21 mai 2020 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité

As Manufacturing Reshapes After COVID-19, Size Will Matter

Michael Bruno May 20, 2020

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If you like the cadre of big aerospace and defense companies now, you are going to love them later. Among the major trends the novel coronavirus is expected to catalyze within aerospace and defense (A&D) manufacturing is that the big will get bigger by gobbling up others or taking back more work.

In the next few years, vertical integration should pick up momentum, according to several executives and consultants. After decades of OEMs, primes and top-tier companies outsourcing major work on their programs, many see the pendulum swinging back to bringing more of it in-house.

“We've already seen signs of more vertical integration coming through the industry and potentially where some of that could be accelerated as we work through the crisis,” says one advisor.

Boeing started this a few years ago as it insourced avionics and other niche segments. Major consolidation picked up last year with the mergers of Raytheon and United Technologies Corp. and L3 Technologies and Harris Corp. Now, whether it be protecting profits or securing supply, the reasons to own more of the work are burgeoning as industry is refashioned in the COVID-19 crisis.

For starters, aerospace suppliers are facing diminished economies of scale but a greater share of fixed-cost in production, with a likely loss in profitability and competitiveness, say Roland Berger advisors Robert Thomson and Manfred Hader. So-called organic top-line increases, through insourcing and acquisition of additional work packages, are possible but only to a limited degree. A fixed-cost reduction likewise is only feasible up to a certain level due to equipment and overhead structures. So consolidation is an important lever to consider.

Part and parcel to that will be the financial distress into which suppliers in Tier 2 and below fall—and the opportunity to roll them up.

Top CEOs are watching. Speaking May 13 to an investor conference, Honeywell International Chairman, CEO and President Darius Adamczyk cited an inflection point. “For a couple of years now, I've been talking about how it is a seller's market, not a buyer's market,” he told Goldman Sachs. “But that calculus may change in the second half of the year, and I think it could become a bit more of a buyer's market, and the valuations may be better and different. That's something that we want to partake in.”

Feeding the phenomenon could be a desire to bring supply closer to home, both for reliability and geopolitical reasons. Suppliers overseas once were revered for their low-cost footprint, but suddenly they are seen as vulnerable to pandemics, economic stress and global trade wars. In turn, consultants expect industry leaders to take another look at favoring local regions.

Even in the defense realm, which for now is considered safer during this downturn, there is talk of larger firms becoming even more powerful. “Large pure-plays should come through the pandemic relatively unscathed but may be looking at lower spending growth outlooks,” Capital Alpha Partners Managing Director Byron Callan noted May 13. “Mergers and acquisitions may thus be more important in delivering growth—even though it's not organic growth—in 2021-25.”

So where to look for vertical integration and consolidation from the top? Clues are already emerging, according to advisor presentations. First, look at niches where top suppliers already are prevalent—environmental and flight-control systems, landing gear, electrical power and interiors—and others where they are not there yet, including maintenance, repair and overhaul, logistics, aerostructures and engines.

Next, look at the supply base from the perspective of a top supplier. Who is distressed or drawing down credit lines? What revenue mix do certain potential targets have—e.g., commercial vs. defense, products vs. services or aging vs. next-generation platforms?

Finally, consider where the new nucleus of consolidation will be. Will more “super Tier 1s” such as Raytheon Technologies emerge, or will conglomeration occur among Tier 2 and 3 providers? The first would allow rationalization of capacity for detailed part production from Tier 1 to 3, for instance, with the super Tier 1s able to secure through-value-chain control and prevent subtier supplier failure, according to Roland Berger. The latter likely would be opportunistically driven rather than following any overarching industry logic.

For smaller suppliers, the questions are more concise, as one consultant says. Do you want to be a buyer, a seller or risk it as is? A simpler question, for sure, but no less difficult to answer.

https://aviationweek.com/aerospace/manufacturing-supply-chain/manufacturing-reshapes-after-covid-19-size-will-matter

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  • The Air Force’s new trainer jet is attracting the Navy’s and Marine Corps’ interests

    8 mai 2019 | International, Aérospatial

    The Air Force’s new trainer jet is attracting the Navy’s and Marine Corps’ interests

