.
SUSBSTANCE FUNCTION The main sought-after functional properties for hard chromium under Use-2 notably include: - surface hardness, - wear resistance, - atmospheric corrosion resistance and - adapted friction coefficient. 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 strong mechanical stresses associated with the firing of projectiles.
IDENTIFICATION OF AL TERNATIVES A significant work of research carried out by Nexter led to identify two potential alternatives for Use-2: High phosphorus electroless Ni (Alternative 1) and Atmospheric Plasma Spraying - MCrAlY or refractory oxides (Alternative 2). If one of these alternatives attains the requirements for Use-2, both these alternatives require several testing, development, implementation and qualification steps in order to be industrially deployed in applications that will be put on the market in 2024:
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“NON-USE” SCENARIO Taking into account the central role played by Use-2 for Nexter’s armament systems, the most likely "non-use" scenario strongly jeopardises the activity of the Nexter Group as a whole. The impact of the banning of Use-2 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.
IMPACTS OF GRANTING AUTHORISATION 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 € 41. 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-2.
CONCLUSIONS Based on the argument put forward, and in order to develop, implement and qualify an alternative solution for Use-2, Nexter Mechanics applies for a 7-year review period.
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2. AIMS AND SCOPE OF THE ANALYSIS
Nexter Mechanics is a French industrial armament manufacturer of military equipment for ground, air-land, naval and naval-air combat. From the point of view of the REACh regulation, Nexter Mechanics must be considered as a downstream user of chromic acids generated from chromium trioxide. Hard chromium plating (Use-2), which is the object of this AfA through the use of chromium trioxide, is at the very heart of the armament manufacturing process; the parts impacted by the sunset date of chromium trioxide are vital to maintain the proper functioning of armaments. As a consequence, the level of performance provided by the hard chromium coating is an essential condition for the competitiveness of Nexter Group as a whole; the economic impact of its banning from the market will affect the entire Group.
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 this document, “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:
Industrial use of a mixture of chromium trioxide for the hard chromium plating of military armament steels parts which are Hard thermomechanically stressed and in contact with oxidizing chromium Use-1 gas at high temperature, so as to ensure a thermal barrier plating with high melting point, a resistance wear and oxidation associated with weapons as well as impact and atmospheric corrosion resistances.
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Industrial use of a mixture of chromium trioxide for the hard chromium plating of military armament parts in order to Use-2 ensure surface hardness, resistance to atmospheric corrosion, abrasive wear resistance and friction coefficient for relative movement parts.
Industrial use of a mixture of chromic acids for the black Black colour hard chromium plating of exterior surface of steel chromium Use-3 weapon barrel designed for military use, to ensure, during the plating whole gun barrel service life, stealth, erosion, corrosion and high temperature resistances in the condition of uses.
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 chromate conversion coating of welded mechanical conversion Use-4 structures of armoured vehicles and associated parts made coating 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-2. 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, a subsidiary of the Nexter Group and the Applicant for the present AfA’s Use-2, 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-2, chromium trioxide is used for high performance hard chromium plating for the manufacture of armament parts. The chromium layer there ensures surface hardness, resistance to atmospheric corrosion, as well as abrasive wear resistance and adapted friction coefficient for parts in relative movement. Unlike Use-1, Use-2 concerns steel parts which do not undergo thermomechanical stresses and which are not in contact with oxidising gases at high temperature. The perimeter of Use-2 was therefore defined having in mind these specific performance requirements and potential alternative processes that are foreseen. An inventory of the specific armament parts concerned by Use-2 was carried out. These parts include:
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- Hydraulic aiming systems; - Loading systems; - Decompressor bodies; - Recuperator gauges; - Command axis and cranks. 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 the performances in a nutshell As of today, the manufacture of parts treated with hard chromium requires the use of hexavalent chromium as chromic acid mixture. It has to be understood that these parts are absolutely critical for several reasons: - They are intricately linked, from both a technical and a business point of view, with the armament systems they are mounted on as well as with Nexter’s ammunitions, thereby giving to the banning of chromium trioxide a broader impact; - Performances provided by the hard chromium coating give a serious advantage to these parts by extending their life span and limiting maintenance operations; - They consequently directly contribute to Nexter excellence and competitiveness as well as to its compliance with international standards. In case no surface treated part can be manufactured by Nexter or the level of performance offered by hard chromium cannot be met, the overall armament systems they are mounted on will be unable to fulfil its function or ensure its own protection and would be therefore rendered unusable. Here, it must be understood that the applications concerned by Use-2 represent the core of Nexter’s activity and that the competitiveness of Nexter Mechanics and more globally of Nexter Systems as a whole is based on the level of performances of these armament systems. The use of parts treated with Nexter’ specific hard chromium process is directly related to the level of resistance, and therefore the service life of armament systems. Hard chromed parts ensure the compliance of Nexter armament systems with the levels of performances required by its clients and users. Moreover, the levels of performance provided by the hard chromium surface treatment allow the use of Nexter ammunitions which are particularly powerful or compliant with high rates of fire and involve high temperature, high pressure and hot oxidising gas outside and/or inside the parts which are defined as thermomechanically stressed1. This application is described in Use-1.
1 For example, the CAESAR self-propelled artillery system is capable of firing six 155mm shells in three minutes within a 4.5 to 50 km distance range (including set-up and set-out of the field artillery battery)
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The level of performance provided by the hard chromium surface treatment is also a condition for compliance with NATO’s2 Standardised Agreement (STANAG) defining processes, procedures, terms and conditions for common military or equipment between the member countries of the alliance. Finally, the use of hard chromium coating secures the armament servants and reduces the gun maintenance requirements by reducing its wear and therefore extends its lifespan. This represents a major requirement for military equipments during field operations, for which maintenance operations are both extremely complex in terms of workforce and logistics. Military engagement scenarios, which define the State’s military capabilities based on geopolitics and geostrategic analysis, directly depend on the lifetime and the accuracy of those armaments. As a consequence, any disruption of supply of Nexter armament systems to the armed forces would severely endanger the State’s military capabilities and sovereignty.
The hard chromium plating process for parts concerned by Use-2 is at the heart of the performances of Nexter’s armament systems and directly conditions the competitiveness of 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.
2.1. Equipments concerned and applications Given its applications in the surface treatment of armament systems parts and components, Use-2 is critical for a large number of the Nexter armament systems portfolio. Use-2 surface treatment process concerns sub-components of main products manufactured and put on the market by Nexter Systems, examples of which currently in use in the French army are given in Figure 1 below:
2 North Atlantic Treaty Organization
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Figure 1. Examples of armament systems concerned by Use-2 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 and 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 three representative examples of applications concerned by Use-2.
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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 have been designed and manufactured in France, according to the 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-2; - Long development processes: the examples below illustrate the extremely long development cycles that are related to defence applications; - 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-2, these equipments present a very strong export potential.
2.1.1. CAESAR
Figure 2. CAESAR
CAESAR3 is a 155 mm/52-calibre gun-howitzer installed on a 6x6 truck chassis, currently operated by the French, Indonesian, Saudi Arabian, and Thai militaries. Main figures of CAESAR comprise4: - Fire rate: 6 rounds per minute; - Effective range: 4.5 to 42 km; - Autonomy: 600 km; - Max speed: 80 km/h; - Total weight: 18 tons;
3 “CAmion Equipé d'un Système d'ARtillerie” - “Truck equipped with an artillery system” 4 Ministère de la Défense, http://www.defense.gouv.fr/terre/equipements/artillerie/caesar-camion- equipe-d-un-systeme-d-artillerie
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- Length x height x width: 10m x 3.7m x 2.5m. The CAESAR system was developed in the 1990s as a technological demonstrator by GIAT Industries. It was first publicly disclosed in 1994 and first pre-production specimen was tested in the army in 19985. DGA ordered 72 CAESAR systems to GIAT Industries for a total amount of $ 358M in December 2004; the first CAESAR system was delivered in July 2008. As of 2015, more than 250 CESAR systems have been ordered for both internal and export markets. Potential alternatives of Nexter’s CAESAR exist, such as Soltam Systems’ Atmos 2000, NORINCO’s SH1, Vojnotehnički Institut’s Nora B52 or Denel Land Systems’s T5- 52. None of these armament equipments meet a fundamental criterion for the French armies: compliance in terms of size with the C130 transportation aircraft. There is no potential alternative for the CAESAR system that is compliant with France’s sovereignty produced in France and meets the performance requirements of the French Ministry of Defence.
Several CAESAR’s sub-components are concerned by Use-2, notably highly mechanically stressed structural axes which have to stand mechanical stresses during the firing. These parts directly condition the performance and the operational worthiness of CAESAR in the context of its foreseen engagement scenarios.
5 Jane's Armour and Artillery, Nexter Systems CAESAR 155 mm self-propelled gun (France), Self- propelled guns and howitzers (wheeled)
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2.1.2. RAFALE
Figure 3. RAFALE (left) and 30M791 cannon (right)
RAFALE is a French twin-engine, canard delta wing, multirole fighter aircraft designed and built by Dassault Aviation. Equipped with a wide range of weapons, the RAFALE is intended to perform air supremacy, interdiction, aerial reconnaissance and nuclear strike missions. Key figures for RAFALE include: - Maximum speed: Mach 1.8 (1,912 km/h) in high altitude and Mach 1.1 (1,390 km/h) in low altitude; - Range: 3,700+ km; - Combat radius: 1,852+ km on penetration mission; - Service ceiling: 15,235 m. In terms of development, a first demonstrator first flew in July 1986, as part of an eight-year flight-test program and the two first examples have been received by the French Naval Aviation in December 2000. A total of 180 RAFALE aircrafts have been ordered out of a planned 2866; approximately 150 are confirmed to be delivered by 20197. Rafale’s unit cost amounts from € 68.8M to € 79M, depending on the model and equipments. Total investments of the programme are estimated to € 45.9B8. Nexter produces the main RAFALE’s gun: the 30M791 autocannon. It uses a new range of 30x150mm B ammunition in a variety of types. It offers a muzzle velocity of 1025 m/s and a selectable rate of fire allowing cyclic rates of 300, 600, 1,500 or 2,500 rounds per minute. It can fire continuous bursts or controlled 0.5 or 1 second bursts. RAFALE is considered as a critical armament system for France’s defence capabilities, for field operations as well as for the France’s Permanent Posture of Security9.
6 Defence Industry Daily, France’s Rafale Fighters: Au Courant In Time?, 2014. 7 Rahir, France To Cut Rafale Order; Betting on Exports. Defence News, 2013 8 Sénat, Projet de loi de finances pour 2014 - Défense: équipement des forces et excellence technologique des industries de défense, 2013 9 General security measures that constitute the basis of France’s defence capabilities and includes: aerial surveillance, nuclear dissuasion capabilities and public services missions (plan Vigipirate, fire fighting, etc.)
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Taking into account the fact that (a) all RAFALE aircrafts are equipped with a 30M791 gun, (b) that Rafale production is programmed until at least the year 2020 and (c) that spare capacity have to be maintained until the aircrafts’ withdrawal from service, the production capabilities of 30M791 gun barrels have to be guaranteed for the aircrafts’ total lifespan of 40 years. A disruption of supply would jeopardise both already confirmed and potential export orders for RAFALE.
