Textron’s Earnings Reflect The Market
Filed under: Bell, Business Line, Companies, Earnings, Events, Military Aviation, Textron, commercial aviation, logistics, production program
Textron reported their third quarter earnings yesterday. They did beat expectations by not having a loss but had a profit of about 1 cent a share. This was a decline of ninety-eight percent from the year before. Despite all this the company is confident they will make a profit for a year and earnings would be as predicted.
Textron decline is caused by financial products and their civil air division. Sales of Cessna aircraft a luxury item right now were down a lot. The company has been reducing their participation in the financial sector due to the general downturn there. Despite Bell Helicopter’s struggles with the Armed Reconnaissance Helicopter (ARH) the military part of the company saw some growth.
There have been previous reports that Textron might sell Bell or other parts as it reorganizes to face the current economic downturn but so far that has not happened. As with everyone the company will have to wait and see how the economy recovers and what growth occurs.
Selling Overseas To Make Up For Coming U.S. Defense Cuts
Filed under: Arizona, Bell, Brazil, Business Line, Companies, Congress, Countries, Department of Defense, Events, Federal Budget Process, India, Qatar, Raytheon, Restructuring, Services, States, UAE, development program, logistics, missile defense, production program
Arizona is a top beneficiary of defense dollars. This is primarily due to Raytheon and Bell activities in the state. Raytheon makes missile defense systems and Bell helicopters. Now with the possibility that Obama’s cuts to the defense budgets starting in 2010 and out the companies there are looking overseas for work.
Unfortunately this will be the business plan for all defense contractors if their is a significant contraction in U.S. defense spending. The focus will be on selling systems and support to Asian, South American and Middle Eastern companies. India, Brazil, the U.A.E. and Qatar have already made major investments in U.S. and European equipment and there are several major contracts coming. In 2008 the U.S. already captured two-thirds of the market but overall purchases were the lowest they had been since 2005. If this trend continues due to the global downturn in the economy there may be less opportunity for these sort of sales.
These trends may lead to further consolidation of the defense industry in the U.S. and abroad as domestic and foriegn markets may not be able to support the amount of business built up since 2001 primarily by the United States. This will be the most important factor facing the industry which has not seen this situation since the early Nineties and the end of the Reagan arms build-up.
ARH’s first try is cancelled
Filed under: Bell, Congress, Department of Defense, Federal Budget Process, Military Aviation, Restructuring, U.S. Army, commercial aviation, development program, production program
After the close of the stock market this evening the Department of Defense announced that they are canceling the Armed Reconnaissance Helicopter (ARH) contract with Bell. The ARH-70 was to be a replacement for the OH-58D Kiowa Warrior aircraft that has been in service for over twenty years. ARH was one of the programs created out of the end of the RAH-66 Comanche program. Bell had run into cost and schedule growth issues with the program, much of it probably due to an overly optimistic US Army estimate on the program. The program had suffered a Nunn-McCurdy cost breach and that required DoD to either certify to Congress on the necessity of the program, or cancel it. Now the Army will start over.
See The Wall Street Journal for more.
House marks appropriations bill
Filed under: Bell, Boeing, Congress, Contract Awards, EADS, Federal Budget Process, Military Aviation, Northrop Grumman Corp., development program, logistics, production program
The House Appropriations Committee marked the FY09 budget before taking their August recess. See a story here. The Army’s struggling Armed Reconnaissance Helicopter (ARH) program was marked to delete 13 aircraft, and the Navy’s Presidential Helo was also decremented. The House also ordered that consideration of jobs would be a criteria for the source selection of the KC-45 tanker. Boeing won its protest of the award to Northrop-Grumman and EADS and forced DoD to reconsider the contract. The Senate needs to also mark the bill and then there will be a Conference mark up as well.
ARH in jeopardy
Filed under: Bell, Congress, Department of Defense, Federal Budget Process, Military Aviation, Restructuring, U.S. Army, development program
The soaring costs of the ARH program have caused a Nunn-McCurdy Cost Breach. See a story here. The 40% increase in unit cost has caused the Army and DoD to rethink, again, proceeding with the contract. Nunn-McCurdy cost breaches were established in the 80’s as part of the overall reform of Congressional monitoring of programs. Read more
Navy orders training systems for the V-22
Filed under: Bell, Boeing, Contract Awards, Military Aviation, U.S. Navy, development program, logistics, production program
The Navy ordered from the Boeing-Bell team manufacturing the V-22 Osprey training devices and related equipment today. The contract is worth about $78 M. See a story here. The Osprey has just finished a successful deployment in Iraq where it carried out heavy lift missions, usually for logistics purposes. The contract will pay for the development and production of training equipment.
