Indra looks at the traditional Defense business and charges the adjustment in the tech subsidiary

Back to the basics. Indra it has shown its cards in the global adjustment of the workforce that it is carrying out in Spain and which has put the trade union organizations on a war footing. The company owned by the State through SEPI has taken out the scissors in its two main divisions to reduce costs in the face of the economic crisis and the reduction of their income in individual collective redundancies. But he has done it in a very uneven way, loading the weight of adjustment on the tech division, under the Minsait brand, in a new attempt by the company to redirect it towards the Defense industry, its home business.

After withdrawing the Temporary Employment Regulation File (ERTE), in the last two weeks the top management of the company has put numbers to the adjustment. The most significant has been the technology division, which focuses on technology outsourcing services to large companies in sectors such as banking and consulting. The first proposal: 1,036 layoffs, which represents 8% of the total workforce. The intention of the company is to maintain that figure and it has not moved its position one iota. The unions described the proposal as “very tough.” “There is not a single ERE in which measures of these dimensions have been proposed,” they assured.

That percentage of affection is just double the amount that Abril-Martorell has assigned to the Transport, Defense and Air Traffic division (Indra Sistemas). Specifically, as communicated to the unions this Friday, there will be 240 employees (3.8% of the total), below what was considered among the workforce in the days prior to this first meeting. Of them, a hundred are concentrated in the management team.

Different justifications

In both cuts the company’s justifications have been more or less similar. At Minsait, the company was somewhat more explicit, insisting that the current economic crisis has shown a drop in results and a decrease in demand for products and services by its customers, especially in the banking segment, where the level of outsourcing is shrinking. To this, he added what they describe as “structural changes” throughout the group.

But yes there is differences between both divisions in terms of registered numbers in the business so far in 2020, especially affected by the global coronavirus pandemic. While in Information Technology Solutions revenues barely fell 1.6% in the first six months of the year with losses of 61 million euros, in the case of Systems, turnover has fallen by almost 9% until September, although the ‘red numbers’ before taxes amounted to 28.7 million.

More contracts in Defense

With all those wickers, the company has taught with this distribution of the impact between the two divisions a new attempt to turn towards the Defense industry, leaving in second place the civil businesses grouped in the subsidiary brand Minsait, according to some union sources. In this market, contracts are multi-year and provide greater stability to the group. That is one of the justifications for executing this return to the origins. And all this at the risk of missing part of the wave of digitization in the coming years and heavy investment in this segment, both in large companies and in SMEs. It must be borne in mind that the technology division is what has allowed Indra to diversify in recent years and also expand internationally.

This turn to Defense would also have a greater dependence on the public budget. It is a sector with a clear weight of government contracts, which has not stopped growing. As the unions explain, not only is there no need to lay off, but up to 400 employees would have to be hired to respond to the demand. “Current hiring is growing at double digits and we still hope to improve the initial budget, which is why it makes us understand that Indra Sistemas does not need an ERE“says CCOO, the majority union. One of the paradigmatic cases is that of the contract as” national coordinator “of the future European combat aircraft, the FCAS, which will replace the Eurofighter.

It is nothing new Indra’s attempt to strengthen itself in this market. A little less than a year ago, it reactivated the purchase of ITP Aero -valued at around 1,360 million euros in 2016- with which it wanted to become the Spanish defense giant. It did not bear fruit due to the demands of Rolls-Royce, owner of the company, which shot up the price claimed by the British group. However, it did give some clues about the interest of the team chaired by Abril-Martorell to concentrate all efforts on a market such as the military business.

Now, the company has several weeks to complete the negotiation of collective redundancies that have put the unions on a war footing. The agreement with them is key for Abril-Martorell, as it would pave the way with the Government to give a ‘green light’. For now, that pact is still quite far away, although there are more possibilities of achieving it precisely in Defense, in full return to its origins.

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