The decompressor body, casing body and decompressor supporting ring of the 30M791 cannon are concerned by Use-2 and hard chromium is the only surface treatment ensuring the compliance of such parts with the extremely high performance in terms of wear resistance and resistance to mechanical stresses due to the fire rate of the cannon. The hard chromium surface treatment not only conditions the performances of the gun, but also the whole survivability of the RAFALE aircraft in case of air combat10 and a downgrade of the performances of the cannon would jeopardise the whole aircraft safety and airworthiness.
2.1.3. Leclerc
Figure 4. Leclerc main battle tank
The Leclerc is a main battle tank built by Nexter and currently in operation within the French and the United Arab Emirates armies. The Leclerc main armament is a 120mm gun designed and manufactured by Nexter. The gun comprises an autoloading system providing a maximum rate of fire of 12 rounds per minute. Secondary armament consists of a coaxial machine gun and remotely-controlled anti-aircraft 7.62mm machine gun. Its mobility, firepower and protection make the Leclerc a key asset in the army equipment.
10 Source: DGA
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Leclerc’s unit price is estimated to € 8M in 2001 price levels11. 254 units are currently in use within the French army and they are to remain in service until 2040. 388 units are in operation within the United Arab army. Several industrial partners are involved in the manufacture of the Leclerc MBT12: - Nexter Systems for project management and global implementation ; - Sagem for the optronics systems; - SESM & Wärtsilä for drive unit; - Goodrich Actuation System for suspension; - Thales for fire control system; - Elno for audio communication system; - Nexter Munitions for ammunitions.
Several critical Leclerc’s subcomponents are concerned by Use-2, notably resetting locking mechanisms. The level of performances provided by hard chromium for these parts is required for the Leclerc’s proper operation.
2.2. Elements of context Three main characteristics place Nexter’s AfA in a particular context:
Parts or components concerned by Use-2 are absolutely critical to the armament systems they are integrated into. 1 Without these parts, and the level of performance provided by the hard chromium treatment, these equipments are considered of no operational worthiness.
The level of performances required for parts concerned by Use-2 is defined by DGA, based on operational needs of the 2 Ministry of Defence and specific engagement scenarios. Applications of parts concerned by Use-2 are therefore directly related to National Defence matters.
France’s sovereignty directly depends on the equipments 3 concerned by Use-2, both to guarantee operational capabilities as well as to secure export opportunities.
The criticality of Nexter for France’s operational capabilities and sovereignty is acknowledged by the DGA and the Ministry of Defence13:
11 Sénat, Rapport public particulier sur les industries d'armement de l'État - La capacité d'action blindée, 2001 12 http://www.defense.gouv.fr/dga/equipement/terrestre/le-char-leclerc 13 Source: DGA
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“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 hard chromium plating operations that enable the production of these weapons are therefore an indispensable element of Frances strategic autonomy.” 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) Finally, 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”14. 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 staff’. This is
14 Cour des Comptes, Le maintien en Condition Opérationnelle des matériels militaires: des efforts à poursuivre. Rapport public thématique, 2014
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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 significant15,16: - 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”17 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:
15 Ibid. 14 16 Serfati, L’industrie française de la défense, La documentation Française, 2014 17 In French: “Niveau Technique d’Intervention” – “Technical levels of maintenance”
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- 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 The general scope of the AfA is synthesised in Table 2 below:
SCOPE COMMENT Temporal 7 years post sunset date: 2018-2024. See Table 3 for a description of boundary the triggering period for each impact. Impacts mainly concern France: - The use of the substance takes place in France; Geographical - The French State and Ministry of Defence are Nexter’s main boundaries customers. Broader impacts concern foreign armies, with a worldwide scope. 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; Economic - Social impacts related to the loss of employment; boundaries - 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-2.
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- Quantities used: 0.5 tons per year Tonnages - 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” Medical treatment 7 yrs: 2018 - 2024 9 yrs: 2016 - 2024 scenario Mortality and morbidity 7 yrs: 2018 - 2024 9 yrs: 2016 - 2024 Loss of profits 7 yrs: 2018 - 2024 9 yrs: 2016 – 2024 “Non-use” Loss of investments 3 yrs: 2015 - 2017 2 yrs: 2016 - 2017 scenario 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: - 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 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:
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- 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 army18; - 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.
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, stating19: “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 dossier20
18 Ministère de la Défense, Les chiffres clés de la défense – Edition 2014, 2014 19 ILO/IMF/OECD/UNECE/Eurostat/The World Bank, Consumer price index manual: Theory and practice Geneva, International Labour Office, 2004 20 OECD, Main economic indicators, Consumer Price Index – data and methods
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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 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 WHO21, 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.
21 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
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General discounting Based on ECHA’s recommendation22, a 4% discounting rate is used to assess the future cost/benefits valued 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.
2.4. Substitution strategy Given the strategic aspect of the equipments concerned by Use-2, several research programs on alternatives were conducted by Nexter, in collaboration with DGA, the French Armament Procurement Agency. Two potential alternatives have been shortlisted, which appear promising but will necessitate comparative assessment, technical agreement and complementary testing as well as industrialisation works and qualification. Preliminary studies about the requirements compliance at the laboratory scale are currently in progress through the DGA’s study “Cr(VI) substitutes study”. If successful, the final substitution surface treatment process is not expected to fully industrialised and qualified before 2024. As a consequence, no potential alternative will be available before hexavalent chromium sunset date on 2017/09/21.
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-2 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.
22 ECHA, Guidance on the preparation of socio-economic analysis as part of an application for Authorisation, 2011
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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 hard chromium treatment, Nexter will have to cease the manufacture and the maintenance in operational conditions of the armament systems concerned by Use-2. As 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. 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 will also impact 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-2. Impacts of the “non-use” scenario are detailed in section 5.
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3. “APPLIED FOR USE” SCENARIO
Under Use-2, chromium trioxide is used in mixture by 5 workers to carry out hard chromium plating in one Nexter Mechanics plant (Tulle, France) and for a maximum of 0.5 t/ year. Chromium trioxide provides surface hardness, wear resistance, atmospheric corrosion resistance and adapted friction coefficient to Nexter armament parts associated with the firing of projectiles. These performances are key to meet the military requirements for these armaments in terms of lifespan and fire rate. Use-2 is supported by Nexter Mechanics but is of wider interest and benefit for Nexter Systems, the Nexter Group parent company.
3.1. Analysis of substance function Chromium trioxide is used by Nexter Mechanics in hard chromium plating process for the manufacture of armament parts. In the chromium bath composition, chromium trioxide is the source of chromium which will be the component of the chromed layer plated on the articles. The hard chrome layer is used to provide the following properties to the parts: - Surface hardness, abrasive wear resistance and atmospheric corrosion resistance: Armaments are designed to be deployed in severe environments and operated in all type of conditions. Shock resistance, abrasive wear resistance and resistance to atmospheric corrosion are therefore necessary to ensure their proper functioning over their lifespan. - Friction coefficient for parts in relative movement: Moving parts, such as loading or aiming systems, need to have a defined friction coefficient so as to ensure their function in accordance with the military requirements in terms en accuracy or rate of fire. According to these high loaded movements, concerned surfaces have to present a good abrasive wear resistance. Coupling parts in relative movement are also designed to offer a well-balanced surface hardness to prevent the wear of the parts which would occur if one of the surfaces possesses a lower hardness than the other. As a consequence, the chromium plating hardness and friction coefficient are two key parameters of the design of the parts concerned by Use-2.
These levels of performance come from the DGA’s requirements that are specified during the development of the armament systems, according to foreseen field use needs and Maintenance in Operating Conditions needs all along their operational deployment.
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The expertise of Nexter is mainly in the management of the hard chromium plating process to obtain such properties and levels of performances which are of vital interest and key to Nexter business, and downstream for France military capabilities and sovereignty. It is reminded that once hard chromed in their final form, armament parts are Cr(VI) free and therefore imply no risk for end-users.
3.2. Market and business trends including the use of the substance Nexter group is composed of several legal entities. Nexter Mechanics is the Applicant for this use of the authorisation dossier but Nexter Systems is also involved in the application for authorisation The supply chain is synthesised in Figure 5 below and can be described as follows: - ATOTECH is the supplier of chromium trioxide used in the formulation of the chromium bath treatment; - Nexter Mechanics uses chromium trioxide to formulate an aqueous mixture used in baths for hard chromium plating on armament parts; - Subcontractors for externalised parts also use hexavalent chromium for hard chromium plating. They are not covered by this AfA, since the subcontracting activity will be internalised by Nexter before the substance’s sunset date; - Nexter Systems is the main contractor for final requirements on hard chromium plating. Nexter Systems uses the articles treated for the manufacture of armaments; - 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.
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Figure 5. Supply chain
Dependency links of Figure 5 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. - 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. The substance is used by Nexter Mechanics and by other 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.
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In terms of location, Nexter Mechanics’ activities are limited to one site in the city of Tulle, France. Use-2 therefore directly concerns Nexter Mechanics and Nexter Systems. The different entities and their key figures are presented in the following table:
ORDER TURNOVER WORKFORCE 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 Please note that the consumption of hexavalent chromium by Nexter Mechanics on the site of Tulle includes both Use-1 and Use-2. As a consequence, it was difficult to precisely identify the quantity of the substance allocated to each use. Although the chromium trioxide used is the same for Use-1 and 2, armament parts, technological considerations and coating processes are different. Annual tonnage of chromium trioxide used by Nexter in the context of Use-1 and Use-2 are the following:
Industrial use of a mixture of chromium trioxide for the hard chromium plating of military armament steels parts which are Use-1 thermomechanically stressed and in contact with oxidizing gas at high temperature (short title). 0.5 t/yr Industrial use of a mixture of chromium trioxide for the plating of military armament parts in order to ensure surface hardness, Use-2 resistance to atmospheric corrosion, abrasive wear resistance and friction coefficient for relative movement parts.
Table 6. Annual tonnages for Use-1 and Use-2
The current industrial use of chromium trioxide – based on the mean value over the last 3 years for both hard chromium plating (Use-1 and Use-2) – is 0.5 tons per year.
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.
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3.4. Human health impacts and monetised damage of the “applied for use” scenario A maximum of 4 workers are concerned by the dipping activity of the steel parts in chromium baths. 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:
Figure 6. 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.
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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 care23,24,25,26. For the following analysis, it was chosen to rely on data provided in a recent study27 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 (Small-Cell Lung cancer). Nevertheless, a previous study in France28 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 7. Lung cancer costs in France for the two first years after the diagnosis29
Two main comments can be made concerning the above table data: - The costs for the first-year care are higher than for the following year; - The highest cost is attributable to the hospitalisation.
23 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 24 Simrova et al, The costs and reimbursements for lung cancer treatment among selected health care providers in the Czech Republic, 2014 25 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 26 Braud et al, Direct treatment costs for patients with lung cancer from first recurrence to death in France, Pharmacoeconomics. 2003;21(9):671-9. 27 Ibid. 23 28 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 29 Ibid. 23
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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 study30 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 %31 5 years 13.6 %32,33 10 years 9.0%34
Table 8. Net year survival rate after lung cancer diagnosis in France
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 9 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.
