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Ces deux articles publiés par l’hebdomadaire Defense News, respectivement les 10 et 24 mai, donnent une idée réaliste des effets sur l’armement, sur la technologie, sur l’industrie, sur la souveraineté, etc, du processus de globalisation. C’est en effet par le mot “globalisation” qu’on peut définir la philosophie du programme JSF autant que le destin de l’industrie d’armement et aéronautique du Royaume-Uni.
• Le premier article offre une approche nouvelle du programme JSF, sur la réalité novatrice et rationnelle profonde de ce programme, contraire à tout ce qui a été proclamé et claironné jusqu’ici. La critique est fondamentale, elle vient du cœur même du DoD. Elle porte sur le sort de la capacité innovante au niveau des technologies qu’accomplit un programme qui verrouille un monopole absolu sur le domaine des avions de combat. Ce passage est significatif :
« “Without programs that force you to stretch your horizons, this industry is doomed,” said DoD transformation chief Art Cebrowski. ”[Companies] need lots of programs, enough to make sure that if you lose this one, there will be another one out there. Integral to that is competition as robust and vibrant as you can make it, to keep people excited. The answer is not to build JSF and nothing else for the next 40 years. In fact, that may be exactly what pushes us into the abyss.” »
• Le second article dresse un tableau effrayant de l’état de l’industrie d’armement et aéronautique du Royaume-Uni, après quelques années fiévreuses consacrées à l’hyper-concentration de cette industrie et sa soumission aux notions d’intérêt financier des actionnaires amenés par la privatisation, — démarches fondamentales de la globalisation. Le résultat est connu, et il est bien illustré ici : une destruction systématique de cette industrie, au travers des rachats, transferts, fusions, etc, vers l’étranger. La question est de savoir si le Royaume-Uni, qui partageait auparavant le rang de n°1 technologique européen avec la France, existera encore demain comme partenaire majeur du domaine en Europe.
By Vago Muradian, Defense News, May 10th, 2004
The ambitious Joint Strike Fighter program is the epitome of U.S. defense industrial prowess: Valued at more than $200 billion, it will create three versions of a warplane to replace thousands of F-16, F/A-18, A-10 and Harrier aircraft worldwide.
But JSF also exemplifies a hidden risk that some say threatens America’s technological lead on the world’s other armed forces. With so much riding on a single development program, there won’t be enough money to invest in new and emerging concepts and technologies — and as a result, some companies may be forced out of business.
“Without programs that force you to stretch your horizons, this industry is doomed,” said DoD transformation chief Art Cebrowski. ”[Companies] need lots of programs, enough to make sure that if you lose this one, there will be another one out there. Integral to that is competition as robust and vibrant as you can make it, to keep people excited. The answer is not to build JSF and nothing else for the next 40 years. In fact, that may be exactly what pushes us into the abyss.”
Instead of building 3,000 JSFs over the coming decades to satisfy the needs of the Pentagon and an array of close allies, Cebrowski argued, it may make better sense to build fewer planes and use the operational lessons learned from fielding those to develop an entirely new aircraft. This would keep industry’s design capacity sharp and the military’s inventory in a perpetual state of modernization.
Cebrowski is not alone in harboring such worries. Even executives whose firms profited from the industry’s post-Cold War consolidation wonder whether the government’s procurement decisions will erode competition, particularly in shipbuilding, armored vehicles, combat aircraft and launch vehicles. The bottom line is that gargantuan programs make each contest a matter of corporate life and death.
Three companies battled to build JSF. McDonnell Douglas lost first and was subsumed by Boeing, which in turn lost to Lockheed Martin. When the F/A-18E/F program is completed in about a decade, Boeing will all but retire from the manned-fighter business.
On May 7, the Senate Armed Services’ subcommittee on readiness and management support called for a commission to assess the future of the U.S. defense industry.
The same thing is happening among shipbuilders. Multibillion dollar, decades-long programs like the DD(X) destroyer and the Virginia-class nuclear attack submarine threaten to be the only game in town, and to leave the military with single-source suppliers for critical platforms. “As soon as you downselect,” Cebrowski recently told the conservative Heritage Foundation in Washington, “you shoot the other design team, which is a real national asset, in the head. This is not downselecting, this is homicide.”