    By: Valerie Insinna NATIONAL HARBOR, Md. — The U.S. Navy and Marine Corps are monitoring the development of the Air Force's T-X training jet, but it may be years before they can launch their own competitions to replace the T-45, officials said Monday. “We're watching the T-X. Obviously the Air Force is going through that process,” Lt. Gen. Steven Rudder, the Marine Corps' deputy commandant for aviation, said during a panel at the Navy League's Sea-Air-Space conference. “At some point, we're going to have to replace the T-45. We're going to have to replace the F-5,” he said, referring to the T-45 Goshawk (used by the Navy and Marine Corps to train fighter pilots) and the F-5 (used to simulate adversaries during exercises). “Our adversary requirement is not going away. It only increases. That's another one that with our Air Force counterparts we're watching closely on many different fronts,” he added. Last year, the Air Force chose a Boeing-Saab team to build a new, clean-sheet trainer, awarding the firms a contract worth up to $9.2 billion. Although the service's program of record is 351 T-X jets and 46 simulators, the agreement gives it the flexibility to buy up to 475 aircraft and 120 simulators. A Navy and Marine Corps buy would add several hundred aircraft to the Air Force's eventual order — a massive financial win for Boeing, which bid extremely low on the T-X solicitation with the expectation of raking in big profits during the production stage. Boeing is set to deliver the first simulators to Joint Base San Antonio-Randolph, Texas, in 2023. In fiscal 2024, the Air Force will have enough simulators and trainers to declare its first squadron as operational. Angie Knappenberger, the Navy's deputy director of air warfare, said the timing of a T-X buy could be “problematic” because of the current schedule of the TH-57 replacement, which is taking priority over a new jet trainer. “Once we're able to accomplish that — the helicopter trainer replacement — then we're going to look more forward to something like the T-45 replacement. T-X would certainly be in the running as a candidate for something like that,” she said.https://www.defensenews.com/digital-show-dailies/navy-league/2019/05/07/the-air-forces-new-trainer-jet-is-attracting-the-navys-and-marine-corps-interests The Navy in January released a request for proposals for the TH-57 replacement, kick-starting a competition with Airbus, Bell and Leonardo that could potentially lead to a contract awarded this year. The service wants to buy 130 helicopter trainers from FY20 to FY23. Knappenberger did not elaborate on why the timing of the T-X program could be challenging for the Navy, but the service plans to finish purchasing new helicopter trainers just as Boeing starts producing and delivering T-Xs to the Air Force. Another key factor may be whether the T-X can be outfitted with the gear necessary for taking off from and landing on aircraft carriers, and how quickly Boeing could complete the engineering work involved. Like Rudder, Knappenberger noted the appeal of buying enough T-X trainers to fill the service's adversary air requirements, saying she's “curious to see” the jet's red air capabilities. The Air Force is also assessing the T-X's ability to conduct other mission sets. “You could imagine a version of the airframe that could be equipped as a light fighter. You can imagine a version that is equipped as an adversary air-training platform,” Air Combat Command head Gen. Mike Holmes told reporters in March. https://www.defensenews.com/digital-show-dailies/navy-league/2019/05/07/the-air-forces-new-trainer-jet-is-attracting-the-navys-and-marine-corps-interests

