Aernnova: Industrial Turbulence Ahead

It is February 2007, and the Spanish aerostructure company Aernnova is going through difficult times. Less than a year earlier, the company broke away from the Gamesa industrial group in an operation led by the former management team. The team put together a strategic plan to the get business, which was heavily leveraged and reporting losses, back on track. The main goal was to establish the company as a Tier 1 supplier in the aerospace industry, in order to maintain and expand its current program portfolio with new profitable contracts. The execution of the plan involves two important decisions: reorganizing Aernnova's industrial footprint in Spain and opening a new aerostructures plant in a low-cost country. In Spain, Aernnova has one technical center, four aerostructure plants and one composites plant. The plants are of different sizes and have varying costs, productivities and geographic locations; all together they provide more than the necessary capacity. On the other hand, the largest manufacturers are putting increasing pressure on their suppliers to set up shop near production facilities. Aernnova is considering opening a new aerostructures plant in Mexico, near the U.S. market, or in China, close to the new Airbus factory. Both decisions (restructuring the Spanish industrial operation and finding a location for the international plant) will influence the company's future in the short and the long term, and they have to be made with an eye to the operational and financial conditioning factors in the aerospace industry.