Clinton’s Legacy?
Analysts, officials and executives trace the problem back to the Clinton administration’s defense industrial policy, forged at the end of the Cold War in response to plunging defense spending.
To cope with budget cutbacks, the Clinton administration: purred a dramatic consolidation of the industry; consolidated weapon programs from multiple individual systems to multifunction ones like JSF; sought acquisition reforms to make it easier for commercial companies to do business with and compete against traditional defense contractors; and fostered globalization to yield truly trans-Atlantic contractors able to win business in home and overseas markets.
The industry consolidated dramatically, so dramatically that many officials, analysts and even executives fear the process has gone so far that competition may be difficult in many market segments. Acquisition reforms have failed to attract widespread commercial interest in defense work — save for commercial software and systems companies — and globalization efforts aimed at yielding trans-Atlantic firms have, under the Bush administration, appear to have stalled.
A decade after the Clinton administration’s ambitious industrial plan, the Pentagon is left with a handful of major suppliers, and a series of major, multifunction platforms that are to be built in vast numbers and steadily upgraded with emerging technologies.
That approach could yield good weapons, Cebrowski says, but he worries that it won’t foster innovation at the same rate as if multiple programs were being pursued at once, and multiple contractors were competing to win each contest. In shipbuilding, where U.S. construction has been minimal for the past decade, the Pentagon finds itself increasingly looking abroad for fresh ideas, and Cebrowski worries the same fate lies ahead for other defense sectors if the Pentagon does not play its cards right.
“Art is onto something,” said Dov Zakheim, the Pentagon’s former comptroller, in an April 14 exit interview. “We’ve demonstrated that we can field systems, complex systems, advanced systems, and do it quickly, inside of a year….And yet, normal order of business takes forever and a day.”
The Naysayers
To be sure, not everyone sees it this way.
Boeing President and CEO Harry Stonecipher believes Cebrowski and others are prematurely pushing the alarm bell.
“People get up in arms saying ‘My God, what are we going to do next?’ The answer is: something else,” Stonecipher said. “We have been building manned combat aircraft for 100 years. Does that mean we are going to keep building manned combat aircraft for another 100 years or will they be unmanned systems. There you have your new thing, and it will push technology as surely as manned aircraft did 100 years ago. The U.S. defense industry will be just fine. The last thing it needs is an industrial strategy.”
But for Cebrowski, the key is preserving options given predicting the future is virtually impossible.
Big programs “are seen as the salvation for industry, but their net effect is the opposite. What we are doing is putting all our eggs into one basket without knowing if that basket is the right one,” Cebrowski said. “What this is all about is options. The security environment we face is very uncertain. The way you cope with that uncertainty is to have as wide an array of capabilities as you can. It’s not about big carrier against small carrier, one plane or the other, but the ability to take many different platforms and bring them together.”
Experienced industry executives like retiring Lockheed Martin Chairman and CEO Vance Coffman maintain that their firms are innovative and competitive and that the current competitive dynamic is a consequence of the government’s consolidation and procurement policies.
They also add that they are comfortable with changes in government buying trends — often shaped by operational experience — that could drive them out of now-lucrative market segments.
“The thing that has struck me most profoundly that happened in Iraq,” Coffman said in a recent interview, “was how much the protective fire laid down in front of our troops was not executed so much by the Army and its own weapons, it was executed by the Air Force. That’s a very different concept for forward deployment of munitions. That means you’re not hauling this stuff on track or ground-oriented vehicles. … It changes the game, and that’s what you’re talking about when you’re talking about transformational concepts.”
This may in turn reduce the Army’s appetite for rocket artillery systems that Lockheed Martin makes, Coffman admitted. But that doesn’t worry him. “We’re quite willing to see that evolution develop because that is exactly how you will conduct modern warfare — in a different way.”
