CFO Studio Magazine - Curt Allen, CFO, Subaru

30 WWW.CFOSTUDIO.COM 1st QUARTER 2015 Merrill Lynch, asked Draillard, “Given the complexities of everything you just talked about —exchange rates, global enterprise— when your board or your CEO asks you for a venture plan, where do you start?” “I’d start with the airplanes,” said Draillard. “Howmany airplanes and when, and what type of airplanes do they want?”The answers will call up “different cost structure and the different margin contribution.” Draillard said he then looks at the company’s manufacturing schedule supporting the delivery of the new aircraft, and finally, “I’ll look at the other businesses —pre-owned, spares, customer service, and maintenance.” The group also shared knowledge about their experiences with the Export-Import Bank of the United States (Ex-Im), the official export credit agency of the United States.The institution does not compete with private institutions, but fills gaps in the trade finance market by working with lenders and brokers. Daniel Prevoznak, senior vice president, senior client manager at Bank of America Merrill Lynch, has clients that sell into South America and Africa who found Ex-Im rates to be favorable. He said the Ex-ImBank has programs that can be very effective for middle- market companies looking to grow global sales. Manufacturing Abroad Dassault imports its aircraft parts to its service centers, including the one located in Brazil. Vincent Durante, executive vice president and secretary-treasurer, Interchem Corporation, supplier of fine chemicals and compounds, asked if there would be cost benefits to manufacturing those parts in Brazil. “Brazil has a pretty robust fair credit in the industry,” said Durante. “Would it pay for you to contract low-cost manufacturing in Brazil to avoid all those duties?” “No, because why would I give [anyone] my production secrets? [That manufacturer] would be my competitor very soon,” replied Draillard. “For most of the aviation companies, secrecy is in our blood. That comes from the military connection to the industry. Secrecy, for us, is built-in. It’s in our DNA.” Some U.S. companies go into Brazil to manufacture and build out their own manufacturing centers to avoid the hefty duties on importing while maintaining tight controls over proprietary information. For Dassault, the local market in Brazil is not strong enough to support manufacturing. In addition, the government-imposed workers’ benefits in Brazil, such as vacation time, add considerably to the cost of doing business. That cost is only worth bearing when the company is selling to the mass market, not just the extremely high-end customers who purchase jets, he said. Marketing and the International Customer Michael Algranati, treasurer and chief procurement officer of UnitedWater, asked Draillard about Dassault’s market and marketing strategy. Draillard explained that the company’s markets are large corporations or very successful midsize corporations that have an international footprint. Dassault’s marketing focuses on the company’s proprietary technology and ability to customize the aircraft tomeet demanding client specifications— more so than competitors can. On the subject of marketing, Robert Weingartz, vice president of finance at Arrow Fastener, a manufacturer of manual, electric, and cordless fastening tools, discussed the role key consumer insights and changes in customer preferences play in how the product is marketed. At Dassault, said Draillard, they look at several different consumer insight criteria when going into product development. They look at the city-pairs most customers are flying and how often the jet is in use. Second, they look at the role of the buyers. For example, are more pilots purchasing aircraft to fly themselves, or are the principals at a company buying aircraft to function as a flying office. Depending on the demographic of the buyer, the emphasis can shift from the cockpit to the cabin. David Wyshner, senior executive vice president and CFO of Avis Budget Group, Inc., a global provider of vehicle rental services through its Avis, Budget, and Zipcar brands, spoke about how executives need to not only trust consumer trends they see, but act on them as well. “We tend to see consumer shifts relatively quickly, but not always in advance of the shift happening,” saidWyshner. “We have to get better about trusting what we’re seeing, recognizing what we’re seeing is real, and having the confidence to act on it.” Analyzing Global Growth Opportunities AndrewZezas, publisher of CFO Studio magazine, CEOof Real Estate Strategies Corporation, and host of the evening’s discussion, referenced the importance of a global organization’s agility and the ability of a multinational company to react to changes brought about by economic dips and recoveries. In the case of Dassault, the private jet industry is one of the first impacted by a recession and one of the last to recover. Peter Dontas, New Jerseymarket executive withBank of AmericaMerrill Lynch, asked Draillardwhere he saw the biggest opportunity for growth. “Mexico, Indonesia, andAfrica,” said Draillard. “That’s where thewealth is. China is a very strangemarket. Chinawas huge from2008 through 2012 and then two things changed. Wewere selling normal-range aircraft, mostly to people in banking and real estate.Well, those are two of the largest bubbles about to burst in China. If those industries were not sustained by the government, theywould probably have burst already.The second thingwas the crackdown on corruption. Now, corporate spending ismuch more conservative as a result.” Jet Etiquette As the evening drew to a close, Solomon posed a question of corporate jet etiquette to the group. “You are flying with the CEO, the chairman, and a few other executives on a private plane for the first time. There are two seats facing forward, two facing backward, and a couple around a small table in the back. What’s the right seat for the CFO to get in?” “The copilot’s seat,” responded Andrew Savadelis, CFO of Angion Biomedica, a biopharmaceutical company. C CFO STUDIO EXECUTIVE DINNER SERIES