Filed under: Business Line, Companies, Contract Additions, Contract Awards, Department of Defense, Events, Germany, Holland, Israel, Lockheed Martin, MDA, missile defense, production program, Raytheon, Saudi Arabia, Services, Taiwan, U.S. Army, UAE
The Pentagon may be planning to reduce or hold spending flat in the upcoming years but with the final passage of the 2012 defense budget major contracts are now flowing to different contractors as Project and Program Offices place production orders. Lockheed Martin (LMT) benefited from this yesterday as they received the latest production contract for the PATRIOT PAC-3 missile.
The PATRIOT air and missile defense system is made up of two major parts: the radar and the interceptor. Currently Raytheon (RTN) is the prime contractor for the radar and command and control systems while Lockheed manufactures the current standard missile, the PAC-3. The PAC-3 version of the system in use since the late Eighties incorporates modifications to maximize missile defense capabilities while the missile is smaller, relies on hit-to-kill technology and is a significant upgrade to the earlier PAC-2 missile as it allows more rounds to be used by each launch unit.
The FY12 order is for both U.S. Army use as well as a follow on delivery for Taiwan. It has a value of just over $900 million and represents a rather significant contract. The work includes not only the missiles but also kits, spares, support equipment and engineering services.
The PATRIOT represents the shorter ranged part of the Army’s missile defense capability with the Theater High Altitude Area Defense (THAAD) system made by Lockheed providing longer range and larger area defense.
The PATRIOT has seen significant foreign military sales to countries like Germany, the Netherlands, Israel, Saudi Arabia, U.A.E. and Taiwan. It is especially valuable to those countries facing a ballistic missile threat like Israel, Taiwan and the Gulf States.
The PAC-3 missile has been in production for several years from Lockheed’s facility in Camden, AR.
Photo from Tumbleweed:-)’s flickr photostream.
Filed under: Boeing, Business Line, California, Companies, Congress, Contract Additions, Contract Awards, Department of Defense, Events, Federal Budget Process, India, logistics, Military Aviation, production program, Services, States, Taiwan, U.S. Air Force, United States
Boeing (BA) is one of the largest exporters in the U.S. as it provides commercial aircraft for many foreign airlines. It is also one of the biggest defense contractors building satellites, aircraft, as well as doing services and IT work for the military and other government departments.
Because of their many overseas sales Boeing gets a great deal of support from the U.S. Export-Import Bank. The company is currently receiving about $15 billion in loan guarantees from the bank which are used to help finance purchases by these foreign commercial customers. Boeing in fact received 63% of all guarantees from the government entity in 2010.
Despite this business Boeing like all of U.S. defense contractors is facing the potential for major cuts and reductions in overall defense spending by the United States. This means that there may be fewer tankers, transports or other products purchased from them. Boeing did receive the new KC-46A tanker contract last year but this offsets the end of the C-17 production for the Air Force and work on the F-22 and other programs. The Air Force is also looking at moving a great deal of their logistic support back to their own depots and away from commercial providers. This too may affect Boeing’s bottom line.
Recently thought the company got some good news in winning two contracts with other countries for military hardware. India announced that it had decided to buy ten C-17 strategic transports. This is especially helpful as it extends the life of the production line for that aircraft. The U.S. decision to not purchase more had put a date certain when the last transport would roll off of the line.
Taiwan also decided this week to purchase thirty AH-64 Apache attack helicopters. These will be the most current version, the Block III. No value for the contract was given but it will be several hundred million dollars.
The C-17 contract has a value of $4.1 billion and now the Taiwan contract will provide work and revenue for Boeing that will be used to offset potential cuts in U.S. arms purchases. Certainly if the Army is faced with major budget reductions which are certainly possible as the U.S. looks at reducing its annual deficits Apache production is one place that may be cut. The draw down in Afghanistan and Iraq which saw heavy use of the helicopter as well may affect Army force structure decisions.
All defense contractors want to sell their products to as many customers as possible. They also want their governments to support them. Boeing certainly is receiving this kind of support as are most U.S. contractors trying to sell products overseas. Of course this support may get too ambitious and enthusiastic leading to situations like in France where Thales and the government now owe millions in fines for paying bribes to Taiwanese officials to secure a new naval vessel program. Boeing will probably see more attempts at these types of contracts over the next several years as the world’s armament industry adjusts to the end of the U.S. budget splurge.
Article first published as Two Foreign Arms Deals for Boeing Cushion Future U.S. Defense Cuts on Technorati.
Filed under: Business Line, Companies, Countries, crime, Earnings, Events, France, production program, Services, Taiwan, Thales
A French court ruled this week that the French defense contractor, Thales (HO:PA), along with the French government must pay a fine in relation to charges that bribes had been paid to the Taiwanese government to secure a large naval ship order. The deal was originally signed with Thomson-CSF and the government owned shipyard DCN. Thomson-CSF is now part of Thales.