Unconcerned
The Pentagon’s industrial policy chief, Suzanne Patrick — who recently sent to Congress her annual report on the health of the U.S. defense industrial — has long said that the defense marketplace is global, offering plenty of innovative options, and that more often than not, smaller firms produce more intriguing concepts than giants. One example: non-traditional, smaller defense firms, such as iRobot, a commercial robot supplier whose products have been used by the U.S. military in Afghanistan.
“Our current highly consolidated defense industrial base suits us now,” Patrick told the Navy Gold Coast Conference in Ventura, Calif., last fall. “We envision three major sources of new and innovative companies that will be household names by 2020. First, we believe that most of the legacy defense suppliers have well understood the transformation mandate, and will change with the times. One of the ways that they could change is by acquiring emerging defense suppliers or by expanding their product offerings. Their corporate names may be the same in 2020, but likely their operating divisions will have different names. They will be joined by lower-tier firms that grow to be prime contractors.”
In speeches, Patrick has repeatedly said that as the Pentagon moves increasingly toward capability based thinking it can afford to have more concentration in its platform markets. For example, having one manned fighter maker in Lockheed Martin is acceptable if JSF is to be the last manned fighter aircraft. If the future will be dominated by unmanned combat aircraft, that field remains wide open to competition.
The key to long-term viability, said Jacques Gansler, DoD’s acquisition chief during the Clinton administration, is that there must be at least two firms in a given market sector to maintain the benefits of competition — pricing and innovation. The perennial competition between General Electric and Pratt & Whitney, the two U.S. jet engine rivals, fuels innovation in that market sector.
Possible Solutions
Cebrowski argues that in place of the giant industrial projects now dominating DoD’s future, the military should shift gears and switch to smaller programs. With less at stake for each program, this would insulate the industry from capricious decisions by Congress or changing DoD priorities that, at least recently, prompted the cancellation of major efforts, such as the Army’s recent decision to cancel its long-running Comanche helicopter program, he said.“When you look at the defense industry and its relationship to the Department of Defense it is an extraordinary one because there is only a single customer. We have a large number of firms with a single customer — the DoD,” Cebrowski told the Heritage Foundation on March 2. “This customer is fickle, unpredictable and the defense industry has to cope with that reality, which causes it to behave in certain ways.”
“Transformation certainly has to take that into account and work with industry through the Congress. Neither industry nor Congress appreciates surprises. However, given advanced information and put on a solid working relationship, both defense firms and the Congress can respond. If you have an advanced understanding of the changes coming, working with firms as well as the Congress, then the firm is going to be in transformation since its product base is going to be changing. It thus has an opportunity to retrain people, reorganize, or create new subsidiaries.”
But doing so would require a longer view to be taken by lawmakers, who are often fixated on short-term local job rolls, and company executives and investors, who are often fixated on short-term stock prices.
“We do long-term industrial planning, it’s just ad hoc, uncoordinated and not necessarily with the right considerations,” said Jeffrey Bialos, a former DoD industrial affairs chief who is now a partner with Sutherland Asbil, a law firm here. “You don’t see a consistency in this area.”
That erratic behavior, however, is leaving the Pentagon with few choices, analysts said.
For example, consolidation has left DoD with only two space launch contractors. So when DoD found Boeing guilty last year of illegally gaining access to proprietary Lockheed data to win the bulk of Air Force space launch contracts, the Pentagon had few options. It stripped Boeing of orders and barred the company from winning new space contracts, leaving the field to Lockheed.
With few competitors and few new contracts, the question is: how hard can the government punish a contractor before undermining its own best interests?
If the Defense Department wants to grow more innovation than it has to change its incentive structure, analysts say.
“As long as you have an acquisition system that awards low margins on R&D work on the premise that it is made up on long production runs, there is a structural disincentive to achieving Cebrowski’s vision,” said Pierre Chao of the Center for Strategic and International Studies.
Steven Grundman, a former DoD industrial affairs chief during the Clinton administration who is now with the Charles River Associates consultancy, agrees.
“The system as it now stands does not reward innovation, rather it reinforces exactly the wrong behavior,” Grundman said. “Industry typically makes single-digit margins on development, but companies can make up to 15 percent on production, and more under fixed-price terms. Change that — put an extravagant reward on early-stage product innovations, for example — and you can change how industry behaves.”