House Authorizers set own priorites
Filed under: Bell, Federal Budget Process, Military Aviation, development program
The House Armed Services Committee marked up the FY09 Defense Authorization Bill to their own priorities. See an article here. Big cuts were made to the Army’s Advanced Reconnaissance Helicopter (ARH) and Future Combat System (FCS). ARH, a new Bell helicopter to replace the OH-58D Kiowa Warrior, has had its struggles. FCS is a vast system of systems that will still get over $2 B of funding with the House cut. Of course the Senate has fully funded both programs so that will have to be worked out in Conference. Some programs did gain such as the C-17 and the House continued the second engine for the F-35 JSF despite Pentagon protests that it is not necessary. There will be many more changes by October.
V-22 money spread around
Filed under: Bell, Boeing, Contract Awards, Eaton, Military Aviation, U.S. Air Force, U.S. Marine Corps, production program
As part of the recent procurement of 167 V-22 Osprey’s by the USAF and USMC the Boeing led team will buy parts from Eaton. The expected revenue for this company from the contract could be over $300 M. See a story here. Eaton makes parts for the tilt rotor aircraft. This again illustrates the spillover effect from these large procurement contracts. Companies all over the world participate in the production of parts and services for the total systems. Gone are the days where one company does all of the work.
India to buy 384 light helicopters
Filed under: Bell, EADS, HAL, India, Kamov, Military Aviation, Proposal, production program
After canceling an earlier contract for Army helicopters, India is trying it again. This time though they are buying 259 for their Army and another 125 for the Air Force. See an article here. For information on the previous contract action see this. It is expected that Bell, Eurocopter, Augusta and Kamov will bid on the contract. The Indian government had for years relied on Russian and British equipment, but is now turning to America and other nations for their procurements. Based on past other procurements we will see similar aircraft to those that were proposed for the US Army’s Light Utility Helicopter (LUH) program which was won by the Eurocopter EC-145 aircraft.
USCG Deep Water problems lead to end of Bell UAS program
Bell was building a tilt-rotor Unmanned Aeriel System (UAS) for the USCG as part of the Deep Water modernization and upgrade program. The whole Deep Water program has been hit with problems and criticism from Congress to the point where the USCG is restructuring. As part of this they canceled the tilt-rotor UAS that Bell Helicopter was building for them based on V-22 technology. See a story here. Read more
Marines pleased with performance of V-22 in Iraq
This article at Rotorhub.com highlights the performance of the V-22 Osprey in Western Iraq. Of note they replaced a CH-53 squadron and are maintaining an availability of 68%. This seems low compared to the Army helicopter systems I am familiar with, but maybe it is good compared to the 53. The squadron has flown 2000 hours or so since deployed in October.
Increased Taiwanese Defense Budget buys new American systems
With an increase in the 2008 defense budget, the Taiwanese military plans to buy AH-64 Apaches and Patriot PAC-3 missile systems. See DefenseNews.com here for more. The military also plans to invest in new cruise missiles and a study for an advanced submarine. Taiwan will also upgrade its Anti-submarine warfare aircraft by purchasing P-3 Orion aircraft.
Bell Boeing Awarded Contractor Support Contract for V-22
On Friday, Bell Boeing was awarded a contract to provide Interim Contractor Support (ICS) for the US Air Forces V-22 aircraft. The contract is worth almost $48 million and will support aircraft in Florida and New Mexico. The company is also required to support any operationally deployed aircraft. Details about the award are here. Since the program is managed by the Navy for all the Services they awarded the contract, although this is for the US Air Force aircraft.
One of the issues with Contractor Logistics Support (CLS), although ICS is not traditional CLS it just provides a bridge until the service stands up their organic support, is that if you are using it you will need to make provisions to deploy your maintenance contractor. That means in Iraq and Afghanistan there are a large number of contractors providing logistic services for aircraft, vehicles and in general.
Issues with Using Commercial Products in Defense Procurement
The author in Government Computer News is talking about software, but it applies to DOD buying any type of commercial product. Of course, since this is Defense procurement there are three categories: Commercial-Off-The-Shelf (COTS), Commercial Item, and Non-Developmental Item. The key sentence in the article is that the government is buying trust from the provider, trust that their product will work and meet their requirements. The key concept of commercial acquisition is that the product already meets your needs, so there is no need to develop anything. For an example of a program where this is how it was supposed to be, and did not end up see the RH-70. The article is here. Read about the RH-70 here.
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