Every month, Aerosud produces 4 500 parts for Boeing aircraft, 10 000 for Airbus, 25 000 parts for Safran Labinal Power Systems and 50 000 for Spirit Aerosystems.
But five years ago, the company nearly collapsed, leaving more than 800 employees jobless.
Formed in 1990, Aerosud manufactures aviation-specific parts covering everything from structural fabrications, composites, thermoplastics and airline interior systems to cockpit linings, cargo linings, wing tips and galleys – 98% of which are exported. The company has an annual turnover of more than R1 billion.
Aerosud found itself in a major financial mess in 2010 after work on delivering components for the A400M military transport to the French Air Force stalled.
Managing director Johan Steyn said: “This had to do with issues of bringing a really complex system such as an aircraft into being. It simply took much more effort than what they anticipated and they literally had hundreds of suppliers worldwide designing such a product in a real-time collaborative design space.”
The French Air Force awarded Aerosud a massive tender in 2006 to produce its fuselage linings, cockpit linings, galleys and wing tips for the full lifespan of its A400M. Aerosud worked together with local companies Denel Aerostructures and Cobham SA, as well as other international companies in the deal.
“This was one of the biggest deals we had ever received, not only because of the capital involved but [because of] the fact that we were a risk-share partner in the A400M program – meaning that should anything go wrong, it would affect us negatively as well,” said Steyn.
“We did our best in delivering as per the contract, but due to the high level of borrowings on operating capital for the A400M programme during 2007 and 2010, a significant risk was realised in 2010. This was when the programme was delayed by three years due to design and technical development issues.”
Jaco Olivier, financial director at Aerosud, describes the delay, which “nearly caused Aerosud’s death”.
The company defaulted on an accumulated loan of R55 million from the IDC, which they took to finance their expansion programme.
Fortunately, said Steyn, “the IDC understood what was happening and it sort of gave us a ‘holiday payment’, allowing us time to recover”.
“Between 2011 and 2012, the company managed to get a fair settlement with the customer and was then able to resume the repayments,” said Steyn.
Although the A400M project nearly caused Aerosud’s death, it also taught it valuable lessons.
“After the turbulence in 2010, we came out stronger on the other side and learnt to be more efficient. This period forced us to focus our strategies and set positive growth targets,” said Steyn.
Unfortunately, this included retrenchments. From a staff of 850, including engineers, technicians, aerospace artisans and skilled machine and process operators, 660 people remain.
The IDC now has a 26% equity stake in Aerosud Holdings and its subsidiaries, Aerosud Aviation and African Non-Destructive Testing, a move that allowed them to make 200 black employees equity shareholders in the organisation.
* This series is reported by City Press and sponsored by the IDC