Europe’s dire defense industrial straits
PARIS — Those worried about the state of the U.S. defense industrial base need look no further than Europe to feel better about their situation. Of course, the shrinking defense budgets across Europe has only led to additional competition for the few weapons programs up for bid making the situation tougher on U.S. companies.
Defense executives here at the Eurosatory land warfare conference have said all week they must expand their global view beyond Europe and the U.S. if they want to survive the economic crisis that has tightened defense purse strings. An echo chamber listing the Middle East as a potential site of industry growth means countries like the UAE and Saudi Arabia will have plenty of bidders to drive down prices.
Heidi Shyu, the Army’s top acquisition executive, said she would work to partner U.S. companies with smaller international companies in hopes of leveraging the technology that might not reach the market otherwise.
Countries like Italy are slashing their personnel numbers in order to keep modernization programs afloat. Research and development investment has been scuttled in many budgets. This is why Shyu emphasized the need for the U.S. Army to maintain, if not increase, its science and technology budget to ensure technological advancements continue.
The European Defense Agency has assembled 17 defense companies to launch a European wide defense industrial study headed by BAE Systems. Claude-France Arnould, EDA’s chief executive, told reporters here on Tuesday the team completing the study must focus on emerging markets and ways in which the companies can collaborate in ways to compete for the shrinking number of contracts.
The study will focus on land systems after EDA published their Future Air Systems study last year. Defense analysts tasked for the study will look not just at the current market, but also those 5, 15 and 30 years into the future. EDA officials conceded that predicting threats 30 years into the future will present challenges, but must be done.
Not everyone is sure the lone target for defense growth is the Middle East. Morri Leland, an international business development executive with Lockheed Martin, said his company has also targeted the Pacific region. Leland said he anticipates countries such as the Philippines will look to improve their military in the coming years.
The White House’s new defense strategy has targeted the Pacific region as the site for the U.S. military’s realignment. Defense Secretary Leon Panetta traveled to the region this month to pave the way for incoming U.S. forces.
Pat MacArevey, Navistar’s vice president for government business and government affairs, listed India has a site for future growth. His company has heard from interested buyers for the Saratoga, a vehicle the company built to fill in between the requirements for a Humvee and MRAP. MacArevey said Navistar has received international interest in the vehicle.
Executives here don’t anticipate a new onslaught of modernization programs in the Middle East or the Pacific to bail them out. Instead, upgrade programs as well as networking opportunities are seen as life preservers before the economy can bounce back and countries can again bolster their military budgets.
The Eurosatory floor was littered with networking programs targeted for the many countries looking to outfit their soldiers with portable computers. Rheinmetall Defense announced it would send 900 units of its Gladius system to the German Bundeswehr to be deployed to Afghanistan. Thales is building a soldiers communications system for the British Army.
“We wanted to expand to build systems to improve the infantry soldiers,” said Oliver Hoffmann, a Rheinmetall Defense spokesman.
As expected, Eurosatory has been slower than previous years because of the state of defense budgets. Instead, a sense of desperation hovers above the floor. The days of lavish chalets are over. Companies, at this point, just want to survive the lean years.