The fine of 630 million euros, which is almost a billion dollars, will be split roughly 70/30 between the government and Thales. As part of the agreement with the court the government will not appeal the decision allowing Thales to get on with business without facing any more potential penalties or bad publicity. Thales says that the money has already been accounted for in preparation for paying the fine. The money will be returned to Taiwan.
Thales stock price has been little affected by the news.
This is the largest corruption case in French history and rivals the payouts that BAE Systems (BAE:LSE) has had to give to the U.K. and U.S. governments over its deals with Saudi Arabia. These totaled almost $500 million to the U.S. and $450 million in the U.K. The U.S. has especially been harsh on companies that used bribes and corrupt acts to win contracts overseas.
Historically bribes and payments have been a part of the international arms trade. Many countries required these kind of payments or the use of middle men to facilitate deals. This practice has been accepted by governments more interested in winning the contract for their own domestic companies like this deal then in ethical practices. These kind of actions cheat the customer because they may not get the best system or deal for their money as well as the other potential bidders as they do not get a fair selection process.
Thales also illustrates the situation where mergers and acquisitions lead to a company inheriting the problems of another. Even though potentially no Thales employees were involved the company is responsible due to acquiring Thomson-CSF. Hopefully more decisions and cases like this will help eradicate this problem from the defense trade.
Photo from Lordcolus’ Flickr photostream.
Filed under: Agusta Westland, Boeing, Business Line, Companies, Contract Additions, Contract Awards, Countries, Department of Defense, Events, Military Aviation, production program, Services, Taiwan, Turkey, U.S. Air Force, U.S. Army
Yesterday both Turkey and Taiwan announced new buys of attack helicopters. These type of aircraft have demonstrated their capabilities in Iraq and Afghanistan by providing precision fire support for ground troops as well as engaging high value targets from safe, standoff distances. The U.S., United Kingdom and the Netherlands have all deployed their Boeing (BA) AH-64 Apache aircraft to Afghanistan for example.
Turkey increased their planned purchase of the Augusta Westland (AW) T129 helicopter by nine with a further order worth about $200 million. This will bring the total number of aircraft purchased to sixty. The aircraft will be assembled at the Turkish Aerospace Industries plant in Turkey. The aircraft is still being designed and initial delivery is expected in 2012.
Taiwan went with its U.S. allies’ product the AH-64 by placing an order for at least thirty of the D model. These are part of an arms sale agreement from 2008. The contract also pay for two trainers. The AH-64D Longbow has a millimeter radar and carries Hellfire anti-tank missiles and a 30 mm cannon. It will also be one of the primary platforms for the new Joint Air-to-Ground Missile (JAGM) in development by the U.S. Army for its own use and the Air Force’s. The advanced procurement part of this contract is worth a little over $140 million.
The U.S. especially has invested several billion dollars since 2001 in improving and expanding their rotary wing fleet. This includes the UH-60M, CH-47F and the AH-64 Block IIID which just entered production. Other nations have also done this with Boeing, Sikorsky, Eurocopter and Augusta Westland benefiting. The purchase of new helicopters for use by the Iraqi and Afghan governments has also led to orders for the Kazakh based manufacturer of the Mi-17 Hip heavily used by the Russian military and former Soviet Union aligned countries.
Photo from jensen_chua flickr photostream.
Filed under: BAE Systems, Business Line, Companies, Contract Awards, Countries, Events, logistics, missile defense, Oshkosh Truck Corp, production program, Services, Taiwan, U.S. Army
The U.S. Army placed an order with BAE Systems (BAE:LSE) for twenty-four FMTV vehicles. The contract is worth around $5 million. The FMTV will be modified to provide support for Taiwan’s PATRIOT air and missile defense systems.
Taiwan has purchased PATRIOT systems to provide defenses against China’s ballistic missile and air forces. The vehicles will perform a variety of roles for the PATRIOT batteries including cargo and tractors versions.
BAE lost the FMTV contract last year to Oshkosh (OSK). Production will be moving from Sealy, TX to Wisconsin.
Filed under: Business Line, China, Companies, Contract Awards, Countries, EADS, Events, Military Aviation, production program, Taiwan
Taiwan fresh off announcing deals with the U.S. for modern weapons followed it up by purchasing twenty Eurocopter EC225 aircraft. These systems will be used for search-and-rescue missions. The total value of the contract if all options are executed could be worth over $100 million. Unlike with the U.S. deals which China has protested strongly there has been no reaction to this deal.
Taiwan has always had the ability to purchase weapons from any source but has relied mainly on its U.S. ally to provide most of them. The Asian nation also has a strong domestic industry to support is military. The EC225 are a capable system and were bought rather then a competing Sikorsky S-92 aircraft.
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.