September 29, 2011 § Leave a comment
By Rosalba O’Brien and Matt Scuffham
Published: 27 September 2011
(Reuters) – Europe’s biggest defense contractor BAE Systems said it will cut nearly 3,000 jobs in Britain as smaller global defense budgets hit orders for its fighter jets.
BAE said the four partner nations in the Eurofighter Typhoon program — the UK, Germany, Italy and Spain — were slowing production rates to help ease their budget pressures, affecting the workload at a number of sites.
The company, one of the largest prime contractors in the U.S, said production was also slowing on the F-35 Joint Strike Fighter jet, a U.S. program led by Lockheed Martin for which BAE produces the tailplane.
“Pressure on the U.S. defense budget and top level program changes mean the anticipated increase in F-35 production rates will be slower than originally planned, again impacting on our expected workload,” said BAE in a statement on Tuesday.
The 2,942 job cuts from Britain’s biggest manufacturer are a blow to the Conservative-led coalition government, which is seeking to rebalance the economy away from an over-reliance on financial services jobs in the overheated south-east of England.
Latest figures show unemployment rose at its fastest pace in two years, totaling 7.9 percent of the workforce.
Trades Union Congress chief Brendan Barber, speaking at the opposition Labour party conference in Liverpool in north-west England, said the job cuts were “yet another devastating body blow to our manufacturing base.”
Many of the job losses will come from the north-west, traditionally a center of British manufacturing. Two – in Warton and Samlesbury and involved in Typhoon and F-35 production – are based in Lancashire.
A third site in north-east England, Brough, makes the Hawk training aircraft. BAE said it had begun consultation on ending manufacturing capability at Brough, which also runs a structural testing facility. Around 400 posts will remain there from a current workforce of 1,300.
Critics of the government say its austerity program is choking off growth and risks plunging the country back into another recession.
Unite, the biggest trade union representing BAE workers, vowed to fight the lay-offs.
“The government cannot sit on its hands and allow these highly skilled jobs to disappear,” it said.
“It’s a dark day for thousands of skilled men and women across the country and it is a dark day for British manufacturing. BAE Systems have dealt a hammer blow to the UK defense industry and Unite is determined to fight the cuts.”
Weapons makers globally are bracing for more cuts in defense spending sparked partly by this summer’s debt-ceiling deal in the United States — the world’s biggest arms market.
British industry body ADS said it feared that the job losses would be “only the tip of the iceberg,” citing a fall in government defense spending from 10 percent 20 years ago to 5 percent currently.
“With such cutbacks under governments that have included all three major parties this is not a party political issue but a matter of the national interest that has a profound impact on the capabilities of both our Armed Forces and our industrial base,” ADS chairman Ian Godden said in a statement.
Howard Wheeldon, Senior Strategist at BGC Partners, said he had believed for some time that such a course was inevitable.
“While the loss…will be a serious blow to hopes of rebuilding the manufacturing skills base as a public company BAE must in terms of employment cut its coat according to the cloth available.”
The U.S. defense department is cutting at least $350 billion from previously projected spending, and additional cuts could kick in if Congress fails to find more deficit reductions by year-end.
Britain, meanwhile, slashed its defense budget by 8 percent last year to help reduce its deficit, hitting BAE, which makes around a fifth of its revenue in the UK. [ID:nLDE6720PZ]
BAE, which has already laid off around 15,000 employees worldwide over the last two years, reported a decline in first half pretax profit in July.
The company, which has a 33 percent stake in the Eurofighter joint venture company alongside EADS and Finmeccanica, is continuing to pursue Typhoon sales in India, Japan, Oman and Malaysia and has said exporting the fighter aircraft remains a priority.
British and U.S. arms suppliers have been battling to win new business in emerging defense markets as they look to offset the belt-tightening at home.
BAE shares were up 1.2 percent to 275 pence at 1056 GMT, underperforming a 2.5 percent rise in the blue-chip FTSE index.
(Additional reporting by Keith Weir and Stephen Addison in London and Adrian Croft in Liverpool; Editing by Chris Wickham and Sophie Walker)
September 26, 2011 § Leave a comment
TOKYO (Reuters) – U.S. planemaker Boeing said local defense contractors might build F/A 18 Super Hornets under license if Japan chose to buy the next-generation fighter jet.
