Thursday, October 27, 2011
OEMs Must Dig Deep to Fund S&T Recovery
“We are not priming ourselves for the future anymore,” said Phil Dunford, vice president/general manager and operating executive for Boeing Military Aircraft, during our meeting in London. It is a "Beware the Ides of March" warning that he has been repeating for several years now—sometimes a lone voice in a cavernous room of echoes, for it has been hard to find others so strenuously voicing similar concerns.
Some progress has been made in that the Vertical Lift Consortium in the U.S. is now engaging with Department of Defense (DoD) over the military’s future rotary requirements—such as the Joint Multi Role (JMR) proposition. But the question remains: is progress being made quickly enough?
At the annual U.S. Army Aviation gathering at Quad-A (Army Aviation Association of America) back in April 2011, Maj. Gen. Anthony Crutchfield, head of Army Aviation at Fort Rucker, said that he expected—almost an "order" but impossible to enforce—that a new high-speed military helicopter should begin to be fielded by 2030 that would be the first step toward JMR. He knows that by then the life of all Army Aviation platforms will be in sight—meaning they will have around a decade left (not long in aircraft delivery terms).
However, there is a major stumbling block—that of time. As Dunford has explained before, it’s currently taking industry around 20 years to develop and deliver new rotorcraft platforms (even the comparatively luxuriously funded Joint Strike Fighter is glacially slow—the Joint Advanced Strike Technology (JAST) program was created in 1993). And those are the ones that make it to the procurement stage—the failures are legendary.
So how is the Army’s new rotorcraft going to be delivered in the expected period if we are already a year into this typical 20-year delivery time and very little is currently on the drawing board (unless Sikorsky’s X2 successor, the S-97 Raider, is on some kind of fast track to success)?
But while rotorcraft OEMs are bemoaning the fact that government is not allocating sufficient, if any, budget to Science and Technology projects (S&T research and development in old money), one must look back to the pioneers of old—such as Sikorsky and Piasecki—and see the progress they made on their own dime before funding kicked in.
Of course, modern rotorcraft (each a system of systems) are much more complex, but then OEMs today generate a lot, in fact phenomenally more money. Could the current annual profits of the modern day OEMs stand to be cut a little deeper for the sake of safeguard their own future prosperity? All figures are for 2010:
Company Net Income
Boeing $64.3 billion
Boeing Defense, Space and Security $31.9 billion (up 5 percent, of which Boeing Military Aircraft $14.2 billion)
Boeing’s Research and Development $4.1 billion (down from $6.5 billion in 2009).
Finmeccanica €557 million (Net Profit)
AgustaWestland €413 million (adjusted EBITA)
Finmeccanica R&D €409 million
Textron $553 million
Bell Helicopter $427 million
United Technologies $4.7 billion
Sikorsky $716 million
EADS €1.187 billion
Eurocopter €182 million
While these organizations do fund their own S&T projects, there could be a charge levied that they have grown fat on government money and that return to shareholder is so ring-fenced that they have forgotten their old pioneering spirit that engineered their legacy so well.
With the western world now in cutback mode, now is the time to cut short-term profits (meaning over the next decade if necessary) and increase internal investment in S&T to guarantee their own long-term prosperity in rotorcraft production—in some cases potentially even their survival.
Here’s the message to the big corporate empires: you’ve had the best of the good times—and reaped the rewards. That time is over for the moment. Now is the time to change policy. If you’ve saved money for a rainy day, then let me tell you it’s pouring outside.
If you are waiting for government money to come in bagfuls anytime soon—forget it. They don’t have it to spend because they are all (in the west at least) trying to manage runaway national debt and prevent semi-global recession that would place the one experienced in the 1930s into "the little league."
The ball is back in your court. The time has come to dig deep and regain the pioneering spirit of your founders. The time has come for industry to be led by lions—not fat cats!