30 Ibid. 28 31 Institut National du Cancer, Prévalence et survie nationales du cancer du poumon, 2015 32 Ibid. 31 33 Ibid. 28 34 Ibid. 31
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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 € 28,041 until the end of the review period
Table 9. 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-2 (4.53 x 10-5):
YEARS AFTER DIAGNOSIS OVERALL COSTS 0 to 1 year € 0.82 1 to 5 years € 0.54 5 to 7 years € 0.09 Total of lung cancer costs € 1.44 Total of lung cancer costs Taking into account a 3% discount rate € 1.27 until the end of the review period
Table 10. Total lung cancer costs during the review period, considering the total excess of risk for workers and the respiratory equipments
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 Year35,36,37,38. The benefits and challenges of these measures have been examined in several publications39,40,41,42.
35 Weinstein, Stason, Foundations of cost effective analysis for health and medical practices. New England Journal of Medicine, 296:716-721, 1977 36 Murray, Rethinking DALYs. In: Murray, Lopez, eds. The global burden of disease. Geneva, World Health Organization, Harvard School of Public Health, World Bank, 1996 37 Hyder, Rotllant, Morrow, Measuring the burden of disease: healthy life years. American Journal of Public Health, 88:196-202, 1998 38 Murray, Salomon, Mathers, A critical examination of summary measures of population health. Bulletin of the World Health Organization, 8(8):981-994, 2000 39 Anand, Hanson, Disability-adjusted life years: a critical review. Journal of Health Economics, 16:695- 702, 1997 40 Williams, Calculating the global burden of disease: time for a strategic reappraisal? Health Economics, 8:1-8, 1999 41 Murray, Lopez, Progress and directions in refining the global burden of disease approach. Geneva, World Health Organization (GPE Discussion Paper No 1), 1999b
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According to the WHO recommendations43 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 impacts44,45.
3.4.2.1. General methodology The following methodology is based on the general WHO methodology for the calculation of DALYs46. 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 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 France47,48) and the average age of death in France (68 years in France49).
42 Murray, Salomon, Mathers, Lopez, Summary measures of population health: concepts, ethics, measurement and applications. Geneva, World Health Organization, 2002 43 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 44 ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008 45 ECHA, Applying socio-economic analysis as part of restriction proposals under REACH - Workshop proceedings, Helsinki, 21-22 October 2008 46 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 47 Eurostat, Mortality and life expectancy statistics, June 2015 48 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. 49 INSERM, INVS/CépiDC, 2012. In: Institut National du Cancer, Mortalité nationale des cancers, 2015
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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 11 below.
PARAMETERS VALUES Standard life expectancy 82.4 years Mean age of lung cancer death 68 years Number of years lost 14.4 years Workers Workers Population at the plating shop at the laboratory Individual excess of lung 9.02 x 10-6 1.82 x 10-7 cancer risk Individual YLL(*) 1.1 x 10-4 years 2.2 x 10-6 years Total excess of lung cancer risk 4.53 x 10-5 Total YLL(*) 5.5 x10-4 years
Table 11. Years of Life Lost (YLL) for Use-2 (*): considering a 3% discount rate until the end of the review period
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 DW50 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 years51) and the mean age of diagnosis (66 years52) 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 12 below.
50 Migrin, A Review and Meta-Analysis of Utility Values for Lung Cancer, U.S. EPA 51 Institut National du Cancer, Cancer du Poumon – Quelques chiffres, Les cancers en France en 2014 52 Ibid. 51
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PARAMETERS VALUES Mean age of lung cancer death 68 years Mean age of lung cancer 66 years diagnosis Number of years with 2 years disability Disability weight 0.772 Workers Workers Population at the plating shop at the laboratory Individual excess of lung 9.02 x 10-6 1.82 x 10-7 cancer risk Individual YLD(*) 1.2 x 10-5 years 2.4 x 10-7 years Total excess of lung cancer risk 4.53 x 10-5 Total YLD(*) 5.9 x 10-5 years
Table 12. Years of Life lived with Disability (YLD) for Use-2 (*): considering a 3% discount rate until the end of the review period
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 ECHA53 and based on the NewExt study54: € 55,800 (in 2003 price levels). This value is in line with Desaigues55, which estimated the central value of life year to € 50k, based on a survey of French residents and with EurovaQ study56, 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 period57. Final YLLs, YLDs and monetised damage are synthesised in the following table:
53 ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008 54 NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003 55 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 56 EurovaQ, European Value of a Quality Adjusted Life Year, Final Publishable Report, 2010 57 Ibid. 20
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PARAMETERS VALUES YLL 5.5 x 10-4 years YLD 5.9 x 10-5 years DALY = YLL + YLD 6.1 x 10-4 years Value of life year lost(*) € 65,985 Total cost for mortality and morbidity € 40.0 (present value)
Table 13. Synthesis of YLLs, YLDs and monetised damage of mortality and morbidity related to the excess cancer risk associated with lung cancer (*): 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:
WILLINGNESS TO PAY VALUE OF STATISTICAL LIFE TO AVOID A CANCER CASE € 1,052,000 € 400,000 per non-fatal case Initial value (2003 price levels) (supposed 2008 price levels) 18.25% 7.32% Inflation over the 2003-2015 period over the 2008-2015 period Present value € 1,244,022 € 429,268
Table 14. Value of statistical life and willingness to pay to avoid cancer58
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 Ščasný59. Mortality rate was derived from incidence and mortality data:
58 ECHA, Guidance on the preparation of socio-economic analysis as part of an application for authorisation, Version 1, January 2011 59 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.
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PARAMETERS VALUES Lung cancer incidence 39,495 Lung cancer fatal cases 29,949 Mortality rate 76% Survival rate 24%
Table 15. Incidence and mortality associated with lung cancer in France, in 201260
Based on the parameters previously put forward, the overall impacts of cancer, as calculated with this methodology are synthesised below:
PARAMETER VALUE COMMENT Taking into account: the total Number of fatal cancer excess risk of cancer and the 3.4 X 10-5 cases over the review period average mortality rate of lung Mortality cancer in France
Discounted until the end of the Subtotal: costs of mortality € 35.9 review period Taking into account: the total Number of non-fatal cancer excess risk of cancer and the 1.1 x 10-5 cases over the review period average survival rate of lung Morbidity cancer in France
Discounted until the end of the Subtotal: costs of morbidity € 3.9 review period
Total € 39.8 Present value
Table 16. Mortality and morbidity costs for Use-2, complementary assessment
The results of this complementary assessment (€ 39.8) validate the results obtained with the DALY approach (€ 40.0).
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 € 1.3 Mortality and morbidity € 40.0 Total € 41.3
Table 17. Overall impacts of the "applied for use" scenario, Use-2
60 Institut National du Cancer, Incidence nationale du cancer du poumon, 2015
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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 € 1.2 Mortality and morbidity € 37.8 Total € 39.0
Table 18. Overall impacts of the “applied for use” scenario, Use-2, complementary analysis taking into account a 4% discount rate
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 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 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 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-2 over the review period amounts to € 41.3.
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4. SELECTION OF THE “NON-USE” SCENARIO
A significant work of research carried out by Nexter led to identify two potential alternatives for Use-2: electroless nickel plating (Alternative 1) and Atmospheric Plasma Spraying - MCrAlY or refractory oxides (Alternative 2). A Cr(VI)-free hard chromium process is furthermore considered. As of today, both potential alternatives appear promising in terms of technical and economic properties, even though Alternative 2 appears more expensive than Alternative 1. Should these alternatives be deemed appropriate, their implementation within the Nexter production chain is yet a long-term solution as it has to undergo several testing, validation and implementation steps. Neither Alternative 1 nor Alternative 2 will be industrially available for Nexter Mechanics before the sunset date of chromium trioxide.
4.1. Efforts made to identify alternatives
4.1.1. Research and development Given the importance of Use-2 for Nexter’s and its customers’ activities, a significant work of research, testing and benchmarking of potential alternatives was carried out by Nexter Systems. As of today, Nexter relies on a joint “Chromium VI alternative study” with the DGA to assess and develop an alternative to Use-2. In addition, and as described for Use-1, Nexter Systems is a member of the HCTC61 consortium (HCTC Consortium for Hard Chromium Tri Chromium coating), which objective is to develop a hard chromium plating process without using Cr(VI) compounds. It has to be stressed that the TRL of this processes is far from industrial scale but this alternative has to be considered as a potential future global alternative of the hard chromium used in armament parts (Use-1 and Use-2). Main characteristics of these two research and development actions are summarised below:
61 “Hard Chrome by Trivalent Chromium”
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CHROMIUM VI STUDY HCTC CONSORTIUM
Comparative assessment of the functional performances of current Develop a hard chromium plating hard chromium versus two Objectives process without hexavalent alternative solutions: electroless Ni chromium and boric acid. plating and MCrAlY // Oxides thermal plasma spraying plating.
Chromium plating sub-contractors, major industrials companies Participants Nexter / DGA joint study (automotive, aeronautic, transportation…)
End of preliminary feasibility study at Time frame for TRL 4: Time frame the laboratory scale:mid-2016 2014-2018
Table 19. Nexter-involving research programs
4.1.2. Data searches Data searches carried out by Nexter include:
Inventory of the specific functional requirements for each part An inventory of the specific functional requirements was carried out, as presented below:
FUNCTIONAL REQUIREMENTS
ARMAMENT SUBCOMPONENT
SYSTEM
WEAR
SHOCK SHOCK
BARRIER
HOT GAS HOT
SURFACE
FRICTION
THERMAL
ABRASIVE
HARDNESS
CORROSION RESISTANCE CORROSION
Machined body x x x x
Naked axis (jack body) x x x x
Naked axis (jack stem) x x x x
155TR Loading aid hydraulic block x x x x
Loading aid tipping jack x x x x
Loading stretcher jack x x x x
"ATS" command crank x x x x
Gauge - CE recuperator x x x x 105 F2 Recuperator gauge x x x x
90F4 Lining x x x x
AUF1 Filler body - muzzle brake x x x x
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Filler piston - muzzle brake x x x x
Site lock x x x x 120 Leclerc Rearmament lock x x x x
Muzzle brake x x x x
155 AUF1TA Left and right balancing x x x x jacks (on-site aiming) Decompressor body x x x x 30M550 Brake ring x x x x F2, F3 & F4 Decompressor nose x x x x
30M781 Command axis x x x x
Table 20. Functional requirements for Nexter armament systems, Use-2
This inventory allowed to precisely identify the functional requirements for each parts impacted by this AfA and therefore to specify as precisely as possible the scope of uses 1 to 4.
