What to expect at the Paris Air Show; Boeing Defense 2.0; Bomb demand still high; and a lot more.
Next week’s Paris Air Show marks the first real chance the business-friendly Trump administration gets to tout the American aerospace industry on the international front.
But while some of the faces and personalities of the U.S. delegation are new, the Aerospace Industries Association — the chief advocacy group for America’s defense and aerospace sector — is preaching continuity.
“I’m looking at this show as a significant opportunity for a large chunk of our partners out there that all come to these shows to test their assumptions about what’s happening with the U.S., what’s going on with the U.S.-partner relationships out there,” Remy Nathan, AIA’s vice president of international affairs, said in an interview. “I think it’s an opportunity to provide some reassurance that … there’s some constancy here.”
That constancy starts with the U.S. delegation scheduled to attend the air show. While Transportation Secretary Elaine Chao is a new face, three-year Deputy Defense Secretary Bob Work will be the Pentagon’s top rep. (His nominated replacement, Patrick Shanahan, awaits Senate confirmation.)
AIA has a new message of its own: don’t forget about the little guys — the smaller suppliers that build parts for planes, satellites and rockets ships — and their crucial role in America’s manufacturing base and supply chain.
“This administration is very focused on jobs and economic development and global trade in terms of trying to put America first,” Nathan said. “We’ve got a great news story to tell from our perspective.”
AIA calculates that of the U.S. aerospace sector’s $90 billion trade surplus, 56 percent accrues to lower-tier suppliers.
“These are the folks that are responsible for a significant amount of the innovation,” Nathan said.
The bottom line: keep pushing U.S. exports, because “It’s not just the big companies that benefit” from multibillion foreign arms deals. AIA calls these smaller firms the “essential exporters.”
AIA’s vice president for national security policy John Luddy: “It keeps our national security industrial base stronger, more flexible and that’s not only good for us from an international relations standpoint,” but it also helps lower the cost of weapons for the American military.
You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. Thanks to all of you who attended or watched the first Global Business Briefing with Boeing defense CEO Leanne Caret. As always, send you tips, feedback and random thoughts to firstname.lastname@example.org or on Twitter @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!
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Planes in Paris
Here are some of the notable military aircraft that will be in Paris next week: Airbus A400M, C295, A330 tanker; Eurofighter Typhoon; Dassault Rafale; Embraer KC-390; L3 Air Tractor AT802L; Leonardo M-346; Textron Scorpion and AT-6; Turkish Aerospace Hurkus; Lockheed F-35 Joint Strike Fighter, F-16 fighter, C-130J and L-100J; Boeing P-8 Poseidon, AH-64 Apache; CH-47 Chinook and KC-135 tanker; and Bell-Boeing V-22 Osprey.
One-On-One With Boeing Defense CEO
Thanks to everyone who showed up at Defense One HQ on Wednesday for the first Global Business Briefing with Leanne Caret, CEO of Boeing Defense, Space and Security. If you couldn’t make it, full video is here — and here are some highlights from Caret’s talk.
On Boeing’s plans to cut 50 executives and reorganize its defense business:
The restructure “was about being more responsive, more agile. We’ve had the same organizational structure since 2002. It has served us very well. I’ll be the first one to say we had a banner year in 2016. We extended every production line. Things are looking up across the board and we’ve had some nice wins. But I still believe we could be more responsive. I still believe we were still operating in an environment where we spent a lot of timing working on internal processes and permissions versus focusing on the customer, addressing their needs, have the teams have power to go make that happen. Yesterday was about taking out a layer of executive management, which is what we’ve done, flattening the organization and elevating some of the programs so there are direct reports to me, so we have a more streamlined approach to how we’re running the business.”
What prompted the restructure?
“It was not winning a collection of things that caused me to say ‘now is the time’. It wasn’t a loss, it was not winning.”
On the future of Boeing’s fighter jet business with lots of new orders booked in 2016.
“The fighter business continues to be part of our core. I am thrilled with the change in tone, with regard to the F-15s and F-18s. I have been very public to believe that that’s an ‘and’ capability to the F-35. We’re seeing the recognition in the partnership with the Navy and the Air Force on the value that these aircraft provide.”
Have these new orders given the fighter-jet efforts new priority?
“It is a key part of our core business, and without a strong core, you can’t continue to invest and grow. Our fighter business has always been a part of the Boeing bloodline, but it’s not our only business. It’s not a zero or a one. So many times folks want to just tie it to one program. There’s not one single program that will make or break Boeing defense because we have such a diverse portfolio.”
