Friday, April 23, 2010

Three Wrongs Don’t Make a Right

Part 3 of 3: The Industrial Base

Some in the F136 camp argue that continued funding of their engine is vital to their survival in the aircraft engine business. Yet General Electric, one of the world’s most diversified conglomerates, continues to dominate the development, production, and aftermarket aerospace engine market, manufacturing six times more commercial engines than Pratt & Whitney every year. Their status includes sole source positions with the GEnx (747-8), GE90 (long range Boeing 777s), CF34 (CRJ700/900, E170/190), CF6 (C-5 re-engining), not to mention the ubiquitous CFM56 (all B737s and more than half of Airbus A320 family deliveries in recent years).

Moreover, GE currently produces nearly 90% of U.S. made military engines, including helicopter engines. Their dominance of this market includes sole source positioning with the T700 on more than 4,900 twin-engine Blackhawk/Seahawk and Apache helicopters. Including spares, this equates to nearly 12,000 powerplants delivered through 2009 with at least 2,300 more forecast between now and 2019 for a total expected to exceed 14,000 T700s.

Another sole source position GE enjoys is through their F404 and F414 powerplants for the twin-engine F/A-18. The F/A-18 continues to be purchased in significant quantities by the U.S. Navy, has landed a new export order (from Australia), and may win other fighter procurement contests around the world. More than 1,900 airframes later, GE has delivered 4200 F404/414 engines with the possibility of another 400 engines before the end of this decade.

GE’s dominance of the installed base and backlog of jet engines positions them well for decades to come with a strong aftermarket business. Furthermore, consider that since the design tools, development processes, advanced technology and materials have become closely aligned between military and commercial products, it is the same people who design these engines for civil or military applications. And one more very important point, GE is heavily involved in two important DoD programs called ADVENT and HEETE. These two research and development efforts are investigating advanced military engine technologies, and will keep GE engineers working for years to come. 

Regardless of whose name is on a commercial or military engine, the reality is that roughly 80% of the content is procured from suppliers. Given the highly specialized nature of building jet engines, many of these suppliers are common to GE, Pratt & Whitney and other manufacturers. Castings, forgings, composites, electronics, controls and accessories all come from the same overall industrial supply base, not from one engine manufacturer’s military business segment. For most suppliers, the difference between one or two F-35 engines simply fails to constitute a “make or break” moment.

In considering America’s aerospace industrial base, you cannot overlook the fact that the F136 engine is the fruit of the General Electric / Rolls-Royce Fighter Engine Team Partnership. 40% of the F136 is under the control of UK based Rolls-Royce, and a large number of those RR parts will be manufactured abroad. This fact further undermines the positive impact GE imagines the F136 would have on American industry.

Despite a global recession, the American jet engine industrial base remains strong, thanks to diversification across civil and military platforms, a continuing emphasis on research and development, and a significant military and commercial aftermarket requirement. GE’s viability as a continuing source of military jet engines simply is not threatened by a single military program Most suppliers wouldn’t be adversely impacted should Congress cease funding for the F136, as repeatedly requested by President Obama, Defense Secretary Gates and others. Add in the current operational needs of our military along with other pressing budgetary matters and the choice becomes more apparent than ever.

-- EagleBlogger

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