• 04.06.2018
  • Air, Land, Group
  • Media release

Statement on the article in the Tages-Anzeiger / Der Bund of 04.06.2018

RUAG fully adheres to its contractual agreements with the federal government...

RUAG and DDPS have arranged their business relationships in contracts. RUAG has an average annual yield of between 8 and 10% for the duration of the 5-year SLA 2013 - 2017, which is in line with the requirements of the Federal Council. This also applies to RUAG Aviation. The far higher margins circulated in the Tages-Anzeiger / Der Bund's article are incomprehensible to RUAG. Of course, RUAG sets itself ambitious goals internally in order to keep its cost pressures in line with that of the competition. The results show that this approach is necessary for the profitability of RUAG and ultimately benefits the customer.

Since 2013, 5-year service level agreements (SLAs) have been in place for the maintenance work on the DDPS systems managed by RUAG. These are largely based on fixed prices (agreed  in advance) with an agreed and calculated price reduction during the length of the SLA. Thus, the DDPS receives improvements in efficiency and RUAG is at risk of actually being able to achieve these improvements. The DDPS thus benefits from reduced prices for the RUAG service business during the term, irrespective of whether RUAG can actually reduce the costs. Based on the good experience, RUAG and DDPS have again concluded 5-year contracts from 2018 onwards.

Ownership Strategy

The Federal Council's owner strategy for RUAG Holding 2016 – 2019 stipulates that RUAG "must demonstrate profitability that keeps pace with comparable technology and defence companies in Europe and sustainably increases the value of the company" (Section 2.1.). This guarantees that, for example, "key competences in Switzerland will be further developed" (section 1.4) or that "a substantial proportion of net sales will be invested in own research and development projects" (section 1.5).

Investigation of the SFAO 2017

The study of the SFAO in 2017 did not demonstrate that RUAG was charging its services differently to DDPS and third-party customers. A cross-subsidization of third-party transactions by the DDPS was therefore not proven. This confirms the results of previous audits by the SFAO (2009) and external analyses by RUAG. RUAG is pleased with this outcome. The audit report of the SFAO also did not produce a single recommendation to RUAG. No misconduct or wrong bookings have been found, making any comparison with the Postbus incident impermissible. RUAG stands for transparency and is open to any suggestions for improvement.

Criminal complaint at the Federal Prosecutor's Office

Responding to information from a whistleblower in 2016, the SFAO filed a lawsuit against an unknown party/parties with the Federal Prosecutor's Office. This action was publicized in the media at that time. The action mentioned in today’s Article of the Tages-Anzeiger / Der Bund is referring back to that in 2015.

To date, the Federal Prosecutor has not opened proceedings against RUAG. As a result, there are no indications of criminal conduct by RUAG or by any of its employees.

Interruption of the price audit of the SFAO

In the course of the price review, RUAG learned via a media report in 2016 that the SFAO had filed a criminal complaint with the Federal Prosecutor's Office on the basis of a whistleblower, and indeed on the same subject as the ongoing audit. Unaware of the details of the lawsuit and due to its duty of care to its employees, RUAG was forced to take measures that in some cases delayed the progress of the audit.

Since then, the cooperation has been for mutual and proven satisfaction. Audits run under normal conditions. For some time RUAG has informed the SFAO that it would welcome it if the SFAO resumed its suspended price review.