00:00CEO of Thales Group, one of Europe's biggest defense contractors. Patrice, thank you so much for joining. And I was
00:05just looking at your financial statement. The Middle East accounts for about six percent of your revenue for last for
00:13the entirety of last year. What's changed for you as this war in Iran has broken out. What have you
00:17heard from your Middle East customers. First and foremost we have I would say put all our employees in a
00:25safe safe place. Sorry to say so but that's the most important point for a company.
00:30Then, of course, many of them, many customers in the region have asked us to help them to support their
00:38equipment. That's the first outcome. And second one is also to sell or to supply three new equipments and typically
00:47radars. That's super important for them to protect their space and also effectors besides rockets or whatsoever to defend themselves
00:56against the Iranian attacks.
00:58So I imagine there's a government regulator that tells you which countries you can sell to and which countries you
01:06can't sell to. Is that the case? And how often does how often does that list change?
01:12In fact, this industry is very specific. And that's normal, by the way. It is super controlled and that's normal.
01:19So when we export from a given country, from the U.S., typically the U.S. government tells us if
01:26we can or not export, if we export from France, from the U.K. as well.
01:30So it's really first and foremost a governmental decision to authorize you to export or not. And then you proceed
01:36further or not.
01:38From which country do you export the most? I mean, is the U.S. your biggest export?
01:42You know, the most, I would say, significant footprint is in Europe still. So we do export a lot from
01:50Europe, from France, from the U.K.
01:53That's probably the main countries from which we support what we call export customers or overseas customers.
01:59There's so much demand now because you add the war in Iran to already the war happening in Ukraine.
02:04I was listening to an interview with Ryan Mattel, CEO, who I'm sure you know well, saying that if this
02:09lasts another month, I think we will nearly have no missiles available.
02:13Are you seeing something similar? Is there a serious shortage of the ability of the U.S., of Middle East,
02:19of these nations to combat drones in the sky, for example, from Iran?
02:23It's difficult, you know, to say whether there will be a lack of missiles or not.
02:29By the way, this piece of information are classified.
02:33And it's also normal, you know, to protect the military edge you have by not disclosing the reality of your
02:40forces, number one.
02:41Number two, to deal with these new types of fights, typically drones or UAVs, indeed, you need cheap, if I
02:49may, cheap effectors.
02:51And in particular, what we do from Belfast in the U.K., I mean, simple missiles, much, I would say,
02:59affordable than typically a Patriot missile, is much more suited to deal with this type of fights.
03:05Are those almost ready for the battlefield? Because it does feel like we're shooting down paper planes with golden arrows
03:09right now.
03:10Those missiles, of course, are ready. By the way, we have multiplied by four, the production in Belfast, just to
03:16give an example.
03:16We've done the same for our production of rockets. It's even cheaper, a rocket. We've multiplied by four in Belgium,
03:25in France.
03:26So if needed, we can go even further.
03:28So just to underline that, as far as I understand it, and there's been a lot more research done on
03:36this by people like me in the last few weeks, you've been doing this your whole career,
03:39but we are depleting our weapons' cash at an uncomfortable pace right now.
03:48And when I say we, I mean the U.S. and NATO. So that's one issue that we have.
03:52The other issue is that our weapons are so much more expensive compared to the weapons that our adversaries are
04:02using.
04:02So there's two kind of asymmetries here that are problematic. How quickly can we change those things?
04:08No, you're perfectly right. This observation is perfectly right. Hence the fact that we really need, you know, to adapt
04:14or to use effectors, as we call them, that are much cheaper.
04:20You can produce in greater quantity. You can produce much quicker as well because they're simpler.
04:25And that's what needs to be done ASAP. That's what I've started to do, by the way.
04:30And by the way, that's a concern that the president raised before we attacked Iran.
04:35I mean, he wants certainly U.S. defense contractors to do things faster.
04:40Absolutely. And by the way, you know, we are part of the Patriot missile. We supply some of the electronics.
04:49And we have been asked really to ramp up steeply our production to support the production of the full missile.
04:56This is something that is clearly at play at the moment.
04:59Do you think that there are any other holes that the past two weeks have exposed in Western Western militaries?
05:04Are there any programs that you've involved in beyond this that you started to ramp up and really lean into?
05:10I think, let's say, the Western world has everything in hand to cover every type of threats.
05:18Maybe it's really true in Europe. We are focusing on the Middle East and currently and the U.S.
05:23because the U.S. is engaged in this war. But looking a little bit at Europe, you know,
05:28this part of the world has clearly under-invested in defense for decades, for decades.
05:34Take Europe, since the fall of the Berlin War, we reopened, all thought that we were living in a peace
05:41of area forever.
05:42It was naive, clearly. And the outbreak of the war in Ukraine was such a shock for these countries
05:48that they rediscovered the fact that we need more. We need to get equipped. We need to protect our people.
05:55So at the same time, these countries need to compensate decades of under-investment and also support countries which are
06:04at war.
06:05So there's a kind of double challenges that they need to meet at the same time.
06:08Are the parliaments around the world facing up to the fact that they need to spend more money?
06:13Because it wasn't just peace that was helpful to Europe spending less.
06:18It was the fact that the U.S. spends, like, what, 66 percent of NATO budget.
06:21We spend more money on defense than the next 10 biggest economies combined.
06:28We spend, like, 36, 37 percent of global defense spending. So are the others going to try and catch up?
06:36Absolutely. That's why, during the latest NATO summit last year, it was decided by all the European states,
06:47to the exception of Spain, by the way, but all the others have committed to grow their defense spendings
06:53in percentage of the GDP. That's what is used to measure the level of efforts that you dedicate to defense,
06:58from 2 percent in average up to 3.5 percent. That's a huge effort,
07:03but that's the commitment of all the European countries, to take their destiny in hands,
07:08as President Trump has suggested, to protect themselves. They are still a part of NATO.
07:14NATO is still super important. But European countries have taken this commitment, yes,
07:19to take their destiny much more in hands than it used to be the case before.
07:23Is it – are there assets that no amount of money can get you quickly enough?
07:28I mean, I think of rare earths, right? Do you have – do Western defense contractors have enough access
07:34to rare earths because they're necessary for especially the targeted weapons that we use?
07:39For the moment, yes. Now, no one can tell what the future will be, but for the moment, yes.
07:43And, by the way, you could raise a topic as well for chips, components. It's not only rare earths.
07:48It's all the entrants that we need in our supply chain at the end of the day to produce all
07:54these equipments.
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