Gansler said there are two approaches to preserving industrial skills — focusing industry to develop breakthrough technologies, and driving robust technology competitions and development that funnels work to engineers, but stops shot of costly production.
Cebrowski said the Littoral Combat Ship could become a model for better procurement. Now on the drawing boards, LCS will be a small ship that can be configured for different missions with removable payloads.
He wants the Navy to abandon plans to choose one of three competitors to do the final design, and instead pay each one to build a few different ships — quickly. The lessons from these might dictate the final shape, a series of upgrades or even another new ship. This approach would reward industry for building and preserving design teams, encourage them to look around the world for different ideas, and for moving quickly from ideas to market, he said.
He offers historical precedents for this approach.
“During the 1930s, the U.S. Navy developed three different cruiser types, none of which were particularly good,” he said. “But despite their flaws they were instrumental in winning Guadalcanal in 1942. They suffered heavy losses, but by using them we learned valuable lessons that by 1943 helped us build the world’s best cruisers. Now, had we decided not to build anything in the ’30s while we refined our ideas — which is the approach we have today — we would not have had the very ships we needed to carry the day at Guadalcanal.”
Cebrowski’s model would require changing Pentagon procurement policies, which currently offer firms low profits on R&D work with the promise that more money is in long production runs.
Near the end of the Clinton administration, the Pentagon studied the idea of parallel JSF development efforts. Instead of a winner-take-all contest, two teams would be paid to develop their concepts.
“The upfront costs of development were so great that they offset the competitive benefits over 30 years,” Bialos said. “You’d like JSF and two other development programs, but where do you find the money?”
‘100 Really Smart Engineers’
Building a defense industry that can meet future needs comes down to teams of skilled engineers and designers, said Gansler.
“What do you need in a company to be competitive?” he said. “It’s not 20,000 people in production, but 100 really smart engineers.”
Building and keeping those teams requires well-funded R&D programs aimed at producing cutting-edge technology. Talented engineers do not do seismically innovative work when upgrading old weapons; they require the inspiration of working on the new, next-generation, state-of-the-art stuff, said Gansler.
But it may be possible to blend upgrades with the cutting-edge. The key is structuring the program so that upgrades include only truly breakthrough technology, Gansler said. Doing that was a top goal for Edward “Pete” Aldridge, who succeeded Gansler as DoD acquisition chief.
Raytheon’s chairman and CEO, Bill Swanson, believes another strong step would be to accelerate program development.
The Pentagon acquisition system can work quickly — it developed thermobaric munitions used to attack al-Qaida and Taliban cave hideouts in Afghanistan in less than 12 months — but far more often does not.
“That has to be your starting point,” Swanson said. “We have programs that are in development for two decades. That raises all kinds of problems. Costs skyrocket. Technology ages. Then by the time you field the system, it may not be the right one. If you can speed these cycles, you can save money for new systems. That usually means more competition. And that means innovation. You have to make speed your friend, not your enemy.”
[Notre recommandation est que ce texte doit être lu avec la mention classique à l'esprit, — “Disclaimer: In accordance with 17 U.S.C. 107, this material is distributed without profit or payment to those who have expressed a prior interest in receiving this information for non-profit research and educational purposes only.”.]
By Andrew Chuter, in London, with Tom Kington, From Rome, Defense News, 24 May 2004
Yet another piece of the United Kingdom’s defense industry looks set to pass into foreign hands.
With the May 20 announcement that GKN is negotiating to sell its half of AgustaWestland to partner Finmeccanica, the British aerospace and automobile components supplier becomes the latest in a long line of U.K. companies looking to sell their defense assets to overseas buyers. If clinched, the deal would sell Britain’s only helicopter maker to the Italian defense giant.
Two months ago, Alvis, the country’s only builder of armored vehicles, made headlines following a takeover bid from U.S. defense giant General Dynamics.
More recently, BAE Systems officials said they might sell the country’s largest warship yards, possibly to a foreign firm. Thales of France and Britain’s own VT Group are interested, and, reportedly, Northrop Grumman.
