Summary of: New Patterns of Collaboration and Rivalry in the US and European Defense and Aerospace Industries
Abstract
International defense industrial affairs are becoming increasing global and increasingly complex. This report is a continuation of the authors' efforts to provide insights and analytical frameworks useful for understanding ongoing developments in the global defense market. We focus primarily on defense industrial firms and their relationships with their sovereign customers -- considering the organization of Boeing 787 development and production, the KC-45 aerial tanker competition, and European defense firms' direct investment in the U.S. defense market. In the 787 case, we observe that even experienced companies like Boeing can run afoul of the complexities of coordinating a multinational, multiform venture. We suspect this problem is not unique to Boeing, and will, if not satisfactorily addressed, limit the scope and success of multinational projects in the defense sector as well. The KC-45, at least to date, seems to illustrate a new weakness of defense establishments relative to their suppliers. The failure to successfully award a KC-45 contract to the EADS-Northrop Grumman team raises some troubling questions. Is it possible to award a protest-proof contract for a major defense system? Doesn't the buyer side of the U.S. defense market more resemble a quarrelsome committee than the classic model of the sovereign monopsonist? With increasingly large, winner-take-all competitions, what's the potential for procurement gridlock -- the state of the KC-45? Will the concentration of buyer power and the resultant increase in agility give suppliers exploitable advantages over their customers? Our discussion of foreign direct investment in U.S. defense industries focuses on three European firms: BAE, EADS, and Finmeccanica. The central theme of this discussion is the interplay between the motivations for these firms to enter the U.S. defense market, the U.S. regulatory environment, and the corporate strategies intended to work with and around those legal barriers.
Document Details
- Document Type
- Technical Report
- Publication Date
- Apr 22, 2009
- Accession Number
- ADA527703
Entities
People
- Bernard Udis
- Ira A. Lewis
- Raymond C. Franck
Organizations
- Naval Postgraduate School