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age Acronyms ..................................................... ix Glossary ....................................................... xiii Abstract ....................................................... xix Executive Summary ........................................ xxi Chapter 1: Introduction Scope .............................................................. 1-1 Approach ............................................................ 1-2 Organization .......................................................... 1-2 Chapter 2: Structural Characteristics of the LCA Aerostructures Industry and Key Determinants of Competitiveness Introduction ........................................................... 2-1 Background ........................................................... 2-1 Structural characteristics ................................................. 2-5 Bilateral oligopoly ................................................... 2-5 Consolidation and globalization ......................................... 2-7 Risk-sharing and R&D arrangements ..................................... 2-8 Contract terms ..................................................... 2-8 Subcontracting ..................................................... 2-10 Manufacturing trends ................................................ 2-10 Specialization and diversification ........................................ 2-11 Determinants of competitiveness ........................................... 2-11 Cost factors ....................................................... 2-12 Production efficiency ............................................... 2-12 Labor .......................................................... 2-12 Capital ......................................................... 2-12 Economies of scale and learning effects ................................. 2-13 Noncost factors ..................................................... 2-14 Core competencies ................................................ 2-14 On-time delivery and flexible production capacity ......................... 2-14 i CONTENTS–continued Page Chapter 3: The U.S. LCA Aerostructures Industry Introduction 3-1 Industry structure and market indicators ..................................... 3-1 Composition of the industry ........................................... 3-1 Trade .......................................................... 3-5 Workforce characteristics ............................................ 3-7 Industry developments .................................................. 3-8 Globalization ...................................................... 3-8 Consolidation ..................................................... 3-9 Foreign direct investment ............................................. 3-11 Changes in the relationship between LCA manufacturers and aerostructures manufacturers ............................................... 3-13 Risk sharing ................................................... 3-14 Design responsibilities ............................................ 3-15 Contract terms .................................................. 3-16 Manufacturing trends ................................................ 3-17 Manufacturing operations and lean manufacturing ....................... 3-18 Computer-aided design and manufacturing ............................. 3-20 Composite structures ............................................. 3-21 Quality audits and cost reduction efforts .............................. 3-21 Implications for the competitiveness of the U.S. industry ........................ 3-22 Chapter 4: The European LCA Aerostructures Industry Introduction 4-1 Industry structure and market indicators ..................................... 4-1 Composition of the industry ........................................... 4-1 The Airbus Company ............................................ 4-2 Other European aerostructures producers .............................. 4-5 Sales .......................................................... 4-7 Trade .......................................................... 4-8 Workforce characteristics ............................................ 4-8 Industry developments .................................................. 4-10 Globalization and consolidation ........................................ 4-10 Foreign direct investment ............................................. 4-11 Changes in the relationship between LCA manufacturers and aerostructures manufacturers ............................................... 4-12 Contract terms .............................................. 4-13 Risk sharing and supply chain management ......................... 4-14 Manufacturing trends ................................................ 4-16 ii CONTENTS–continued Page Chapter 4: The European LCA Aerostructures Industry–continued New manufacturing technologies and techniques ............................ 4-17 Advanced materials ............................................... 4-18 Specialization ................................................... 4-20 Subcontracting ..................................................... 4-20 Manufacturing software developments .................................... 4-23 Implications for the competitiveness of the European industry ..................... 4-24 Chapter 5: The Canadian LCA Aerostructures Industry Introduction ........................................................... 5-1 Industry structure and market indicators ..................................... 5-1 Composition of the industry ............................................ 5-1 Sales ............................................................. 5-3 Trade ............................................................ 5-4 Workforce characteristics ............................................. 5-4 Industry developments ................................................... 5-5 Globalization and consolidation ......................................... 5-5 Foreign direct investment .............................................. 5-6 Changes in the relationship between LCA manufacturers and aerostructures manufacturers ................................................ 5-7 Risk sharing .................................................... 5-7 International competitors ........................................... 5-8 Manufacturing trends ................................................ 5-9 Lean manufacturing .............................................. 5-10 Implications for the competitiveness of the Canadian industry ..................... 5-11 Chapter 6: The Asian LCA Aerostructures Industry Introduction ........................................................... 6-1 Industry structure and market indicators ..................................... 6-1 Composition of the industry ............................................ 6-1 Workforce characteristics ............................................. 6-4 Industry developments ................................................... 6-5 Globalization and consolidation ......................................... 6-5 Foreign direct investment .............................................. 6-6 iii CONTENTS–continued Page Chapter 6: The Asian LCA Aerostructures Industry–continued Changes in the relationship between LCA manufacturers and aerostructures manufacturers ............................................... 6-7 Risk-sharing and R&D arrangements ................................. 6-7 Contract terms .................................................. 6-8 Implications for the competitiveness of the Asian industry ....................... 6-9 Chapter 7: Research and Development for Aerostructures Introduction .......................................................... 7-1 R&D elements .......................................................