The comment came after the U.S. aerospace giant, along with Lockheed Martin and a consortium of European countries, submitted bids to produce Japan’s next mainstay combat aircraft in a deal that could be worth up to $8 billion.
Japan, which is facing a resurgent China and its growing military as well as threats from North Korea, plans to decide this year how it will replace its current fleet of aging F-4 Phantom fighters with about 40 new combat airplanes.
Phillip Mills, Director of Boeing’s Japan FX Capture Team, said Japanese makers could supply about three quarters of Super Hornet components if Japan opted for the fighter jet.
There has been great interest in how much of next-generation fighter jet-related jobs will be outsourced to the Japanese industry, which has been battered by gradual but consistent shrinkage of the defense budget.
“If you came to the Boeing production line, everything you saw Boeing doing in St Louis would be available or is available for Japan industry to do,” Mills told Reuters in an interview.
“It’s clear that we are going to be somewhere in the 75 percent area,” Mills added, referring the percentage of F-18 component production that the company could outsource to Japanese makers.
Japanese fighter jet and aeroplane components makers include top defense contractor Mitsubishi Heavy Industries , Kawasaki Heavy Industries and IHI .
Boeing’s F/A 18 Super Hornet is set to compete against Lockheed Martin’s F-35 Joint Strike Fighter and the Eurofighter Typhoon made by a consortium of European countries for the contract.
Mills said the high rate of planned outsourcing to Japanese companies, competitive pricing and ability to deliver on time give Boeing a competitive edge against the competition.
“The lower risk and affordability and licensed production we are offering is, I think, as good as they are going to get . so all and all we are feeling pretty good about it,” he said.
“We’ve offered an extremely fair and competitive price for not only initial aircraft but also for licensed production aircraft.” said Mills.
He declined to specify the offer price.
Kazuya Sakamoto, professor at Japan’s Osaka University, said the Lockheed Martin F-35’s stealth, or radar-evading, capability gives it an advantage over the competition, although its cost overruns and schedule slips have cast doubts over its prospects.
Fighter jets’ stealth capability has drawn heavy attention in Japan since China, which has a long-running territorial dispute with Japan, in January confirmed it had held its first test flight of the J-20 stealth fighter jet.
Mills said Boeing’s multi-role Super Hornet comes with a stealth capability, but the rival F-35 is “stealthier.”
Lockheed Martin, the world’s biggest defense contractor, which also submitted its proposal to Japan earlier on Monday said the F-35 stealth jets would deliver “unmatched cost-effective capability for Japan’s defense, now and well into the future.”
“We are committed to an enduring F-35 partnership with Japanese industry to deliver F-35’s transformational 5th generation capability for Japan’s long-term national security,” John Balderston, Director of the Japan F-35 Campaign, said in a statement. Meanwhile, a consortium of European companies that makes the Eurofighter Tyhpoon said that fighter jet could be manufactured, maintained or integrated in Japan under license and that the aircraft’s crucial data and software source code could also be handed out to Japan.
Some media reports have said U.S. makers have a better chance of winning the deal since Japan may shy away from picking European fighter jets out of fear that doing so could further ruffle its U.S. ties, already hurt by disputes over the relocation of the U.S. Marines’ airbase in southern Japan.
(Additional reporting by Tim Kelly in Tokyo, and Jim Wolf in Washington D.C.; Editing by Matt Driskill, Lincoln Feast and Hans-Juergen Peters)
September 21, 2011 § Leave a comment
By Craig Whitlock and Greg Miller
Published: 21 September 2011
The Obama administration is assembling a constellation of secret drone bases for counterterrorism operations in the Horn of Africa and the Arabian Peninsula as part of a newly aggressive campaign to attack al-Qaeda affiliates in Somalia and Yemen, U.S. officials said.
One of the installations is being established in Ethiopia, a U.S. ally in the fight against al-Shabab, the Somali militant group that controls much of that country. Another base is in the Seychelles, an archipelago in the Indian Ocean, where a small fleet of “hunter-killer” drones resumed operations this month after an experimental mission demonstrated that the unmanned aircraft could effectively patrol Somalia from there.
