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P-8 Orders for Boeing Spill Over into Canada

The Boeing (BA) manufactured P-8 Poseidon is the new maritime patrol and anti-submarine warfare aircraft for the U.S. Navy. A version has also been sold to India. The P-8 is based on the 737 commercial airliner and will ultimately replace the Cold War era P-3 Orion aircraft manufactured by Lockheed.

Boeing has recently received the Low Rate Initial Production (LRIP) orders from the Navy and the system is currently undergoing testing at NAS Patuxent River in Maryland. So far the contracts issued for the aircraft are well over $1.5 billion and ultimately 100 of them could be operated by the Navy. India has also ordered 12 of the new aircraft.

As with many new systems Boeing is providing not only the aircraft, but things like spares, support and training. As part of this they recently placed an order themselves with Canada’s CAE (CAE) for six more operational flight trainers to support the U.S. Navy’s program. These OFT are part of Boeing’s recent LRIP order.

The OFT’s along with Desktop Environment Trainers (AeDTE) are key components of the program and will support aircrew transitioning to the new aircraft as well as maintaining proficiency. Due to the high cost of operating aircraft more-and-more services are investing in high fidelity simulators and training devices to aid these efforts while reducing flight time on the actual aircraft.

CAE and its American subsidiary have over the last several years established themselves as one of the premier designers and manufacturers of simulators and training devices like these for the P-8.

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Navy Goes International for LCS Radar

Update at 1700 CDT – The post has been updated to make clear that the SAAB radar has been selected only for the Austal USA version of the LCS.

The U.S. Navy’s new Littoral Combat Ship (LCS) is a small combatant designed to fight close in to shore. It will carry out a series of different missions including anti-piracy operations, Anti-Submarine Warfare (ASW), surveillance and reconnaissance and sanction enforcement. It is unique to the U.S. Navy at this time in that two very different designs with the same basic capability are being built from two contractors This is to allow rapid production.

LCS construction is being carried out by Lockheed Martin (LMT) teamed with Marinette Marine Corp. of Wisconsin as well as Austal USA, a subsidiary of Australian company Austal. The Navy has ordered 9 of the ships so far split between the two teams.

The Navy announced this week that it has decided to install the Sea Giraffe AMB radar onto the Austal USA version of the LCS. This system is manufactured by SAAB’s (SAABB) American subsidiary. The “Agile Multi-Beam” radar provides air and surface surveillance capabilities and is used to generate a three dimensional picture of the area to support operations. It has already been installed on a variety of combatants in use with countries like Sweden, Canada and Australia.

No value for the contract was given.

The first two, LCS 1, USS Freedom, and LCS 2, USS Independence, have already been completed.

The Navy had gone back and forth on the acquisition strategy for the ship due to concerns about price and schedule after the first two were put on contract. The original plan to use the two sources was ended and there was discussion of ordering batches of ten to a single producer at a time. After the proposals were received for the first contract from Lockheed and Austal the prices were so good the Navy went back to ordering from two suppliers.

Late last year the Navy gave contracts for ten ships each to the two companies.

The LCS remain controversial due to their size, weapon suite and capabilities. The Navy seems committed to the program and has begun large scale production. The decision to use the Sea Giraffe also highlights their commitment. It is uncommon for a non-American system to be ordered like this. The standard U.S. Navy radar and combat system, the AEGIS Weapon System, is much too large for the LCS and buying an existing system like this should save time and schedule.

As with all new classes of ships once they have been in service for a few years, worked out their kinks and demonstrated their capabilities they will be accepted and should be a valuable addition.

Due to the concerns about future shipbuilding budgets and capabilities the LCS if it really is built in the numbers proposed will make up a decent portion of the U.S. surface fleet by mid-Century. Ships last a long time and can receive incremental upgrades as technology progresses and that is what will happen with this class.

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EADS North America Turns in Proposal Today

EADS North America, the American subsidiary of EADS (EADS:P), turned in their proposal for the KC-X aerial tanker today to the U.S. Air Force. This represents their second attempt to win the program and the Air Force’s third try.

EADS North America will base their program on a modified Airbus A330 transport aircraft. As with the previous attempt in 2008 they will assemble the aircraft at a facility in Mobile, AL. Then they will receive the necessary modifications to meet the U.S. requirements. Airbus will also assemble all of their A330 transports at this new facility if EADS does win the contract when it is awarded in November.

