Frustration Mounts Among JSF Partners

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Frustration Mounts Among JSF Partners

By Joris Janssen Lok, JDW Special Correspondent, The Hague
Jane's Defence Weekly March 24, 2004

Thales Nederland, the largest defence contractor in the Netherlands (a Joint Strike Fighter (JSF) Level 2 partner nation), has stopped nearly all efforts to position itself for JSF business.

The move reflects the company's frustration at not having won any significant JSF-related business so far, chairman and chief executive Arno Peels told JDW.

"In 2002, when we signed the agreement for the Netherlands to join the JSF system development and demonstration (SDD) phase as a Level 2 partner, the understanding was that JSF would include a $200 million opportunity for us to develop and supply cryogenic cooler technology for the aircraft's electro-optical sensors," Peels said.

"Today, after nearly two years of working very hard on this, all we have is $200,000 from Northrop Grumman. We just cannot go on spending millions on acquisition and proposal costs when the return is so insignificant."

According to Peels, an "uncomfortable feeling" about the JSF programme's perceived failure to deliver contracts is increasing in the Dutch defence and aerospace industry and also elsewhere in Europe, including Denmark, Norway and the UK.

Echoing Peel's comments, defence industry executives at UK and Italian companies have also told JDW that they have become frustrated with what they are beginning to feel is a disingenuous request by the US government o compete for JSF work.

Peels' company, a subsidiary of the French-owned Thales Group, with 2,735 staff and an order intake of nearly EUR600 million ($745 million) in 2003, is one of the key members of the Netherlands Industrial Fighter Aircraft Replacement Platform (NIFARP). Late last year, NIFARP expressed concern about its prospects for JSF series production business in a confidential letter to Dutch State Secretary for Economic Affairs Karien van Gennip.

Turnover

In the letter, NIFARP chairman Kier Vis told Van Gennip that, so far, only a small part of the JSF-related contracts awarded to the Netherlands truly offered the possibility of "substantial production turnover".

According to the NIFARP letter, JSF prime contractor Lockheed Martin and propulsion plant contractors Pratt & Whitney and General Electric/Rolls-Royce committed in early 2002 to a certain level of Dutch industry involvement in the JSF programme.

For Lockheed Martin, this amounted to $800 million in the SDD phase, followed by $8 billion during series production (based on a total of 6,000 JSFs built). The engine contractors would each have offered Dutch industry up to $1 billion in opportunities to capture business.

More than $150 million in JSF business has been awarded to the Netherlands but, according to NIFARP, it is not clear if and how the full volume will be achieved, especially during series production.

NIFARP told Van Gennip that the key industries hoping to become involved include: Stork Aerospace, with potentially $5.5 billion worth of cabling, doors, leading edges and engine nozzles; Philips, with potentially $1.7 billion worth of engine parts and high-speed machining work; and Thales, with potentially $750 million worth of cryogenic coolers plus production work on integrated core processor, electronic warfare, radar and optical assembly.

Others include Axxiflex, Dutch PHM Consortium, Dutch Space, Eldim/Sulzer, NCLR, NLR, Senior Aerospace Bosman, SP Aerospace, TNO and Urenco.

According to Peels, the difficulties in winning JSF contracts from the US are in part to be blamed on US hesitation to share sensitive technologies with international partner industries. "They sit on their technology; they protect it," Peels said.

Company executives from other countries have made similar complaints. Two executives with BAE Systems in the UK told JDW that unless the US begins to share information, continued UK involvement could, as a practical matter, become impossible.

Similarly, an executive with Italy's Finmeccanica said that the climate was so restrictive with regard to sharing information that the company was effectively competing for a subsystem without knowing the design parameters required.

Peels also called for "tougher negotiating" at government level, referring to a "cultural gap" in doing business with the US. "For the Americans, what counts is what is in the signed contract; nothing else," he observed. "This is tough business. It is about survival."

According to senior Thales Nederland executives, one way for Lockheed Martin to help appease the growing concern in the Netherlands about industry involvement could be to allow Dutch technology into other, non-JSF programmes the corporation is pursuing.

A key example could be the US Navy's Littoral Combat Ship programme, for which Thales Nederland is offering Tacticos combat management system technology (through Northrop Grumman), the SMART-S Mk 2 multibeam radar and the Scout covert surveillance radar (through DRS Technology).

Additional reporting by David Mulholland, JDW Business Editor, London.
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