Bibliographic research of hard chromium alternatives A preliminary inventory showed that 170 treatments appeared to theoretically comply with at least one of the identified functional requirements. These treatments were gathered in a database, with the following distribution by process categories:
120
100 100
80
60
40 26 19 20 11 Number of processes identified processes of Number 6 3 5 0 Chemical Electrolytical Mechanical Projection Physical vapor - - deposition deposition action deposition Wet process Dry process Thermo- Conversion chemical coating
Figure 7. Detail of the 170 pre-identified processes for hard chromium alternatives, by type of process
Selection of potential alternatives for medium and large calibre armaments
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Based on this preliminary inventory, a secondary selection was carried out in order to short-list potential alternatives meeting a maximum of functional requirements. Four potential alternatives were identified for Use-2:
Electroless Nickel + PTFE62 Electroless nickel plating High phosphorus electroless Nickel Thermomechanical treatment Nitrocarburizing with post-oxidation treatment Thermal spraying treatment Refractory metallic alloys // refractory oxides
Table 21. Short-listed potential alternatives for Use-2
Preliminary testing of the basic functional performances for these aforementioned alternatives The four potential alternatives identified (Table 21) have undergone preliminary testing in order to assess their basic functional performances.
The testing methodology for the basic functional performances of the short- listed potential alternatives is the following:
TEST TYPE REFERENCE NORM COMPLIANCE CRITERIA
Satin to bright visual aspect Compliance criteria: smooth, regular and continuous deposit over the machined Aspect Visual control areas. No sign of cracking, excess thickness, porosity, peeling or scratching. The thickness measurement is made Control according to one of the onto the significant section of the part: Treatment techniques of ISO 6158, section 9 sections of the part that touched in all thickness Recommendation: metallographic points by a 20mm diameter ball cut Compliance criteria: compliant with usual defined thickness Peel test using an adhesive of adhesiveness in accordance with No detachment to be observed, for NF EN ISO 2409 section 4.4. deposit as well as for finish Recommendation: use SCOTCH 3M ref 2525 Adhesion Indentation with a HB BRINEL durometer using a punch of 2.5mm in diameter with By analogy with NF ISO 4527 of a 40 KgF load. 02/88 (Annex B - B3): punch test Observation of the indented zone (flaking, disbonding, cracking, …)
62 Poly Tetra Fluoro Ethylen
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Compliance criteria: ≥750 HV (except for NF EN ISO 4516 norm Microhard medium calibre weapon systems or Recommendation: metallographic ness thickness <20μm) or compliant with cut specified value, if any Corrosion Exposure to saline mist according No red oxidation after a 360h exposure resistance to ISO 9227 norms Temperatu re and Damp heat test 70°C / 96% No red oxidation after a 10 days humidity relative humidity exposure resistance Abrasive TABER test by analogy with SAE Compliance criteria: undefined - wear AMS 24378D 07/09 - CS 10 comparison with hard chromium coating resistance grindstone / 500 & 1 000 g load
Table 22. Testing methodology for short-listed potential alternatives
4.2. Identification of known alternatives Unlike Use-1, for which no short-term solution has been deemed appropriate for armament parts undergoing thermomechanical stresses and in contact with oxidising gases at high temperature, potential alternative solutions have been identified for Use-2. As exposed in 4.1.2, the following alternatives have undergone laboratory testing and could be appropriate for Use-2, provided that sufficient testing, validation and implementation time is available: - High phosphorus electroless nickel ; - Atmospheric Plasma Spraying: MCrAlY // refractory oxides ; - High phosphorus electroless nickel + PTFE ; - Nitrocarburizing with post-oxidation treatment. The overall testing results for these alternatives are synthesised in Table 23 below:
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ABRASIVE SURFACE CORROSION FRICTION WEAR HARDNESS RESISTANCE COEFFICIENT RESISTANCE
Alternative 1 Low without High phosphorus thermal OK OK OK electroless Ni treatment
Alternative 2 Atmospheric Plasma Higher than OK OK OK Spraying: MCrAlY or Use-2 refractory oxides
Alternative 3 Lower than Better than High phosphorus Low OK Use-2 but Use-2 electroless Ni + PTFE sufficient
Alternative 4 Nitrocarburizing with High OK OK OK post-oxidation treatment
Table 23. Functional properties assessment for Use-2
As of today, high temperature resistance, impacts on mechanical characteristics of steel (mechanical resistance, fatigue, and impact strength), contamination by fluids as well as thickness uniformity on complex shape parts have yet to be further investigated for all alternatives Nexter is thus furthermore involved in three ways to extend its knowledge and to identify an alternative to hard chromium for Use-2: 1. Chromium VI joint study with the DGA, to further assess the comparative performances of hard chromium and electroless high phosphorus nickel plating. The aim of this in-depth laboratory scale study is to evaluate the compared behaviours of these two treatments in operational conditions. According to the preliminary results, it seems possible to identify differences between these two processes to rule on the capability of the alternative process to substitute hard chromium for Use-2. 2. An internal study, with the same tests methodology than for the Chromium VI joint study, to compare the performances of hard chromium with a MCrAlY // refractory oxides coating. As for Chromium VI joint study, the aim is to identify performance specificities of these treatments and to rule on the capability of the alternative process to substitute hard chromium. 3. Nexter is furthermore involved in the HCTC consortium, which goal is to develop a Cr(VI)-free surface treatment solution. This research is in progress and the study should see its first results in 2018. At the time of writing, and considering these studies are still at a very early stage of development, it is too soon to assess the level of compliance of potential alternatives with requirements of armament parts.
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4.2.1. Other publicly available potential alternatives Some publications describe works based on Physical Vapour Deposition (PVD) processes. It has to be understood three main points about these processes: - The first one is that PVD process need to be carried out under high vacuum (10-6 mbar), so the vacuum chamber has to be compliant with the length of the gun; - The second one is that magnetron process or other plasma assisted technologies need a cathode inside the gun barrel or the auxiliary parts and a distance between the cathode and the gun compliant with a plasma creation; - The third one is that the deposition speed is very low and the coatings are currently around 2 to 10 µm thick. These alternatives have already been considered in the studies with DGA. Taking into account the costs, technical issues related to the dimension and shapes of the parts to be treated as well as the low coating thicknesses that can be obtained with this process, these solutions have been aborted.
4.3. Assessment of shortlisted alternatives According to the first studies results, the compliance of the four potential alternative solutions with Use-2 functional performances can be described as follows:
Alternative 1: High phosphorus electroless nickel Alternative 1 is the most compliant of the four alternative solutions. The most important difference with hard chromium is a lower hardness. However, if the hardness of both mechanical parts in alternative movement is the same, then the wear of one of them is not enhanced. It has to be assessed that the hardness is sufficient to stand the mechanical load. In addition, this treatment is well-known and the network of subcontracting is widely developed. As a wet surface treatment, there is no technological leap and it could therefore be easily integrated within the current Nexter Mechanics plant.
Alternative 2: Atmospheric Plasma Spraying: MCrAlY // Refractory oxides This treatment is globally compliant with the basic requirements for Use-2. However, it induces a major technological leap for Nexter Mechanics and costs which are significantly higher than those of hard chromium or electroless nickel plating.
Alternative 3: High phosphorus electroless nickel + PTFE The main interest of this coating compared to high phosphorus electroless nickel plating is its low friction coefficient. On the other hand,
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hardness is lower and the allowable temperature before degradation is low (280°C). This could be an interesting alternative only for a few parts, but it is unsuitable for all parts concerned by Use-2.
Alternative 4: Nitrocarburizing with post-oxidation treatment This treatment is globally compliant with the basic requirements of the Use-2. It is, however, limited to nitridable steels and high tempering temperature steels according to the temperature and time of nitrocarburizing. It thus may not be suitable for all parts in Use-2. Based on these arguments, Alternative 1 and Alternative 2 appear to be the only two shortlisted potential alternatives.
4.3.1. Alternative 1
4.3.1.1. Substance ID, properties, and availability High phosphorus electroless nickel plating is also known as Kanigen electroless Nickel. It allows the deposition of a nickel–phosphorus composite coating from aqueous solutions onto a substrate without the use of electric current. Typical composition of the high phosphorus nickel coating is 87-90% nickel and 10-13% phosphorus63. High phosphorus electroless nickel plating is an autocatalytic deposition process. Because of the occurrence of phosphorus compounds in the batch, phosphorus is mechanically included in the nickel coating growth as a solid solution of Ni/P. By thermal treatment, it is possible to precipitate Ni3P compounds from this solid solution. This precipitation enhances the hardness of the coating from 400 – 500 HV to 800 – 900 HV. As described in the NF EN ISO 4527 standard (Metallic coatings — Autocatalytic (electroless) nickel-phosphorus alloy coatings — Specification and test methods), three kinds of electroless phosphorus nickel are distinguished: low, medium and high according to the phosphorus concentration in the coating. The high phosphorus electroless plating are lower in hardness but much better in corrosion resistance and are therefore best suited for the needs of Use-2.
4.3.1.2. Technical feasibility of Alternative 1 This coating is worldwide used as a wear and atmospheric corrosion resistance plating. The process is sensitive but known for many years.
4.3.1.3. Economic feasibility and economic impacts of Alternative 1 As a wet process, alternative 1 does not induce a wide technological leap for Use-2. Its implementation in Nexter Mechanics’ facilities does not appear to necessitate in-depth modifications.
63 Parkinson, Properties and applications of electroless nickel deposits, Technical Series No. 10081, Nickel Development Institute, 1997
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The cost of nickel electroless plating is foreseen to be in the same range than hard chromium plating.
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 c. Functional validation of alternative solutions on a laboratory scale 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 8. Global implementation timeline of Alternative 1
Alternative 1 is a mature process. Even though basic testing has shown conclusive results, its implementation within the Nexter production chain is yet a long-term solution as it has to undergo several testing, qualification and implementation steps: - Assessment of basis performance (hardness, adhesion, corrosion and wear resistance) and comparison with hard chromium performance [Already carried out: 2 yrs 2013-2014] - Assessment of functional performances and compliance with steel mechanical properties and Chromium VI joint study [2 yrs 2015-2016] - Nexter Systems / DGA technical agreement in principle of the alternative solution, for each part [2 yrs 2016-2017] - Complementary testing for final validation on weapons [1 yr 2017-2018] - Nexter Mechanics industrial implementation of the alternative process [2 yrs 2018-2020] - Qualification of the alternative process for Nexter Mechanics and subcontractors, by typology of armament [1 yr 2018-2019] - DGA qualification of the alternative solution on weapons [4 yrs 2020- 2024] As a consequence, this alternative will not be available before the hexavalent chromium sunset date on 2017/09/21.
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It has to be stressed that, for DGA, substitution with Alternative 1 will be considered as a major change and therefore in-depth qualification before implementation on actual armament systems.
4.3.1.5. Hazard and risk of Alternative 1 It has to be stressed that the process of ATOTECH nickel electroless plating, unlike other electroless nickel plating process does not imply the use of boric acid [CAS number: 10043-35-3] listed on the Candidate List of substances of very high concern for Authorisation for its reproductive toxicity. It mostly implies salts [Nickel sulphate CAS number: 7786-81-4 and Nickel oxide CAS number: 1313-99-1] for which a Risk Management Option Analysis (RMOA) is currently under development.
4.3.1.6. Conclusions on Alternative 1 Alternative 1 is regarded as potentially the most compliant and the most easily implementable of the two contemplated alternative solutions with functional requirements associated to Use-2.