How long before a British-owned defense industry ceases to exist? More to the point in today’s globalized market, does it matter who owns the shares?
The U.K. government thinks not. Under the defense industry policy launched in late 2002, it’s all about where technology is born, where skills are held, where intellectual property resides and where jobs are created. “Ownership doesn’t matter,” Defence Secretary Geoff Hoon told newspaper reporters here early last year.
Not everybody agrees. Some, like Tony Edwards, chairman of U.K. aviation interest group Air League, say that as control of British companies passes to overseas owners, so does control of the industrial base.
“Ownership does matter,” said Edwards, the former head of the government’s Defence Export Sales Organisation. “When ownership moves abroad, you lose control of the future. Eventually, there are few levers left for governments and local industry to pull to influence where research and development is undertaken and intellectual property resides. These things will eventually drift overseas.”
Edwards compares the defense and aerospace industries to the electronics sector, which set up in Scotland in the 1980s.
“When the market collapsed in the 1990s, many of the foreign-owned companies just pulled out,” he said.
Britain has the most open procurement rules of any major military nation.
“The remaining British companies will conclude their best option may be to sell themselves to the highest bidder while their value is at the maximum,” Edwards said.
Many have already taken that route.
Racal, Pilkington Optronics, Shorts Missile Systems and a host of other companies have been purchased by Thales. Messier-Dowty is part of Snecma, BAE’s space activities and cryptographic specialist Cogent are owned by EADS, QinetiQ is controlled by U.S. investor group Caryle, and Claverdon is part of United Technologies.
So what is left to sell? Increasingly little. BAE dominates the list; it has linked its future closely with the United States and may merge with a U.S. firm. The remaining major players are Cobham, GKN, Meggitt, Rolls-Royce, Smiths Aerospace, Ultra Electronics and the VT Group.
A Reform Laboratory
In effect, Britain has become a laboratory for defense industry reform based on competition-driven procurement. That is a fundamentally different approach than elsewhere in Europe and North America, where industry leaders may be thinking globally but directors of national procurement and industrial policies are not.
In France, even the recent sale of a pharmaceutical firm drew government intervention to preserve strategic interests.
But open-market reciprocity is one of the keys to British industry’s long-term health, said Andrew James, a senior research fellow at the University of Manchester who studies the defense industry.
“Ownership is of diminishing relevance in a global industry like defense,” James said. “More important are issues like government willingness to spend on research and development to maintain technology capability, where the intellectual property resides, the ability of politicians here to encourage others to open their markets, and the nature of the procurement decisions by the MoD.”
James dismisses the idea of a U.K. national champion, a single giant defense firm that would bulwark the country’s industry.
“What we do need is an industrial and technological base strong enough to give us a seat at the negotiating table when it comes to gaining a share of future joint procurements by evolving European agencies and NATO,” he said.
John Ward, national defense and aerospace negotiator for Amicus, Britain’s largest manufacturing union, said the government’s laissez-faire attitude has undermined industry’s commitment to remaining in the defense sector in the United Kingdom. Companies like Smiths, GKN and BAE all look to the U.S. market for their growth.
“The government is presiding over the demise of the second-best, second-biggest defense industry in the world,” he said.
Owners’ Intent Matters
The Defence Manufacturers Association also is not so concerned about who owns what.
“Ownership is not the issue. The intent of the owner is,” said retired Maj. Gen. Alan Sharman, the association’s director-general. “If British companies like GKN can’t see a future in helicopters or other products, maybe [AgustaWestland] is better in the hands of a foreign owner who can.”
But Sharman warns that Britain must stick to its defense industry policy to build a strong capability base. Overseas buyers must not be allowed to strip the best bits of acquired firms and carry them back home.
“The government and the buyer can agree what they want about retaining assets in the U.K., but no one can say what will happen 10 years down the line,” he said.
[Notre recommandation est que ce texte doit être lu avec la mention classique à l'esprit, — “Disclaimer: In accordance with 17 U.S.C. 107, this material is distributed without profit or payment to those who have expressed a prior interest in receiving this information for non-profit research and educational purposes only.”.]
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