The U.S. military also has flown drones over Somalia and Yemen from bases in Djibouti, a tiny African nation at the junction of the Red Sea and the Gulf of Aden. In addition, the CIA is building a secret airstrip in the Arabian Peninsula so it can deploy armed drones over Yemen.
The rapid expansion of the undeclared drone wars is a reflection of the growing alarm with which U.S. officials view the activities of al-Qaeda affiliates in Yemen and Somalia, even as al-Qaeda’s core leadership in Pakistan has been weakened by U.S. counterterrorism operations.
The U.S. government is known to have used drones to carry out lethal attacks in at least six countries: Afghanistan, Iraq, Libya, Pakistan, Somalia and Yemen. The negotiations that preceded the establishment of the base in the Republic of Seychelles illustrate the efforts the United States is making to broaden the range of its drone weapons.
The island nation of 85,000 people has hosted a small fleet of MQ-9 Reaper drones operated by the U.S. Navy and Air Force since September 2009. U.S. and Seychellois officials have previously acknowledged the drones’ presence but have said that their primary mission was to track pirates in regional waters. But classified U.S. diplomatic cables show that the unmanned aircraft have also conducted counterterrorism missions over Somalia, about 800 miles to the northwest.
The cables, obtained by the anti-secrecy group WikiLeaks, reveal that U.S. officials asked leaders in the Seychelles to keep the counterterrorism missions secret. The Reapers are described by the military as “hunter-killer” drones because they can be equipped with Hellfire missiles and satellite-guided bombs.
To allay concerns among islanders, U.S. officials said they had no plans to arm the Reapers when the mission was announced two years ago. The cables show, however, that U.S. officials were thinking about weaponizing the drones.
During a meeting with Seychelles President James Michel on Sept. 18, 2009, American diplomats said the U.S. government “would seek discrete [sic], specific discussions . . . to gain approval” to arm the Reapers “should the desire to do so ever arise,” according to a cable summarizing the meeting. Michel concurred, but asked U.S. officials to approach him exclusively for permission “and not anyone else” in his government, the cable reported.
Michel’s chief deputy told a U.S. diplomat on a separate occasion that the Seychelles president “was not philosophically against” arming the drones, according to another cable. But the deputy urged the Americans “to be extremely careful in raising the issue with anyone in the Government outside of the President. Such a request would be ‘politically extremely sensitive’ and would have to be handled with ‘the utmost discreet care.’ ”
A U.S. military spokesman declined to say whether the Reapers in the Seychelles have ever been armed.
“Because of operational security concerns, I can’t get into specifics,” said Lt. Cmdr. James D. Stockman, a public affairs officer for the U.S. Africa Command, which oversees the base in the Seychelles. He noted, however, that the MQ-9 Reapers “can be configured for both surveillance and strike.”
A spokeswoman for Michel said the president was unavailable for comment.
Jean-Paul Adam, who was Michel’s chief deputy in 2009 and now serves as minister of foreign affairs, said U.S. officials had not asked for permission to equip the drones with missiles or bombs.
“The operation of the drones in Seychelles for the purposes of counter-piracy surveillance and other related activities has always been unarmed, and the U.S. government has never asked us for them to be armed,” Adam said in an e-mail. “This was agreed between the two governments at the first deployment and the situation has not changed.”
The State Department cables show that U.S. officials were sensitive to perceptions that the drones might be armed, noting that they “do have equipment that could appear to the public as being weapons.”
To dispel potential concerns, they held a “media day” for about 30 journalists and Seychellois officials at the small, one-runway airport in Victoria, the capital, in November 2009. One of the Reapers was parked on the tarmac.
“The government of Seychelles invited us here to fight against piracy, and that is its mission,” Craig White, a U.S. diplomat, said during the event. “However, these aircraft have a great deal of capabilities and could be used for other missions.”
In fact, U.S. officials had already outlined other purposes for the drones in a classified mission review with Michel and Adam. Saying that the U.S. government “desires to be completely transparent,” the American diplomats informed the Seychellois leaders that the Reapers would also fly over Somalia “to support ongoing counter-terrorism efforts,” though not “direct attacks,” according to a cable summarizing the meeting.
U.S. officials “stressed the sensitive nature of this counter-terrorism mission and that this not be released outside of the highest . . . channels,” the cable stated. “The President wholeheartedly concurred with that request, noting that such issues could be politically sensitive for him as well.”