4.3.2. Alternative 2
4.3.2.1. Substance ID, properties, and availability The Atmospheric Plasma Spraying: MCrAlY // Refractory oxides is a thermal spraying treatment. This process relies on the projection on a substrate of a powder at a temperature close to its melting point. In the case of atmospheric plasma spraying, the powder is melted in atmospheric plasma which allows reaching the melting temperature of the refractory oxides. The main issue with this process family is to obtain an adequate adhesion on steel substrates. For instance, refractory oxides do not adhere directly on steel. An undercoating has thus to be used with adhesion mechanisms compliant with those of steel. Moreover, this undercoating has also to comply with the adhesion of oxides. Generally the undercoatings used are MCrAlY alloy (M for metal). These processes lead to rough surfaces, but they can be machined to obtain a low roughness with adequate friction behaviour. The hardness of refractory oxides is very high and they offer a very high atmospheric corrosion resistance. They are, however, very sensitive to impacts. The choice of the oxides mixture powder is key to the final performances of the treated parts.
4.3.2.2. Technical feasibility of Alternative 2 These processes are currently used in aircraft engines manufacturing to prevent wear and erosion. They are also being deployed in other industries like paper making industry. They, however, represent a technological breakthrough for the other industry fields. The application process is mainly dependant on the shape of treated parts. For each part the conditions of applications are different. The usual thickness of
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these coatings is also significantly higher than for wet processes (up to 200 - 300µm), which induces design modifications of the parts to stand the final dimensions.
4.3.2.3. Economic feasibility and economic impacts of Alternative 2 Alternative 2 appears to be more expensive than wet processes and to require substantial modifications of Nexter Mechanics’ facilities. They represent technological breakthroughs and thus need a technology transfer and specific formations of the workers.
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 (2016) with the same test program than the Chromium VI joint study c. Functional validation of alternative solutions on a laboratory scale (2016) 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 9. Global implementation timeline of Alternative 2
Alternative 2 is a mature process. Even though basic testing has shown conclusive results, its implementation within the Nexter production chain is yet a long-term solution as it has to undergo several testing, qualification and implementation steps: - Assessment of basis performance (hardness, adhesion, corrosion and wear resistance) and comparison with hard chromium performance [Already carried out: 2 yrs 2013-2014] - Assessment of functional performances and compliance with steel mechanical properties and Chromium VI joint study [2 yrs 2015-2016] - Nexter Systems / DGA technical agreement in principle of the alternative solution, for each part [2 yrs 2016-2018] - Complementary testing for final validation on weapons [1 yr 2016-2017]
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- Nexter Mechanics industrial implementation of the alternative process [2 yrs 2018-2020] - Qualification of the alternative process for Nexter Mechanics and subcontractors, by typology of armament [1 yr 2018-2019] - DGA qualification of the alternative solution on weapons [4 yrs 2020- 2024] As a consequence, this alternative will not be available before the hexavalent chromium sunset date on 2017/09/21. It has to be stressed that, for DGA, substitution with Alternative 1 will be considered as a major change and therefore in-depth qualification before implementation on actual armament systems.
4.3.2.5. Hazard and risk of Alternative 2 Alternative 2 does not imply substances covered by the REACh regulation. Specific equipments have to be used to prevent noise impacts and spraying robots to prevent the risk of burn. These safety equipments are well-known of the manufacturers of these apparatus.
4.3.2.6. Conclusions on Alternative 2 Given the argument put forward in the previous sections, Alternative 2 is kept as a backup solution, in case Alternative 1 does meet the performance requirements for Use-2.
4.3.3. The most likely “non-use” scenario As described above, potential alternatives have been identified for Use-2. 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.
4.3.3.1. 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 “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 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.
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Performance level associated with the use of hard chromium under Use-2 directly participates in the lifespan of parts, the performance and therefore the survivability of the armament systems. In most cases, hard chromium plating is deposited on critical parts of the armaments. Here, “critical” has to be understood: a failure of these parts would make equipments concerned non-operational. For example, the breakdown of an axis of the CAESAR due to breaking under a firing mechanical stress or blockage due to an increasing of the friction coefficient would lead to taking artillery vehicle out of service, thereby leading to the end of the mission for which CAESAR is engaged on the battlefield. A decrease in the lifespan of parts concerned by Use-2 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 firing of a specific amount of munitions during a mission. Failing to comply with such engagement scenarios, for example by needing to replace an armament gun barrel or an auxiliary part on the battlefield, means that armed forces cannot play their full part in the current geostrategic and geopolitics context. As stated above, the management of downgraded armament systems would entail extremely complex issues: - Manufacture works scheduling is incompatible with the increase of 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; - Field operators’ workforce and training would have to be re-scaled to sustain such an increase in MOC activity, which appears extremely difficult both in terms of financial extra costs and the unavailability of trained operators able to intervene in the fields of operation. 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 current financial context, this increase in ownership cost would have to be carried out while maintaining the overall budget of the Ministry of Defence and would therefore impact both employment and operational capacities of other sections of the French army.
The relocation of hard chromium treatment outside France hypothesis According to the DGA64, 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:
64 Source: DGA
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- 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. From a complementary point of view, it has to be reminded that Use-2 concerns a low amount of parts with very specific shapes. This would make the process of finding a potential subcontractor outside the EU, transferring the surface treatment technology and qualifying the final parts extremely complicated, costly and time- consuming, with no economical relevance. 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. 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-2 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-2: Several issues nevertheless strictly prevent such a procurement policy: - Same arguments as for relocation of hard chromium surface treatment outside France apply (as developed above) in terms of State independence and sovereignty; - Nexter’s equipments concerned by Use-2 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. For example, the CAESAR rate of fire or the Rafale’s 30M791 cannon rate of fire, accuracy and integration in French aircrafts’ hulls are property equipments that cannot be found in or directly replaced by other manufacturers’ solutions;
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- The armament-platform interface has to be taken into consideration: armament systems are developed for a specific platform (vehicles and systems). The adaptation of other armament systems on the current platforms would therefore imply the need for a complete redesign and adaptation of such interface (both mechanically for the fitting of the armament systems and electronically for the adaptation of the control systems with those of the platform). 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, testing and qualification imperatives would, no matter what, delay their actual operational deployment by 5 to 10 years65.
4.3.3.2. 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-2 are key for Nexter’s portfolio, (b) there is no available alternative to hard chromium for the requirements of Use-2, (c) a downgrade of armament systems’ performances (i.e. withdrawal of hard chromium treatment) would threaten France’s operational capabilities to a point where some field operations could not be assumed and (d) relocation of production outside France would pose major geopolitics and legal issues with a risk to jeopardise France’s sovereignty. 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 hard chromium treatment, Nexter will have to cease the manufacture and the maintenance in operational conditions of the armament systems concerned by Use-2. 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.
65 See testing and qualification delays associated with the development of the examples of equipments developed in section 2.1.
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5. IMPACTS OF GRANTING AN AUTHORISATION
Given the strategic aspect of armament systems concerned by Use-2 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.
Impacts of the denial of an authorisation comprise economic, social and distributional dimensions: - Economic impacts on Nexter’s activity 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-2. A synthesis of the main impacts taken into account in this AfA is given below:
Figure 10. Synthesis of the impact categories of the “non-use” scenario
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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 as possible 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-2
Loss of revenues and profits The assessment of the share of revenues impacted by Use-2 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 11 below presents the forecast revenues associated with equipments concerned by Use-2 between 2015 and 2017.
#3a
Figure 11. Annual revenues concerned by Use-2 over the 2015-2017 period, M€
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Revenues directly generated by armament systems concerned by Use-2 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-2 (€ [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 upward 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 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 note that values taking into account (a) growth of revenues over the review period and (b) the upper and lower bound of the revenues concerned by the use over for 2015, 2016 and 2017 are 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). The 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%66) and amounts to € [100-1,000M](#2e).
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:
#3b
Figure 12. Orders concerned by Use-2, over the 2015-2017 period, M€
Orders directly concerned by Use-2 of the present AfA are forecasted to respectively represent (#2f), (#2g) and (#2h) of the total orders foreseen for Nexter Systems for 2015, 2016 and 2017.
66 Nexter, Etats financiers au 31 décembre 2014 – en norme IFRS
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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-2, 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 24. Global loss of revenues, profits and order book over the review period for the AfA (cumulated for Use-1, 2, 3 and 4)
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 either a cease or a very strong reduction of activity for several subsidiaries of the Nexter Group. 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.
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5.1.2. Lost investments An assessment of the investments made aimed at Use-2 applications over the 2015-2017 period aimed was carried out, with the following results:
Figure 13. Net book value of investments in relation with Use-2, M€
Taking into account a 4% discount rate for the values of 2016 and 2017, the investments directly related to Use-2 that are considered as lost in the context of the “non-use” scenario amount to: € 18.6M over the review period. These investments concern machinery or facilities.
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. 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 Industries67.
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-2 – and therefore of non-compliance with contractual agreements – can be estimated to several tens of billions of Euros.
67 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
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It has to be further mentioned that contracts, 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 objectives68.
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. 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:
68 Les Echos, Un trio pour mener la modernisation de l’armée de terre, 27/10/2015
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"NON-USE" SCENARIO % OF NB OF NB OF ACTIVITIES SUBSIDIARY ACTIVITY DEPENDENCY ON Cr(VI) EMPLOYEES EMPLOYEES JUSTIFICATION EMPLOYEES CONCERNED IMPACTED IMPACTED High Direct impact of Nexter Main contractor and design Virtually all armament systems produced and - Support functions 1,806 80% 1,445 the "non-use" authority for armament systems placed on the market by Nexter Systems are - Productive functions Systems scenario concerned by the "non-use" scenario Low Produces on behalf of its customers, Only impact would be indirect for telescoped Indirect impact of Nexter French and foreign Forces, a 594 munitions, in case the production of the CT40 - Productive functions 15% 90 the "non-use" complete range of Tank, Artillery Munitions gun is aborted in the context of the "non-use" scenario and Medium-Calibre ammunition. scenario Specialist in educational engineering using the GVT® Low Strong indirect Nexter 10 (Generic Virtual Training) VR Training is directly related to the equipments - Productive functions 20% 2 impact of the Training training software developed and produced by Nexter Systems "non-use" scenario marketed by the company Specialised in the design and Low Nexter marketing of land and air-land No impact of the 6 Not directly impacted by the equipments None 0% 0 robots for defence and security "non-use" scenario Robotics concerned by the AfA applications High Nexter Electronics' electronic systems are Strong indirect Nexter Specialised in embedded electronic - Support functions 107 intended to be embedded on Nexter Systems' 80% 86 impact of the systems engineering - Productive functions Electronics armament systems concerned by the "non- "non-use" scenario use" scenario High Specialised in manufacturing Virtually all the components and equipments Direct impact of Nexter - Support functions 114 mechanical and hydraulics manufactured by Nexter Mechanics are 50% 57 the "non-use" - Productive functions Mechanics equipment intended to be implemented in armament scenario systems concerned by the AfA Analysis of Alternatives – Socio-Economic Analysis
Produces equipments dedicated to detection (chemical and biological threats), personal protection (gas masks, filter cartridges, etc.), group High protection (air treatment, climate The NBC systems produced by NBC-Sys are - Support functions No impact of the NBC-Sys 59 80% 48 control and filtration systems for intended to be implemented on armament - Productive functions "non-use" scenario vehicles and buildings) and systems concerned by the "non-use" scenario decontamination (of aircraft, vehicles, sensitive equipment and personnel) High Specialist in the field of optical and Strong indirect The optical systems produced by Optsys are - Support functions Optsys 30 protected vision equipment for 80% 24 impact of the intended to be implemented on armament - Productive functions armoured vehicles "non-use" scenario systems concerned by the "non-use" scenario Designs, qualifies, produces and supports sustainable mobile Low Strong indirect Euro-Shelter 44 solutions based on light, rigid Not directly impacted by the equipments None 0% 0 impact of the structures built with sandwich concerned by the AfA "non-use" scenario panels High Direct impact of CTA - Support functions 52 Manufacturer of the CT40 gun The CT40 gun is concerned by the "non-use" 100% 52 the "non-use" - Productive functions International scenario as the main armament of JAGUAR scenario Designer and manufacturer of No impact of the Mecar 381 Low None 0% 0 ammunition "non-use" scenario Simmel Designer and manufacturer of No impact of the 175 Low None 0% 0 Difesa ammunition "non-use" scenario TOTAL 3,389 - - - - 1,804 -
Table 25. Description of employment sensitivity 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
Use-2 Nexter Mechanics 63
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 5.1.1. 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 87 705 281 481 on the share of revenue loss per use
Table 26. 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 5.6.