Why did Boeing protest the U.S. Air Force’s buying strategy for a new Compass Call aircraft?
“The decision in terms of how they were going to make the source selection in terms of the airframe — you noticed we did not file that protest as soon as all that information was released — we gave it a little time, we had some further conversations. It’s not something we do lightly. We felt we were disadvantaged in a way in terms of getting information out about the capabilities that our 737 platform provides. We just want to make certain that it’s considered appropriately. We’ll let the process works itself out and see how it plays out.
The Air Force says the KC-46 tanker is late again. What’s the status?
“We are diligently working to make sure those risks are mitigated. That will allow delivery this year and that is our focus. The government simply said if you look at the risk and they’re not mitigated, there is going to be an impact. Our job on any program is to go manage those risks and we’ll mitigate them. That’s what we’re focused on doing. I look forward to a tanker delivery later this year.
On how the Trump administration is affecting the aerospace industry?
“Politics has always been around, and politics will always be around. It’s a choice whether you embroil yourself in it, or you don’t. … I don’t think that there’s a good or bad. … What I like, and we’ve all seen, is that [Trump’s] focused on business results and he’s focused on getting a great deal for our taxpayer.”
What are Boeing’s goals in Paris?
“The biggest one is it’s an opportunity for us to come together with several key customers and have some great dialogue. We traditionally don’t have defense deals that we announce at Paris, but it is an opportunity for us to meet and be available to customers who are going to be there. … It’s also a great time for us, as we’re the Boeing Company, where we bring our commercial defense and services business together so we have the ability to showcase how it all knits together.”
More Good News For Boeing
Qatar has signed a $12 billion deal for 36 F-15 fighter jets.
The Precision Weapons Demand
We continue tracking the global demand for bombs, missiles, rockets and other munitions, mostly driven by the nearly three-year old campaign against Islamic State militants. This week, the U.S. Navy ordered $180.5 million worth of the laser-guided rockets that BAE Systems calls the Advanced Precision Kill Weapon System. The “rockets are seeing increasing use in theater because they deliver cost-effective precision strikes with reduced potential for collateral damage,” the company said in a statement.
In related news, the U.S. will soon start delivering smart bombs to Saudi Arabia that were part of a 2015 arms package, Bloomberg reports. That’s separate from a controversial $500 million bomb deal with Saudi that lawmakers narrowly approved this week.
Acquisition Announced, Merger Canceled
Norway’s Nammo has entered an agreement to acquire Moog’s “In-Space Propulsion businesses in UK and Ireland.” Best known in the U.S. for building the rocket motor in Raytheon’s AMRAAM air-to-air missile, Nammo said the acquisition will “strengthen [the firm’s] position as one of the world’s leading providers of compact thrusters and rocket engines for space launchers and satellites.” The Norwegian company has been eyeing expansion in Europe and the U.S. for several years.
On the flipside, Intelsat has called off its proposed merger with OneWeb. “This decision resulted from Intelsat not receiving the requisite percentage of bondholder acceptance of the terms of our debt exchange offers,” Skot Butler, the president of Intelsat General, said in a statement. “While this is disappointing from a corporate development standpoint, practically speaking, our strategy remains the same. We will continue our close relationship with OneWeb, particularly as it pertains to mobility, energy, government and connected car applications.”
Military Intel Budget Up, Again
Just a few months ago we told you the Pentagon was upping its planned intelligence spending for 2017 to $18.5 billion. It’s about to go up again. The Defense Department said it has asked Congress for $20.7 billion in fiscal 2018.
President Trump has nominated David Ehrhart to be the Air Force general counsel. A retired Air Force brigadier general, Ehrhart is now associate General Counsel at Lockheed Martin Aeronautics in Fort Worth, Texas. Per a White House announcement: at Lockheed, he “was the lead attorney responsible for the F-35 Program advising the company on critical legal issues affecting the program for the United States Air Force, Navy, Marine Corps, and nine international partners.” That makes six confirmed, 11 nominated, and 37 vacant Senate-confirmed positions at Trump’s Defense Department.
In addition to joining Textron’s board next month, former Air Force Secretary Deborah Lee is joining the Center for Strategic and International Studies’ International Security Program as nonresident senior adviser. She is also joining Bain & Company, a global business consulting firm, as a special advisor.