JSF International Industrial Participation Study
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JSF INTERNATIONAL INDUSTRIAL PARTICIPATION: A STUDY OF COUNTRY APPROACHES AND FINANCIAL IMPACTS ON FOREIGN SUPPLIERS JUNE 2003 i This report and all appendices can be viewed online and downloaded at: http://www.acq.osd.mil/ip This report was produced by the Office of the Deputy Under Secretary of Defense (Industrial Policy) from March - June 2003. Michael Caccuitto and Dawn Vehmeier, Industrial Base Transformation Directorate in the Office of the Deputy Under Secretary, led this effort. Rosemary Carpenter, Victor Ciardello, and Cara Negrette of the Industrial Policy staff also had major roles in the production of this report. Support was provided under contract by First Equity Development, Inc. Among others, special thanks are due to Joshua Krotec, Matthew Mejía, and David Cohen of First Equity for their important contributions. The team would especially like to acknowledge the contributions of the government representatives, companies, and Offices of Defense Cooperation in the United Kingdom, Italy, Netherlands, Canada, and Norway who hosted our site visits, provided us with data on a compressed timeframe, and gave us logistical support. We would also like thank our colleagues in the Office of the Director for International Cooperation, the JSF Joint Program Office, Lockheed Martin, and Pratt & Whitney for their advice and counsel. The draft of this report was formally reviewed by Lockheed Martin, Pratt & Whitney, the JSF Joint Program Office, and the Office of the Director of Defense Systems. Most comments were incorporated. Companies listed or mentioned in this report are representative; the list is not exhaustive. Inclusion or exclusion in the report does not imply future business opportunities with or endorsement by DoD. Inquiries regarding the report should be directed to Michael Caccuitto at (703) 607-4065 or Dawn Vehmeier at (703) 602-4322. ii INTERNATIONAL INDUSTRIAL PARTICIPATION: A STUDY OF COUNTRY APPROACHES AND FINANCIAL IMPACTS ON FOREIGN SUPPLIERS OFFICE OF THE DEPUTY UNDER SECRETARY OF DEFENSE (INDUSTRIAL POLICY) JUNE 2003 iii STUDY OBJECTIVES/METHODOLOGY Provide a preliminary assessment of partner country strategies and the financial impact on their defense industrial base of the Joint Strike Fighter (JSF) program. Use comprehensive case studies of partner country governments and major industrial suppliers to characterize financial effects of JSF for representative companies in order to assess the likely return on investment. • UK, Canada, Italy, and Netherlands were selected for in-depth assessment based on their level of partnership and/or the maturity of their industrial linkages. • Norway, Denmark, Australia, and Turkey were examined on a more prospective basis to illuminate their approaches and earnings potential from participation in the program. Document “lessons learned” for JSF and other programs to capitalize and improve upon the success of JSF’s revolutionary acquisition strategy. iv T ABLE OF C ONTENTS E XECUTIVE S UMMARY ............................................................... 1 JSF PROGRAM O VERVIEW.......................................................... 9 A NEW PARADIGM.....................................................................................................................................10 IMPORTANCE TO DOMESTIC AND GLOBAL INDUSTRIAL BASE ........................................................................13 U NITED K INGDOM .................................................................. 15 KEY FEATURES OF GOVERNMENT APPROACH.............................................................................................16 CONCERNS ...............................................................................................................................................20 FINANCIAL IMPACT.....................................................................................................................................22 I TALY ................................................................................. 25 KEY FEATURES OF GOVERNMENT APPROACH.............................................................................................26 CONCERNS ...............................................................................................................................................30 FINANCIAL IMPACT.....................................................................................................................................32 T HE N ETHERLANDS ................................................................ 35 KEY FEATURES OF GOVERNMENT APPROACH.............................................................................................36 CONCERNS ...............................................................................................................................................39 FINANCIAL IMPACT.....................................................................................................................................40 C ANADA .............................................................................. 43 KEY FEATURES OF GOVERNMENT APPROACH.............................................................................................44 CONCERNS ...............................................................................................................................................48 FINANCIAL IMPACT.....................................................................................................................................50 T HE W AY A HEAD ................................................................... 53 NORWAY...................................................................................................................................................55 DENMARK .................................................................................................................................................61 AUSTRALIA ...............................................................................................................................................65 TURKEY....................................................................................................................................................69 C ONCLUSIONS ...................................................................... 73 S OURCES ............................................................................ 77 v A PPENDICES APPENDIX A – FINANCIAL ANALYSIS METHODOLOGY & ASSUMPTIONS APPENDIX B – UNITED KINGDOM: COMPANY CASE STUDIES & COMPENDIUM BAE GOODRICH ROLLS ROYCE SMITHS ULTRA GPA COMPANY COMPENDIUM APPENDIX C – ITALY: COMPANY CASE STUDIES & COMPENDIUM ASE FIATAVIO FINMECCANICA (INCLUDES ALENIA AERONAUTICA, GALILEO AVIONICA, AND MARCONI SELENIA) GPA COMPANY COMPENDIUM APPENDIX D – THE NETHERLANDS: COMPANY CASE STUDIES & COMPENDIUM PHILIPS SP AEROSPACE STORK AEROSPACE (INCLUDES STORK FOKKER AND FOKKER ELMO) THALES URENCO GPA COMPANY COMPENDIUM APPENDIX E – CANADA: COMPANY CASE STUDIES & COMPENDIUM CASEBANK GASTOPS HEROUX-DEVTEK MAGELLAN PRATT & WHITNEY GPA COMPANY COMPENDIUM APPENDIX F – NORWAY: COMPANY CASE STUDIES & COMPENDIUM KONGSBERG DEFENCE & AEROSPACE VOLVO AERO NORGE GPA COMPANY COMPENDIUM APPENDIX G – DENMARK: GPA COMPANY COMPENDIUM APPENDIX H – AUSTRALIA: GPA COMPANY COMPENDIUM APPENDIX I – TURKEY: GPA COMPANY COMPENDIUM vi E XECUTIVE S UMMARY 1 E XECUTIVE S UMMARY The Joint Strike Fighter (JSF) program was conceived as an international acquisition program in order to attract financial investment and technological innovation from partner countries, as well as to partner early with governments whose military Services were likely users of this state-of-the-art coalition forces platform. This study was produced to provide an initial assessment of the international acquisition strategy of the program. While it has only been about a year and a half since the October 2001 award of the System Design and Development (SDD) contract to the Lockheed Martin/Northrop Grumman/BAE Systems contracting team, for number of reasons we chose to do an initial assessment now. First, we believe that enough time has elapsed to do a “first look” at the strategies partner countries have adopted in the face of the industrial and economic opportunities which this program’s acquisition strategy presents. Second, we feel that our findings could lead to refinements in the program acquisition strategy, approaches taken by individual partner countries, or companies – or all three. Third, we hope that this study may help prospective JSF partner countries and companies forge more robust accession strategies for this program and its opportunities for coalition warfare and financial return. Finally, many of the largest programs moving toward production in this Administration provide for international industrial participation to help our war fighters get the best of what the global defense industrial base has to offer. As such, some of the early lessons learned in JSF may help programs such as Missile Defense, Future Combat System, Littoral Combat Ship, the Multi-Mission Maritime Aircraft, and Deepwater optimize their own international acquisition strategies. This report is based on comprehensive case studies of partner country governments and major industrial suppliers. We used standardized engagement questionnaires to conduct inquiries and guide the collection of data to support uniform development of findings and conclusions. We selected the UK, Italy, Netherlands, and Canada for in- depth assessment based on their level of partnership or the maturity