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: - DARES69 provides the key figures of the State’s employment-oriented expenditures and notably the cost of unemployment compensations for the year 2011: € 28.02B70,71; - 2,173,500 unemployed persons received a compensation for the same year72. The average annual cost of an unemployed person for the French State can therefore be estimated to € 12,89173.
69“ Direction de l’animation de la recherche, des études et des statistiques” – “Directorate for Research, Studies and Statistics”, Minister of Social Affairs and Employment 70 Dares, Les dépenses en faveur de l’emploi et du marché du travail en 2011, Analyses n°18, Février 2014 71 Unemployment compensations represent 60% of the “targeted expenditures” (“dépenses ciblées”) global amount of € 46,7B 72 Pôle Emploi, Chômage indemnisé ou non indemnisé (Situation au 31 décembre 2011), October 2 2012 73 28.02x109 / 2,173,500 Analysis of Alternatives – Socio-Economic Analysis
This figure is globally in line with Idea Consult74, 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 Unemployment benefits € 10,686 Public Guidance and administrative costs € 1,641 intervention Subtotal for public intervention € 12,327 Loss in social contribution of employers € 10,172
Potential loss Loss in social contribution of workers € 3,294 of public Loss in direct taxation € 1,888 revenues 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 27. Average individual social cost of an unemployed person in France, 201075
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 period76); - Correction for the average duration of unemployment in France: 460 days for workers during the 2nd semester of 201477. 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-2 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:
74 Idea Consult, on behalf of European Federation for Services to Individuals (EFSI), Why invest in employment? A study on the cost of unemployment, 2012 75 Ibid. 74 76 Ibid. 20 77 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) 705 jobs
Individual cost of unemployment € 38,245
Total unemployment costs € 27.0M
Total cost of unemployment, discounted(*) € 24.0M
Table 28. Total cost of the loss of employment for Use-2 (*): 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-2, 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 29. 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 Use-2 is carried out on the site of Tulle, which is classified by INSEE78 as a “class 3” employment zone, meaning it is characterised by an ageing population and subject to industrial change79. 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. Industry represents 8% of the employment of Tulle’s territory, which already declined by 53% between 1999 and 200980.
78 “Institut national de la statistique et des études économiques” – “National Institute for Statistic and Economics Studies” 79 INSEE Centre, Les zones d’emploi en région Centre – Les Dossiers n°20, February 2014 80 Direction Départementale des Territoires de la Corrèze, Diagnostic territorial de la communauté d’agglomération de Tulle, September 2013
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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 study81, based on data issued by the Belgian State82 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 study83 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 study84 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.
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.
81 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. 82 Bureau Fédéral du Plan, Les multiplicateurs de production, de revenu et d’emploi 1995-2005 – Une analyse entrées-sorties à prix constants, September 2013 83 INSEE, En Midi-Pyrénées, plus de 55 000 emplois salariés sont liés à l’industrie aéronautique – 6 pages de l’INSEE, October 2007 84 INSEE, L'influence de PSA Sochaux se concentre dans le « Nord Franche-Comté », May 2009
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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 5.3.2.
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 army85. 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.
85 Ibid. 18
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Figure 14. Detail of Nexter’s involvement in the manufacture of the French land army equipment and the impacts of this AfA’s four uses
Use-2 Nexter Mechanics 69
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-2 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 has to reminded the crucial role played by Nexter armament system within the SCORPION programme. 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. The first step of design for the equipments of the SCORPION programme is currently engaged. At the time being, no alternative to hard chromium had been qualified. So it is very likely that hard chromium coatings could be designed for high mechanical stress parts in relative movements for JAGUAR and GRIFFON. Taking into account the quantity and diversity of equipments concerned by this AfA, and as justified in section 2.2, 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 15). These deployment capabilities constitute a key pillar of France’s defence and sovereignty policy and are only available to a few countries in the world. Analysis of Alternatives – Socio-Economic Analysis
Figure 15. French army field operations, July 201586
Main strategic objectives in terms of armament systems’ operational availability for the armed forces are the following87: - 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.
86 French Ministry of Defence - http://www.defence.gouv.fr/operations/rubriques_complementaires/carte-des-operations-exterieures 87 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 30. Availability of various equipments in the French army88
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 rate 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-2, are equipments on which the French armed forces rely on a daily basis to fulfil their mission (e.g. CAESAR 155 mm gun-howitzer) and therefore occupy a strategic position in France’s field operation capabilities. In this context, and taking into account the limited lifespan of the armament barrels and auxiliary parts (and therefore the potentially frequent need for replacement as stated in section 4.3.2.1), 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-2, 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:
88 Ibid 14
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- 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; - 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 possession 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. It has to be mentioned that Use-2 also concerns spare parts of armament systems that are already in operation within the army and that will remain in service until at least 2025. Without such parts, and the level of performances provided by Use-2, those armament systems will not be maintained in operational condition and therefore disabled with no possibility of repair. Such equipments include: - 105F2 howitzer ; - 90F4 six-wheeled armoured all-terrain vehicle ; - 30M550 F1, F2 & F4 30mm cannon ; - AUF1 self-propelled artillery vehicle ; - 155TR towed howitzer ; - 30M791 30mm cannon (RAFALE aircraft) ; - LECLERC main battle tank ;
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- VBCI armoured vehicle for infantry combat; - CAESAR six-wheeled 155 mm/52-calibre gun-howitzer.
Such equipments represent a significant part of the French ground military capabilities. Taking into account the impossibility to supply new equipments related to the “non-use” scenario, and the inability to maintain the current equipments in operational conditions, the impacts of the disruption of Use-2 would strongly jeopardise France’s operational capabilities and sovereignty.
5.5.3. Loss of investments for the French State One of the main impacts of the fact that Nexter’s Use-2 equipments are rendered partially to completely unusable by the disruption of the hard chromium treatment is the loss of investments for armament programmes that are rendered useless. It has to be reminded that Use-2 concerns most parts of armament systems, such as cannon bodies or decompressors. 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-2 cannot realistically be outlined, and that most of these data are confidential, it is reminded that the overall investments for the Rafale program amount to around € 46.4B (see section 2.1).
5.5.4. Impact on France’s sovereignty As described in section 9.1.1.1, 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-2 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
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sovereignty and doctrine. An example of this independence can be found in the recent Operation “Serval” in Mali or Operation “Barkhane” in Sahel89. With the denial of an authorisation, key armament systems for such field operations (CAESAR, Leclerc) 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 years90. As developed in section 9.1.3, export of French armament systems to foreign armed forces represent 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 potential of such equipments and therefore endanger both France’s sovereignty and defence industry. As of today, foreseen export potential for a few of the main concerned equipments is the following: - Rafale - An order was placed by Egypt for 24 aircrafts, while several are being negotiated (India for 36 aircrafts, Qatar for 24 to 36 aircrafts) and prospection is ongoing with Belgium, Canada, United Arab Emirates, Finland or Poland. Rafale’s unit cost is estimated to around € 162M91; - CAESAR - 106 units of the CAESAR 155 mm/52-calibre gun-howitzer have already been ordered and this amount is expected to grow in the coming years. CAESAR’s unit cost is estimated to US$ 5M92; - Eurocopter Tiger - negotiations are ongoing for 12 to 20 Tiger units for the Malaysian army93 and Qatar expressed interest in a dozen of Tiger units94. Tiger’s unit cost is estimated to € 73.7M95.
89 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. 90 Source: DGA - http://www.defence.gouv.fr/dga/la-dga2/missions/presentation-de-la-direction- generale-de-l-armement 91 Reiner, Pintat & Gautier, Projet de loi de finances pour 2015: Défense: équipement des forces: IV. Engagement et combat, Commission des A aires étrangères, de la Défense et des Forces armées (Sénat), November 20th 2014 92 Abas, Sights on howitzer sale, The Malay Mail, July 30th 2010 93 De La Grange, L'armement européen se vend bien en Asie du Sud-Est, Challenges, February 28th 2012 94 La Tribune, Défense: 20 milliards d'euros sous le soleil du Qatar... pour la France ?, October 30th 2012 95 Rapport public annuel, Cour des Comptes, 2010
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A rough estimate, based on data detailed above for only three armament systems impacted by Use-2, leads to an overall amount of € 18B 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 caution96, 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.
5.5.5. Impact on Nexter’s industrial partners Nexter is associated with several industrial partners for the development and manufacture of its armament systems, as specified in sections 2.1.1, 0 & 2.1.3. For example, Nexter directly collaborates with Renault Trucks Defense and Mercedes-Benz Unimog for the manufacture of the CAESAR’s chassis as well as Renault Trucks Defence and Thales Communications & Security for the manufacture of the GRIFFON and JAGUAR vehicles.
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
96 It will not, for example, be taken into account as such in the final monetised impacts of the “non-use” scenario.
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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 NewExt97: 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:
COSTS ASSOCIATED TO MORTALITY AND MORBIDITY Considering the upper bound of € 161.2 Value of a Statistical Life-Year (€ 225,000) Considering the lower bound of € 19.5 Value of a Statistical Life-Year (€ 27,240)
Table 31. Uncertainty analysis for mortality and morbidity, Use-2
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 - Standard life expectancy Low uncertainty: although data used - Mean age of lung cancer are average and not directly representative of the population of death Mortality and workers concerned by the AfA, - Mean age of lung cancer morbidity uncertainty is reduced by the use of diagnosis specific data for the French population Low uncertainty, since the value used - Disability weight is specific for lung cancer Low uncertainty, since the value used - Costs of medical treatment Medical is specific for lung cancer in France treatment Low uncertainty, since the values used - Survival rate are specific for lung cancer in France
Table 32. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario
97 Ibid. 54
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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 5.1.1, 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 used98. 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-2 € (#1g) over the 2015-2017 period (Uncertainty analysis 2) Lower bound of the revenue concerned by Use-2 € (#1h) over the 2015-2017 period (Uncertainty analysis 3)
Table 33. 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.