The Seychelles drone operation has a relatively small footprint. Based in a hangar located about a quarter-mile from the main passenger terminal at the airport, it includes between three and four Reapers and about 100 U.S. military personnel and contractors, according to the cables.
The military operated the flights on a continuous basis until April, when it paused the operations. They resumed this month, said Stockman, the Africa Command spokesman.
The aim in assembling a constellation of bases in the Horn of Africa and the Arabian Peninsula is to create overlapping circles of surveillance in a region where al-Qaeda offshoots could emerge for years to come, U.S. officials said.
The locations “are based on potential target sets,” said a senior U.S. military official. “If you look at it geographically, it makes sense — you get out a ruler and draw the distances [drones] can fly and where they take off from.”
One U.S. official said that there had been discussions about putting a drone base in Ethiopia for as long as four years, but that plan was delayed because “the Ethiopians were not all that jazzed.” Other officials said Ethiopia has become a valued counterterrorism partner because of threats posed by al-Shabab.
“We have a lot of interesting cooperation and arrangements with the Ethiopians when it comes to intelligence collection and linguistic capabilities,” said a former senior U.S. military official familiar with special operations missions in the region.
An Ethiopian Embassy spokesman in Washington could not be reached for comment Tuesday night.
The former official said the United States relies on Ethiopian linguists to translate signals intercepts gathered by U.S. agencies monitoring calls and e-mails of al-Shabab members. The CIA and other agencies also employ Ethiopian informants who gather information from across the border.
Overall, officials said, the cluster of bases reflects an effort to have wider geographic coverage, greater leverage with countries in the region and backup facilities if individual airstrips are forced to close.
“It’s a conscious recognition that those are the hot spots developing right now,” said the former senior U.S. military official.
September 21, 2011 § Leave a comment
By The Associated Press
Published: 21 September 2011
BEIJING — China’s fast growing demand for aircraft has become a strong influence on how Boeing Co. designs and markets its newest planes, one of the company’s executives said Wednesday.
Ihssane Mounir also said Boeing welcomes future competition from China’s state-owned COMAC, which is developing a pair of passenger jets, but warned the commercial aircraft business could be punishing.
“It needs a lot of money, it needs a lot of patience, and the learning curve is tough,” Mounir, senior vice president of sales and marketing for greater China and Korea, told The Associated Press.
Mounir’s comments at the Aviation Expo China in Beijing follow Boeing raising its estimate for Chinese commercial aircraft purchases over the next 20 years to 5,000 jets, at which time China will be the world’s second largest plane market after the United States.
“The number is pretty staggering. It’s mind boggling actually,” Mounir said.
Boeing aims to capture a least 50 percent of that demand, and is developing its planes with an eye specifically on the Chinese market, he said.
“You would be a fool to ignore the requirements of China. China is one of the drivers” of how Boeing designs and builds its planes, Mounir said, listing size, seating configuration, range, and fuel efficiency as areas in which Boeing takes its customers’ requirements into account.
A similar trend has already taken hold in the auto industry, where global car makers including Ford Motor Co., General Motors Co., and BMW have introduced new models with the Chinese consumer in mind.
Chinese airlines have tripled the size of their fleets over the past decade to a total of 1,593 jets and plane maker AVIC estimates an additional 4,583 passenger planes need to be added over the next 20 years to keep up with passenger growth and to replace aging aircraft.
AVIC helped set up COMAC to build China’s entrants into the large commercial airplane industry: the 150-seat C919 that would compete with the Airbus and Boeing models and the 78-90-seat AR-J21 to serve regional routes. While more than 300 of the planes have been ordered, mainly by Chinese carriers, they both remain in development, with a C919 prototype yet to be built. Four ARJ21s have flown and have undergone testing in extreme conditions.
AVIC is also developing a turbofan engine to one day power the C919, although it was shown at the Beijing exhibition only in model form. The ARJ-21 is powered by engines from General Electric Co.
While warning of the high entry costs, Mounir said it entirely understandable that China would want to take advantage of a booming market in an important industry. He said competition will force Boeing and other industry leaders to stay on their toes.
“I worry about it to that extent, but also welcome it because it makes us build better planes,” Mounir said.