  • Contracts for September 21, 2021

    22 septembre 2021 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité

    Contracts for September 21, 2021

    Today

  • Contract Awards by US Department of Defense - November 10, 2020

    11 novembre 2020 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité

    Contract Awards by US Department of Defense - November 10, 2020

    AIR FORCE The Boeing Co., Defense, Space & Security, St. Louis, Missouri, has been awarded a $9,800,000,000 indefinite-delivery/indefinite-quantity contract for F-15 support for Saudi Arabia. This contract provides for modernization and sustainment of the F-15 Saudi fleet to include such efforts as hardware, software, and interface design, development, integration, test, subsystem and structural component production and installation of future modifications and enhancements to the F-15 Saudi weapon system as well as product support. Work will be performed in St. Louis and as separately specified in individual task and delivery orders and is expected to be completed by November 2025. The ordering period for this contract is five years from the date of contract award plus an option for an additional five year ordering period. This contract involves Foreign Military Sales (FMS) to the Kingdom of Saudi Arabia and is the result of a sole-source acquisition. Initial delivery order FA8634-21-F-0015 will be awarded concurrently in the amount of $1,032,649 using FMS modification and development type 4F funds. The F‐15 Division Contracts Branch, Wright Patterson Air Force Base, Ohio, is the contracting activity (FA8634‐21‐D‐2703). The 3M Co., St. Paul, Minnesota, has been awarded a $37,460,947 firm-fixed-price modification (P00003) to contract FA8638-20-C-0046 for the production capacity expansion for N95 respirators undefinitized contract action (UCA). This modification definitizes the UCA. Work will be performed in Aberdeen, South Dakota, and is expected to be completed April 30, 2021. This award is the result of a sole-source acquisition. Fiscal 2020 other procurement funds in the full amount are being obligated at the time of award. This modification brings the total cumulative face value of the contract to $125,460,947. Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Ohio, is the contracting activity. Leidos Inc., Reston, Virginia, has been awarded a $10,319,026 cost-plus-fixed-fee contract for Pulsed and Continuous Wave Innovation for Integration and Effects Research (PACIFIER). This contract provides for enhanced experimental and predicative capabilities to address existing and emerging laser systems and to quantify the effects of high power continuous-wave lasers interacting with a variety of materials and targets. Work will be performed at Kirtland Air Force Base, New Mexico, and is expected to be completed Sept. 30, 2025. This award is the result of a competitive acquisition and three offers were received. Fiscal 2020 research, development, test and evaluation funds in the amount of $1,800,233 are being obligated at the time of award. Air Force Research Laboratory, Kirtland Air Force Base, New Mexico, is the contracting activity (FA9451-20-C-0026). (Awarded Sept. 29, 2020) KIDDE Technologies Inc., Wilson, North Carolina, has been awarded a $7,800,000 firm-fixed-price, indefinite-delivery/indefinite-quantity contract for the manufacture of fire cartridge extinguishers. This contract provides for supply of fire cartridge extinguishers for F-35, E-8, E-3, and KC-10 aircraft. Work will be performed in Wilson, North Carolina, and is expected to be completed Dec. 31, 2026. This contract involves sales to Joint Partner Nations and Foreign Military Sales countries and is the result of a sole-source acquisition. Fiscal 2021 Joint Strike Fighter funds in the amount of $97,986 are being obligated at the time of award. Air Force Life Cycle Management Center, Hill Air Force Base, Utah, is the contracting activity (FA8213-21-D-0001). NAVY RAMSys GmbH, Ottobrunn, Germany, was awarded a €35,324,329 and $35,634,345 firm-fixed-price modification to a previously awarded contract (N00024-18-C-5403) for fiscal 2021 German Navy requirements for Rolling Airframe Missile (RAM) MK 49 Guided Missile Launching Systems (GMLS), and associated shipboard hardware and spares. The RAM Guided Missile Weapon System is co-developed and co-produced under an International Cooperative Program between the U.S. and Federal Republic of Germany's governments. RAM is a missile system designed to provide anti-ship missile defense for multiple ship platforms. This contract is to procure material, fabricate parts, assemble, test, and deliver RAM MK 49 GMLSs and spares. Work will be performed in Tucson, Arizona (33%); Ulm, Germany (26%); Roethenbach, Germany (16%); Louisville, Kentucky (12%); Ottobrunn, Germany (10%); and Schrobenhausen, Germany (3%), and is expected to be completed by June 2028. German cooperative funds in the amount of €35,324,329 and $35,634,345 will be obligated at time of award and will not expire at the end of the current fiscal year. This contract was not competitively procured under the exception 10 U.S. Code 2304(c) (4), International Agreement. The Naval Sea Systems Command, Washington, D.C., is the contracting activity. (Awarded Nov. 5, 2020) KBR Diego Garcia LLC, Houston, Texas, is awarded a $61,307,522 modification for the exercise of Option Three under an indefinite-delivery/indefinite-quantity contract for base operating support services at U.S. Navy Support Facility, Diego Garcia. After award of this option, the total cumulative contract value will be $240,038,950. The work to be performed provides for general management and administration services; command and staff (information technology services, information technology support and management, telephone services, telecommunication services, antenna maintenance); public safety (fire protection and emergency services); air operations (ground electronics, airfield facilities, and passenger terminal and cargo handling); port operations; supply (supply services and petroleum, oil and lubricant management and operations, and ship's store service activities); morale, welfare and recreation support; galley; bachelor quarters; facilities support (facility management, facility investment sustainment, restoration and modernization, custodial, pest control, integrated solid waste management, grounds maintenance, and pavement clearance); utilities (electrical, compressed gases, wastewater, steam, hot water and demineralized water and potable water); base support vehicles and equipment; and environmental to provide integrated base operating services. 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Contract funds in the amount of $40,000 will be obligated at the time of contract award. Obligated funding is fiscal 2020 aircraft procurement, Navy. In accordance with 10 U.S. Code 2304(c)(1), this contract was not competitively procured; only one responsible source and no other sources will satisfy agency requirements. The contracting agency is Naval Surface Warfare Center, Crane Division, Crane, Indiana (N0016421GWS42). Hornbeck Offshore Operators LLC, Covington, Louisiana, is awarded a $9,176,100 firm-fixed-price contract for the Undersea Rescue Command support vessel HOS Dominator in the Eastern Pacific vicinity of San Diego, but may be employed worldwide. This vessel shall function as offshore support vessel primarily for the U.S. West Coast. The vessel's primary mission shall be to support Navy submarine rescue utilizing the Navy Submarine Rescue Chamber Flyaway System, Assessment Underwater Work System, and the Navy Submarine Rescue Diving and Recompression System, including training. The vessel may also serve as escort for submarine sea trials, as well as a diving platform utilizing existing and developing portable diving systems, and other missions as required by the Navy and permitted by the vessel's certifications and classifications. The contract also contains four unexercised options which, if exercised, would increase cumulative contract value to $44,245,122. Work is expected to be completed by November 2025. Fiscal 2021 working capital funds (Navy) in the amount of $6,787,800 are obligated on this award and will expire at the end of the current fiscal year. This contract was competitively procured via the beta.SAM.gov website, with four proposals received. The Navy's Military Sealift Command Norfolk, Virginia, is the contracting activity (N32205-21-C-4115). ARMY Turner Construction Co., New York, New York, was awarded a $34,050,240 firm-fixed-price contract for construction of a new aircraft hangar facility at Redstone Arsenal. Bids were solicited via the internet with three received. Work will be performed at Redstone Arsenal, Alabama, with an estimated completion date of Dec. 31, 2022. Fiscal 2020 military construction, Army funds in the amount of $34,050,240 were obligated at the time of the award. U.S. Army Corps of Engineers, Mobile, Alabama, is the contracting activity (W91278-21-C-0006). *Small business https://www.defense.gov/Newsroom/Contracts/Contract/article/2411921/source/govdelivery/

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