98 Deloitte, 2015 global aerospace and defense industry outlook
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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 amounts to 819 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 € 27.8M.
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:
APPLICATION PARAMETER UNCERTAINTY ANALYSIS Low uncertainty: the values used to - Revenues and order estimate the loss of revenues are based on book impacted by the a comprehensive inventory of the Loss of uses of the AfA armament systems concerned by the AfA revenues, and the associated revenues and orders profits and Low uncertainty: the value used is based on orders the financial report of Nexter and is - Operating margin considered as representative of Nexter’s operating margin over the review period 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. - Net book value of Loss of In order to remain in the context of the investments in relation realistic worst-case scenario, only the values investments with the AfA 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. - Average individual cost Low uncertainty: the values used are of an unemployed specific for France person Potential high degree of uncertainty, since the change in loss of employment is not Loss of - Breakdown of job losses necessarily directly related to the change in employment loss of revenues. per use, based on the This hypothesis, however, is considered as share of revenue loss for under-estimating the results since it does each use not take into consideration synergies between uses: one use may impact several employees
Table 34. 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:
200 € 161.2 € 150 €
100 €
40.0 € 50 € 19.5 €
- € Reference value Uncertainty analysis Uncertainty analysis Upper bound Lower bound
Figure 16. 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:
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(#1i)
Figure 17. Uncertainty analysis of the loss of profits and the costs associated with the loss of employment, in €
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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
Loss of profits € [100-1,000M](#1j) Economic impacts Lost investments € 18.6M Social impacts Loss of employment € 24.0M Total monetised impacts of the “non-use” scenario € [100-1,000M](#1k)
Table 35. Synthesis of the monetised impacts of the “non-use” scenario
As a complement, other impacts of the “non-use” scenario are synthesised in Table 36 below:
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IMPACTS ORDER OF MAGNITUDE Contractual duties of defence programs imply a very high level of final Economic Contractual penalties performances of armament systems and include strong contractual penalties Billions of Euros impacts in case equipments cannot be delivered to the armed forces. Nexter Mechanics’ site of Tulle and geographic territory is very sensitive to Territory vulnerability Not assessed industrial employment. Social impacts Along with direct loss of employment, indirect job losses (suppliers, sub- Indirect employment Not assessed contractors) are foreseen in the context of the “non-use” scenario. Equipments concerned by the AfA are considered as operationally unusable in the context of the “non-use” scenario. These equipments constitute the very Impact on operational availability Hundreds of thousands backbone of the French current and future operational capabilities; a of armament systems to Billions of Euros disruption of supply of maintenance in operational conditions of these equipments jeopardises France’s field operation capabilities. Defence programs impacted by the “non-use” scenario have been developed Loss of investments for the based on significant investments of the French State. These investments will be Billions of Euros Distributional Ministry of Defence impacts lost in case of unavailability of the equipments concerned. Equipments concerned by the AfA are considered as strategic for the French Impact on France’s sovereignty Ministry of Defence and their unavailability for the armed forces would Not assessed endanger France’s sovereignty and France’s diplomatic independence. Nexter collaborates with several European industrial companies for the Impact on Nexter’s industrial manufacture of its equipments; the “non-use” scenario implied direct impacts Not assessed partners on their activities.
Table 36. 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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AoA – SEA IN A NUTSHELL
APPLICATION FOR AUTHORISATION
APPLICANT: Nexter Mechanics USE: Use-2: 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 SUBSTANCE: Chromium trioxide service life, stealth, erosion, corrosion and high temperature resistances in the condition of uses.
ANALYSIS OF ALTERNATIVES
A significant work of research carried out by Nexter led to identify potential alternatives for Use-2: High phosphorus electroless Nickel and Atmospheric Plasma Spraying - MCrAlY or refractory oxides.
Both these alternatives require several testing, development, 2013-2014 2015 – 2016 2016-2018 2018-2020 2020-2024 Research & preliminary Comparative Technical agreement & Pilot scale & implementation and qualification steps in order to be deployed in DGA Qualification assessment assessmentUse-2 complementary testing implementation applications that will be put on the market:
As a consequence, no potential alternative will be available before hexavalent chromium sunset Use-2 date on 2017/09/21 and a review period of seven years is needed to achieve substitution.
Loss of profits SOCIO-ECONOMIC ANALYSIS 240,084,740 €
Mortality and morbidity 40 € As per Art. 60(4) concerning the Socio-economic assessment route, (#1n) evidence was provided that the socio-economic benefits outweigh the Medical treatment risks arising from the use of the substance by a factor of [1,000,000-10,000,000](#1o) 1 € 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 Loss of investments impacts on Nexter’s industrial partners . 18,601,868 € Loss of employment 23,973,154 €
Monetised impacts of the "applied for use" scenario: Monetised impacts of the "non use" scenario: € 41 € [100-1,000M](#1m)
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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-2, Nexter Mechanics applies 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.
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[Ministère de la Ministère de la Défense, Le déroulement et la conduite des opérations d’armement Défense, 2011] (Instruction générale 125/EMA-1516/DGA du 26 mars 2010), 2011 [Ministère de la Ministère de la Défense, French White Paper – Defence and national security, 2013 Défense, 2013] Murray, Salomon, Mathers, Lopez, Summary measures of population health: concepts, ethics, [Murray et al., 2002] measurement and applications. Geneva, World Health Organization, 2002 Murray, Rethinking DALYs. In: Murray CJ, Lopez AD, eds. The global burden of disease. [Murray & Lopez, 1996] Geneva, World Health Organization, Harvard School of Public Health, World Bank, 1996
[Murray & Lopez, Murray, Lopez, Progress and directions in refining the global burden of disease approach. 1999b] Geneva, World Health Organization (GPE Discussion Paper No 1), 1999
[Murray, Salomon & Murray, Salomon, Mathers, A critical examination of summary measures of population Mathers, 2000] health. Bulletin of the World Health Organization, 8(8):981-994, 2000 [NewExt, 2003] NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003 New Elements for the Assessment of External Costs from Energy Technologies, Final Report to [NewExt, 2004] the European Commission, DG Research, Technological Development and Demonstration (RTD), 2004 Oudot, Renégociations des contrats de défense: le rôle des aspects informels. In: Fondements [Oudot, 2013] économiques et industriels de la Défense, Innovations - Cahiers d’économie et de management de l’innovation, Numéro 42, 2013 Parkinson, Properties and applications of electroless nickel deposits, Technical Series No. [Parkinson, 1997] 10081, Nickel Development Institute, 1997 Pôle Emploi, Chômage indemnisé ou non indemnisé (Situation au 31 décembre 2011), 2 [Pôle Emploi, 2012] octobre 2012 Simrova, The costs and reimbursements for lung cancer treatment among selected health [Simrova, 2014] care providers in The Czech republic, 2014 Sénat, Projet de loi de finances pour 2002 - Tome III - Annexe 42: II. Défense: Exposé [Sénat, 2001] d'ensemble et dépenses en capital, 2001 Sénat, Rapport d'information: Les capacités industrielles militaires critiques, Commission des [Sénat, 2011] affaires étrangères et de la défense, Session extraordinaire 2011-2012, 2012 Reiner, Pintat & Gautier, “Projet de loi de finances pour 2015: Défense: équipement des [Sénat, 2014] forces: IV. Engagement et combat”, Commission des A aires étrangères, de la Défense et des Forces armées (Sénat), 20 novembre 2014 [Serfati, 2014] Serfati, L’industrie française de la défense, La documentation Française, 2014 [Tardelli, 2015] Tardelli, Alternative au chromage dur hexavalent, A3TS – IRT M2P, 3 juin 2015
[Weinstein & Stason, Weinstein, Stason, Foundations of cost effective analysis for health and medical practices. 1977] New England Journal of Medicine, 296:716-721, 1977 Mathers, Stein, Fat et al. “Global Burden of Disease 2000: Version 2 methods and results.” [WHO, 2002] Global Programme on Evidence for Health Policy Discussion Paper No. 50: World Health Organization, 2002 Williams, Calculating the global burden of disease: time for a strategic reappraisal? Health [Williams, 1999] Economics, 8:1-8, 1999
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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 PAGE JUSTIFICATION FOR CONFIDENTIALITY ITEM REFERENCE NUMBER Strategic data: the blanking of these data is made 8, 59, 78, 81, #1a to #1p necessary by the blanking of data concerning the 82, 84, 85 loss of revenues (#2a to #2i below). Strategic data: the forecasts of revenues, profits and orders for 2016 and 2017, and conversely the #2a to #2i 58, 59 loss of revenues, profits and orders over the review period constitute strategic business data and cannot be disclosed for confidentiality reasons. Strategic data: detailed values of the revenues and #3a to #3b 57, 59 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].
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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 competitiveness99. 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 Policy100. 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 comprise101: - € 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 exports102 and to 32% of the European armament exports103. 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).
99 European Commission, On defence - Towards a more competitive and efficient defence and security sector - Commission staff working document, 2013 100 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 101 AACHEAR, Technologies et industries de défense et de sécurité. In: Géostratégie et armement au XXIème siècle, Collection Armement et Sécurité, 2014 102 AACHEAR, Quelle évolution pour l’industrie française de l’armement terrestre ? in: Géostratégie et armement au XXIème siècle, Collection Armement et Sécurité, 2014 103 Yves Fromion, Les exportations de défense et de sécurité de la France, 2006
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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 system104 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 sovereignty105: - “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
104 AACHEAR (2014) Quelle évolution pour l’industrie française de l’armement terrestre? In Géostratégie et armement au XXIème siècle - Collection Armement et Sécurité 105 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 State’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 Upstream technical studies Operational scenarios
Geopolitics and geostrategic prospective Procurement strategy and industrial Identification of potential threats strategy
Defence prospective Definition of armed forces Impacts of technologies on threats and risks Operational contracts
Defence ambitions Alliance strategies Doctrine Defence agreements
Budgetary parameters
Table 37. Global elements of France’s long-term defence strategy106
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
106 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 UK107. 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 strategies108: - 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 money109. In France, conversely, industrial manufacturing within the country was often prioritised110. 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 program111.
107 AACHEAR (2014) Technologies et industries de défense et de sécurité. In Géostratégie et armement au XXIème siècle - Collection Armement et Sécurité 108 Sénat (4 juillet 2012) Rapport d'information: Les capacités industrielles souveraines / capacités industrielles militaires critiques, p. 28 109 MoD (February 2010) The defence strategy for Acquisition reform AND (February 2012) National Security through technology 110 Sénat, Rapport d’information - Les capacités militaires industrielles critiques 111 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 SANDIE112. 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:
SHARE OF THE TOTAL SHARE OF THE INDUSTRIAL REGION EMPLOYEES OF THE EMPLOYEES OF THE DEFENCE INDUSTRY 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 38. 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 défense113
As an example, the defence industry amounts to 9% of the overall defence industry employment and 10% of the regional industrial employment in the region Centre. In this region, one third of the companies generate more than 25% of their revenues in relationship with the defence industry114, 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, Roanne and Vendôme. Those areas are, therefore, extremely sensitive to any
112 http://www.insee.fr/fr/insee-statistique-publique/default.asp?page=statistique- publique/defense.htm 113 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. 114 Serfati,L’industrie française de la défense, La documentation Française, 2014
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modification in the defence industry activities115. 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 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 missiles116.