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
September 20, 2011 § Leave a comment
By The Associated Press
Published: 16 September 2011
PARIS — Air France-KLM says it has ordered 50 long-haul planes from Airbus and Boeing and has the option to buy another 60.
Europe’s largest airline by passengers said Friday that the order was for Airbus’ A350-900 and Boeing’s 787-9 planes.
The order is for 25 planes from each of the rival manufacturers and will be finalized by the end of the year.
None of the companies involved would say how much Air France-KLM agreed to pay, but the catalog prices for the planes would make the order worth $12.1 billion.
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
September 20, 2011 § Leave a comment
Published: 19 September 2011
The future of Germany’s stake in aerospace organization EADS has been uncertain since Daimler announced it wanted to sell its shares. But now Qatar is said to be in talks with Berlin about acquiring a stake. Will this upset the delicate balance of power between France and Germany at EADS?
With German automaker Daimler looking to sell its shares in the European aerospace company EADS, a stake of 7.5 percent is now likely to be bought up by Qatar. Such a sale would mean a significant loss of German control in the company, which Berlin had previously said it wanted to avoid.
Government officials from the Arab emirate met the week before last for their first negotiations on the matter with Economy Minister Phillip Rösler, who contrary to Berlin’s former position, reportedly has no objection to having shares held abroad.
Some months ago Daimler — the company’s biggest German shareholder — announced plans to get out of the risky aerospace industry and sell its 22.5 percent holding in EADS, which is a joint project between the Germans and the French, with limited participation by Spain. At the time Daimler said it hoped for a quick sell of the shares, 15 percent of which it holds directly, and 7.5 percent of which it has parked in banks.
Delicate Balance of Power
The situation created a conundrum in Berlin, where officials feared they would either be forced to make the unpopular decision to invest or risk selling to the French. Berlin had hoped to keep the investment within Germany, fearing an upset in the delicate balance of power between the two countries.
With its most recent annual turnover at some €45.8 billion ($62.3 billion), the company known worldwide for its Airbus planes, helicopters, satellites and military aircraft is hugely important on an industrial-political level for both countries. But until now, no suitable German buyers could be found, leading to speculation that Berlin could be forced to invest in the group after all.
But now, according to SPIEGEL sources, Qatar officials are interested in a 7.5-percent stake in EADS. The information comes after Daimler CEO Dieter Zetsche mentioned last week that there had been progress in the search for an EADS solution.
The chancellery had floated the idea of possible government intervention through the government-owned KfW development bank if necessary, but the Economy Ministry is reportedly against such measures. Phillip Rösler, the leader of the FDP, Chancellor Angela Merkel’s junior coalition partner, would rather find a financial investor — even if that means looking outside Germany.
— SPIEGEL Staff
September 16, 2011 § Leave a comment
Published: 16 September 2011
The so-called congressional “super committee” got to work this week, beginning its task of finding trillions in budget savings. Sharing the halls of Congress with those “supers,” the defense contracting industry also got down to work this week, in a full-court press to convince Congress to cut spending anywhere but in the Pentagon.
Charged with finding at least $1.2 trillion in savings before the end of Thanksgiving, the “super committee” could influence the course of government policy, economic growth and the overall national trajectory for at least a decade. The group of12 promises to put scrutiny on every “sacred cow” in Washington, from Medicare to defense.
With that kind of power, it’s no surprise that corporate lobbyists are gaming for access to super committee members. The defense industry in particular has much at stake — if the super committee fails to agree to a plan for $1.2 trillion in savings, it will automatically “trigger” certain measures into effect, including $600 billion in defense cuts.
Already this year, the Budget Control Act — the debt ceiling deal that spawned the super committee — puts Washington on track to cut $350 billion from the defense budget over 10 years, in the first defense cut since the 1990’s. More cuts this year to the Pentagon seem inevitable, but defense contractors say that doesn’t have to be the case.
“Defense has been cut into the bone, and we cannot have that continue,” Marion Blakey, president of the Aerospace Industries Association (AIA), said at a press briefing this week. “As far as defense is concerned, the cuts have been taken that could be absorbed.”
Perhaps fortunately for AIA, some of its strongest allies sit on the super committee. The group’s co-chair, for instance, is Democratic Sen. Patty Murray, who represents Boeing’s home state of Washington, is a founding member of the Senate Aerospace Caucus, and a member of the Senate Appropriations Defense subcommittee.