Boeing (BA) will also turn in their proposal by tomorrow. A third contended, U.S. Aerospace, has committed to submit a proposal by Friday if the Air Force does not grant their extension request.

Alabama Offers Advantages to EADS For KC-X as Boeing Workers Strike

If EADS’ (EADS:P) American subsidiary wins the contract from the U.S. Air Force for the new aerial they will assemble the basic aircraft at a new facility in Mobile, AL. When they along with Northrop Grumman (NOC) had the short lived contract two years ago to build the KC-45 derivative of the Airbus A330 the plant would have been used then. Once the contract was lost to Boeing’s (BA) protest the plans to use the plant were put on hold.

EADS has already stated that if they executed the contract all A330 transport production would be transferred to America from current European plants. There are several benefits to EADS by doing this. First the weak dollar will help lower costs of materials and production. Secondly Alabama is a right-to-work state and a non-union workforce is almost guaranteed. This will be a big change from the highly unionized and regulated workforces of the company in France, Germany and Spain.

There is currently a movement by both U.S. and foreign companies to move production and other services back to the United States. A good deal of these decisions are being driven by the dollar’s strength and to take advantage of excess capacity.

The Japanese automakers have been doing this for years driven by U.S. requirements for car assembly in the States. Honda, Toyota, Nissan and others have plants primarily in Southern States primarily due to the lack of unions as well as the desire of those states to provide economic assistance and financial incentives. Volkswagon for example has just started production of a large plant outside Chattanooga, TN to illustrate that this process is still on-going.

If a company like EADS is going to produce aircraft for the U.S. military it would make sense to try and assemble these in the U.S. As already demonstrated during the last two years of struggle over the KC-X contract it helps them get Congressional support. The advantage of a non-union workforce will not only help costs but prevent potential issues with labor relations and strikes.

Strikes are one of the most disruptive events that may affect production for the military. The only worst thing is really sabotage. The Sikorsky Aircraft Corporation (SAC) strike in 2006 affected production of the UH-60 Black Hawk aircraft for the Army and the SH-60 model for the Navy. These aircraft were and continue to be critical to U.S. operations in Afghanistan and Iraq. The strike was settled after six weeks but it left bad feelings between the company, its unions and customers.

Boeing has suffered several strikes over the past few years. These have not only affected their civil aircraft production but also military products. On Sunday the union representing workers at their St. Louis, MO plants voted to authorize a strike if negotiations don’t resolve contract issues related to seniority. The threat was quickly followed by workers in Kansas where the new Boeing tanker would have some work done.

The workers at the Long Beach, CA facility where the C-17 transport is manufactured have now been on strike for two weeks due to current contract negotiations. This just further illustrates the point that despite the priority of military systems even they may be delayed by the Boeing workforce.

Boeing has moved to counter the reliance on unions by establishing a production facility in South Carolina which is also a right-to-work state. In this way they are mirroring the Japanese automakers and EADS.

At a time when one of the biggest messages in Boeing’s favor is to not delay the KC-X contract any longer by allowing time for EADS to bid or waste time with a competition. If a strike did happen that delayed 767 tanker production once Boeing won the contract it would be a serious black eye for the company and its supporters.

Boeing could try to avoid this by slowly moving production to its South Carolina facility which presumably will be non-unionized but that would antagonize its Washington based Congressional allies. There would also be a cost associated with the move that might increase the cost of the production beyond what the Air Force wants or initially awards. The hope is that the KC-X will use a fixed price contract so Boeing would have to have a good estimate going in and try to limit upfront costs.

EADS by starting out in Alabama avoids the potential issue with a unionized workforce. This should also have mean labor costs for the assembly portion of the aircraft. Score one in the foreign company’s favor.

http://www.flickr.com/photos/alliancenewzealand/ / CC BY-SA 2.0
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EADS North America adds former U.S. Air Force General to Board

Retired Air Force General Arthur Lichte was named to EADS North America’s board. DefenseNews writes that the former head of the Air Mobility Command (AMC) will join EADS (EADS:P) American subsidiary’s board soon.

The AMC commands the Air Force’s tanker assets and having Gen Lichte will aid the company in preparing not only their proposal but the battlefield as he will certainly carry weight with government officials and Congress.

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