Unsatisfied Italy May Cut JSF Participation

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Unsatisfied Italy May Cut JSF Participation

By TOM KINGTON
Defense News, Posted 10 May, 2004

Italy may reduce its investment in the U.S.-led Joint Strike Fighter (JSF) because Italian firms have received too little work share. Italian defense officials told Lockheed Martin JSF program manager Tom Burbage during his recent visit here that they were considering a drop from a Level 2 to a Level 3 partner, according to government and industry sources with knowledge of the talks. Burbage responded that the move could forfeit Italy's guarantees of Level 2 work, including wing-box construction work by Finmeccanica unit Alenia Aeronautica, the sources said. "I don't think it will come to this. The Italian suggestion may be negotiating talk," said an Italian industrial source whose firm is in line to receive JSF work. "But it does indicate a level of disquiet about work share. Italy should not be treated as a secure customer. It needs the same attention as Norway and Turkey." In June 2002, Italy became a Level 2 partner by committing to invest $1 billion in the JSF program's system development and demonstration stage. In return, Alenia Aeronautica was guaranteed wing-box work worth $320 million, and Italy was told its work share would likely reach around 65 percent of its investment. Although Lockheed has compiled contracts and commitments that it believes will bring Italy's work share, excluding engine work, close to 60 percent, few contracts have been awarded to date, and Italian industry managers feel they have missed out on prestigious, high-tech work, officials said. In March, a group of Italian defense, government and industry officials met in Washington with Pentagon officials and U.S. congressmen to express concerns about the work share and technology transfer Italy is receiving on JSF and other joint projects. A U.S. defense official said the Italians' aggressive stance surprised their hosts. Finmeccancia unit Marconi Selenia Communications is one of the few Italian companies to date to have won a contract for the program. In May 2003, it signed up to supply backup radios for the aircraft. "We may have won the contract, but I would still say access to the program is unsatisfactory," a Marconi Selenia manager said May 4. "The bidding procedure is very slow and there are a thousand difficulties," echoed a senior manager at Finmeccanica unit Galileo Avionica.

Finmeccanica has 54 engineers working in the United States on the JSF, and the value of that presence was being calculated as part of the percentage of work share. But the Italian industrial source was skeptical. "The engineers are restricted from seeing the whole project. They have gone from designing the entire wing of the Eurofighter to working on brackets on the JSF," he said. He suggested Italy would be better satisfied with its involvement if offered after-sales opportunities. "A final assembly line is feasible here, but only makes sense if coupled with maintenance and repair work. A positive solution on that, and on logistics support work, would increase the quality of the work." One senior Italian defense official was more optimistic about workshare. "We are fairly confident of reaching 65 percent [of the $1 billion investment], to which we can add a share of royalties on eventual sales and the advantage of nonrecurring costs. What we do still want is to be better recognized as the second partner to the U.S. on the program after the U.K." Lockheed's effort to give Italy workshare can continue throughout the development stage, thus into the next decade, but the Italian industrial source said answers are needed soon. "We are not convinced by commitments for work that is still some years off and still subject to export limitations."

Little Pullout Risk

Despite the reservations about work share, the senior defense official said Italy is unlikely to drop out entirely, as Norway threatened to do last month. "We want to stay in the program and get out of it that which we agreed with our U.S. counterparts," the official said. Besides, the aircraft is now a reasonably firm operational requirement for the Italian Air Force and Navy. While Norway is still juggling the option of the JSF with other combat jets like a multirole Eurofighter Typhoon, Italy is buying Eurofighters to fill an air-to-air role and has opted for the JSF to fill the ground-attack role. An order of 120 to 130 likely will replace its AMX bombers and Harriers, and a further 70 to 80 might replace its Tornados. "The STOVL [short takeoff and vertical landing] JSF is a must for the smaller-sized aircraft carrier arriving with the Navy, while the Air Force will take a mixed fleet of STOVL and regular JSFs," said the senior defense official. Italy's new 235-meter-long aircraft carrier, to be delivered in 2007, will accommodate 12 JSFs after the Navy's Harriers are phased out. Italy is likely to sign a memorandum of understanding to buy a certain number of JSFs not earlier than the end of 2005, said the Italian industrial source.
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