But defense contractors are looking past Murray, crafting a message for an entire Congress that’s itching to slash budgets, as well as a war-weary nation. Cut $600 billion from their industry, say companies like Lockheed Martin and Northrop Grumman, and nothing less than America’s economic strength and national security would be at risk.
“If we had additional cuts of $600 billion … I would question whether or not we will have a fighting force that’s capable, or an industrial base left,” Jim Albaugh, president and CEO of Boeing Commercial Airplanes, said at the AIA briefing.
AIA took that aggressive message to Capitol Hill this week for National Aerospace Week, an event established by Congress that happened to fall on the week the super committee was getting to work. During National Aerospace Week, representatives from Boeing and other big-name defense contractors were on the Hill holding policy luncheons, hosting exhibits and meeting with members of Congress and staff to show off their industry’s strengths.
On Tuesday, after the super committee held its first public business meeting, the Aerospace Industries Association presented Murray with its “Wings of Liberty” award to honor her advocacy for their sector. The AIA said the decision to give Murray the award was made long before she was appointed to the super committee and was intended to honor the four-term senator’s longtime service to the industry.
The industry has given more than just awards to Murray; she received $195,810 in donations from the defense industry for her 2010 election campaign. Just three other Senate candidates received more.
Murray’s office says the senator’s advocacy isn’t about catering to a deep-pocketed special interest, but about protecting a sector that employs a significant number of her constituents.
“Senator Murray has fought for American aerospace because it provides good, family-wage jobs for workers in Washington state and across the country,” said Matt McAlvanah, a spokesman for the senator.
That doesn’t mean defense cuts are off the table, McAlvanah added.
Murray “has also been clear from the moment that she was named to the Joint Select Committee that a bipartisan, balanced solution is going to include some things that will be difficult to swallow for everyone,” he said. “Balancing the unique needs of the aerospace industry, the jobs it creates, and proposed cuts will – like so many of the serious issues facing this committee – mean tough choices for Senator Murray and all the other members.”
With such stern words from one of their biggest supporters in Congress, the AIA doubled down and launched a campaign called “Second to None” to educate all lawmakers and the public at large about the aerospace and defense industry, which the firm Deloitte says supports more than 1 million direct jobs and 2.9 million American jobs overall.
In unveiling the campaign this week, Blakey said that further cuts to the industry pose a “deep risk to our national security and our economy,” with the potential to kill “hundreds of thousands” of American jobs and “decimate” research and development that’s critical for the defense, air and space industries.
Blakey said AIA decided to launch its “Second to None” campaign before the super committee was formed, since it was clear much earlier that Congress was ready to start making significant budget cuts.
The group is busy meeting with as many lawmakers as possible, including super committee members like Murray, Rep. James Clyburn, D-S.C., and Sen. Pat Toomey, R-Penn.
“It’s hard to tick off all of the members we’re engaging with,” Blakey said. “People are listening very closely.”
Some opposed to the United States’ ongoing military operations are concerned Congress is listening a little too closely. The liberal group Brave New Foundation, which earlier launched the initiative “Rethink Afghanistan,” launched a new campaign this week called War Costs to counter the AIA’s “Second to None” campaign.
The deficit discussion in Congress right now, the War Costs team argues, “is a zero sum game, pitting military spending against the exact kinds of spending that would create more jobs.” The group points to research suggesting government funds could more efficiently create jobs in sectors like health or education, as well as a study indicating the defense sector has inflated its significance in terms of jobs.
Other groups, meanwhile, have been more concerned about the influence special interests in general will have on the super committee. One liberal group zeroed in on Murray’s role as super committee co-chair not because of her ties to the aerospace industry, but because she is chair of the Democratic Senatorial Campaign Committee. The group asked Murray to step down from that role, which makes her one of the chief fundraisers for the Democratic party, while she’s serving on the super committee.
It’s unlikely the super committee members will stop fundraising while they search for budget savings, but lawmakers from both sides of the aisle have at least called for more transparency — Sen. David Vitter, R-La., introduced the Super Committee Sunshine Act, for instance, while a bipartisan group in the House introduced the Deficit Committee Transparency Act.