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:
115 Cidef - L’industrie de la défense en 2012 116 Besson, L'industrie de l'armement, un atout majeur pour la France, Le Figaro, 19/02/2008
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Figure 18. "Three circles” model of the statuses of defence technologies and competences117.
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”118 (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 Scheel119, such
117 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 118 In french: “Capacités industrielles militaires critiques” 119 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. As exemplified in section 5.5 and detailed in appendix 9.1 of this analysis, 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 follows120: - 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.
Shareholder Regulator
Architect Promoter
Customer
Figure 19. 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.
120 Assemblée Nationale, Journal official de la République Française, Session ordinaire du 2014-2015, Séances du jeudi 15 janvier 2015, Compte rendu integral, 2015
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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 agencies121. Expression of needs is defined by the Etat-Major, notably based on geopolitics and geostrategic works provided by the Delegation for Foreign Affairs122. 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 following123:
Figure 20. 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
121 AACHEAR, Le management de l’Armement. In: Géostratégie et armement au XXIème siècle, Collection Armement et Sécurité, 2014 122 “Délégations aux Affaires Etrangères” - DAT 123 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 programs124: 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:
ASSESSMENT OF ACTOR DECISION AUTHORISATION… COMPLIANCE…
… with technical … of production and Qualification requirements support DGA … of property transfer of Acceptance … with contractual terms the equipments
Armed … with military Adoption … of implementation forces characteristics
Entry into … with conditions of use … of operational use operational service
Table 39. Verification & validation approach125
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 following126,127: “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.
124 Ibid. 123 125 Ibid. 123 126 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 127 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.
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 safeguards CIMCs) in a context of budgetary restraint128. Below are presented the share of France in the revenues of 4 of its main defence companies129:
Revenues per geographic zone (in %) Revenues per geographic zone (in %) Case of Nexter Case of Thales
France France 17 22 Rest of the world 24; 24% Rest of the world 7 Europe 76; 76% 32 22 North America Asia
128 Rapport au Parlement 2015 sur les exportations d’armement de la France, p. 16 129 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%).
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Revenues per geographic zone (in %) Case of Dassault aviation Revenues per geographic zone (in %) Case of Safran France 4 UK 29 France 14 7 29 Rest of Europe Rest of the world 71 5 North America 20 10 Australia and NZ 11 Saoudi Arabia and Middle East countries
Figure 21. 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 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.
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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 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.
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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 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 41.
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 ;
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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. Different types of licenses are summarised below:
CRITERIA PROCEDURE Transfer license Export license Geographic Towards EU Towards non-EU criteria countries countries Individual licenses DGA 1 customer CIEEMG Global licenses
Operational 1 or several customers for a limited Prime Minister and Minister criteria duration responsible for customs General licenses DGA who deliver once a All operations in the restrictive scope of registration number the license
Table 40. 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
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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.
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.
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9.2. Overview of France’s legal framework
TEXT SCOPE
Export and import of military equipment and - Act No. 2011-702 of 22 June 2011 related materials and intra-Community transfers - Decree No 2012-901 of 20 July 2012 of defence-related products Plan of military materials, weapons and ammunition (classification of materials, Act No. 2012-304 of 6 March 2012 organization and operation of AFCI, rules on the - Decree No 2013-700 of 30 July 2013 acquisition, holding, port, transport and transfer of arms)
Update of the Inter-ministerial Commission Decree No. 2012-1176 of 23 October 2012 missions for the study of exports of war material amending Decree No. 55-965 of 16 July 1955 (CIEEMG)
List of war materials and assimilated subject to authorisation prior to export and products Decree of 27 June 2012 amended related to the defence subject to authorization
prior to transfer
Decree of 30 November 2011 as amended relating to the corporate certification Corporate certification procedure procedure wishing to be recipient of defence related products
Decree of 30 November 2011 amended Obligations of exporters reporting transactions establishing the organization of control out-of- carried out; provisions of control in place; site and on-site operation of the ministerial committee of the conducted by the Ministry of Defence under subsequent verification
Article L2339-1 of the Defence Code Military and Military assimilated material
Decree of 16 July 2012 concerning the accounts of imports carried out and transfers of war Obligations on account of the import / weapons and ammunition from transfers from EU Member States Member States of the European Union materials
Decree of 14 April 2014 concerning the manner of request of individual licences and global Manner of declaration in respect of export export of war and assimilated equipment and restrictions manner of request of individual and global licenses of transfer of defence related products
- Decrees of general transfer license of 6 January 2012 - Decree of general transfer license of 3 June General transfer/ export licenses 2013 - Decree of general export and transfer of 6 June 2013
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Export of firearms, ammunitions and its Decree No. 2014-62 of 28 January 2014 components
Export and import of certain goods which could Decree No. 2011-978 of 16 August 2011 be used for capital punishment, torture or other cruel, inhuman or degrading treatment.
Export, import and transfer of explosive Specific restrictions Specific - Decree 2009-1140 of 23 November 2009 substances and products (with the exception of
- Decree of 4 October 2007 explosives on the list of war and assimilated andtransfer of certain goods. applying to applying the export, import equipment)
Table 41. Overview of France’s legal framework130
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.
130 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
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QTY IN OPERATION CONCERNED BY USE CATEGORY EQUIPMENT MANUFACTURER (June 30th, 2014)131 OF THIS AfA
Main battle tanks Leclerc - Nexter 200 Use-2
132
High mobility vehicles - Hägglunds 53 - (VHM)
Tracked 133 armoured systems
Tank recovery vehicles - Nexter 18 - (DCL)
134
131 Ministère de la Défense, Les chiffres clés de la défense – Edition 2014, 2014 132 Author: Daniel Steger, Source: http://openphoto.net/gallery/image.html?image_id=11044 133 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 134 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
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- Ateliers de construction Battle tanks (AMX 30 D) d'Issy-les-Moulineaux 58 - - Nexter 135
- Ateliers de construction Demining systems d'Issy-les-Moulineaux 56 - (EBG & SDPMAC) - Nexter 136
Light reconnaissance vehicles - Nexter 248 - (AMX 10 RCR) Wheeled 137 armoured systems Wheeled armoured all- - Panhard General Defense terrain vehicles (ERC 90 110 Use-2 - Nexter Sagaie) 138
135 Author: Davric. Source: https://fr.wikipedia.org/wiki/AMX-30#/media/File:AMX-30D-cote-droit.jpg 136 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 137 Author: Davric. Source: https://fr.wikipedia.org/wiki/AMX-10_RC#/media/File:AMX-10-RC.JPG 138 Author: Pierre Delattre. Source: https://fr.wikipedia.org/wiki/ERC-90_Sagaie#/media/File:ERC-90_Sagaie_008_FR.JPG
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Armoured vehicles for Use-3 - Nexter 604 infantry combat (VBCI) Use-4
139
Troop transport vehicles - Renault Trucks Défense 3,135 - (VAB)
140
Small protected vehicles - Panhard General Defense 1,183 (PVP)
141
Light armoured vehicles - Panhard General Defense 1,470 Use-3* (VBL-VB2L) - Nexter*
142
139 Author: Daniel Steger. Source: http://openphoto.net/gallery/image.html?image_id=11058 140 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_Shi eld.JPEG 141 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 142 Author: Supercopter. Source: https://commons.wikimedia.org/wiki/File:VBL_RHP_Afghanistan.JPG
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Infantry mobility Use-3 - Nexter 14 vehicles (Aravis) Use-4
143
Mine protected clearance vehicles - Force Protection 4 - (Buffalo) 144
Use-1 155mm cannon - Nexter 121 Use-2
145
- Ateliers de construction Artillery observation d'Issy-les-Moulineaux 90 - Artillery vehicles (VOA) - Nexter
Wheeled 155 mm gun- Use-1 - Nexter 77 howitzers (CAESAR) Use-2
146
143 Author: Kevin.B. Source: https://commons.wikimedia.org/wiki/File:Nexter_Aravis_%C3%A0_Strasbourg,_2010_(3).jpg 144 Author: US government. Source: https://fr.wikipedia.org/wiki/Buffalo_(MPCV)#/media/File:Buffalo_mine-protected_vehicle.jpg 145 Author: Sgt. Alex C. Sauceda. Source: https://commons.wikimedia.org/wiki/File:F-1-Towed-Gun-howitzer.jpg 146 Author: Daniel Steger. Source: http://openphoto.net/gallery/image.html?image_id=11060
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120mm mortars - TDA Armements 140 -
147
Fighter’s Félin - Sagem Défense Sécurité 18,242 - equipment
148
Milan - MBDA 549 -
149 Anti-tank systems
Hot - MBDA 30 -
150
147 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 148 Author: Daniel Steger. Source: https://commons.wikimedia.org/wiki/File:FELIN-openphotonet_PICT6047.jpg 149 Author: David Monniaux. Source: https://commons.wikimedia.org/wiki/File:Milan_501607_fh000004.jpg 150 Author: Jwnabd. Source: https://commons.wikimedia.org/wiki/File:Long_Range_Anti-tank_Weapon_HOT_3_-_ILA2002-clean.jpg
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Eryx - MBDA 678 -
151
Javelin - Raytheon & Lockheed Martin 76 -
152
Gazelle - SNIAS 127 -
153 Helicopters
- Airbus Helicopters Use-2 Tigre 49 - Nexter Use-3
154
151 Author: davric. Source: https://commons.wikimedia.org/wiki/File:ERYX-2ndFrInReg_2.jpg 152 Author: Gary L. Kieffer, USA, CIV. Source: https://commons.wikimedia.org/wiki/File:FGM-148_Javelin_-_ID_061024-A-0497K-004.JPEG 153 Author: Eric Gaba. Source: https://commons.wikimedia.org/wiki/File:Gazelle_SA342M.jpg 154 Author: David Monniaux. Source: https://commons.wikimedia.org/wiki/File:Eurocopter_Tiger_p1230203.jpg
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- Aérospatiale Use-2* Cougar 24 - Nexter* Use-3* 155
- Aérospatiale Use-2* Puma 88 - Nexter* Use-3*
156
- Airbus Helicopters Use-2* Caracal 8 - Nexter* Use-3*
157
- NHIndustries Use-2* Caïman 13 - Nexter* Use-3*
155 Author: Arnaud Gaillard. Source: https://commons.wikimedia.org/wiki/File:Cougar_heli_ag1.jpg 156 Author: davric. Source: https://commons.wikimedia.org/wiki/File:SA340_Puma.JPG 157 Author: Dmitry A. Mottl. Source: https://commons.wikimedia.org/wiki/File:Eurocopter_EC-725_Cougar_MkII.jpg
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Ground-to-air - MBDA armament Mistral 126 - - Nexter systems
158
Table 42. Inventory of the French Land Army equipment * depending on configurations
158 Author: Adrian. Source: https://commons.wikimedia.org/wiki/File:Lansarea_unei_rachete_MISTRAL.jpg
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