The US Government may be finally realising that, in aerospace at least, there is a world outside its own borders - or so its industry is hoping. In its year-end review and forecast, the US Aerospace Industries Association (AIA) has noted that the Department of Defense (DoD) is expected to unveil rules early next year that make it easier for foreign companies to acquire US defence contractors. The AIA believes that the merger of major US and European aerospace concerns will happen sooner rather than later.
The lobby group also doubts that the DoD will be ready when it happens, but believes such a move could help convince the US Government that the future of its aerospace industry lies in the global arena. The European take-over of a US concern is only one of the issues to be identified by the AIA as facing the industry in the coming year, however.
Among the association's concerns are the need for the US Government to clarify its position on domestic mergers; overhaul export controls; and to make up the deficit in R&D spending that has resulted from massive cuts in the US defence budget. All the issues are interconnected.
The AIA believes that the government's shift on mergers has virtually halted consolidation of the US aerospace and defence industry. Industry leaders say that, since the Government blocked the merger of Lockheed Martin and Northrop Grumman, "no-one is going to buy anyone" until the rules are clear - and firm. Consolidation in Europe is gathering pace, meanwhile, and it is only a matter of time before one of the emerging giants makes a play for a US company. Similarly, industry is anxious that recent moves from the Pentagon towards guidelines for US manufacturers acquiring overseas companies are bought to a speedy conclusion. There will be little meaningful movement by industry without it.
Export controls, meanwhile, are exercising the AIA after Congress transferred the licensing of commercial satellite sales from the Department of Commerce to the Department of State, after allegations that China illegally gained access to technology while launching US communications satellites. This puts commercial satellites on the same strictly controlled "munitions list" as cruise missiles.
The AIA believes it is bad policy to put commercial products on this list, if only because it will discourage commercial companies from doing business with the DoD for fear that their exports will be subjected to the same controls as weapon sales. The AIA believes that the DoD should be doing more business with commercial companies - not driving them away. Only by buying commercial products can it make defence cash go further.
The AIA wants government to be a partner with industry on exports, and to recognise that aerospace is a global endeavour - and that US companies must be allowed to compete globally. The USA's biggest exporter, aerospace generates the biggest trade surplus of any industry sector, but that is driven largely by civil sales, which are highly cyclical. Military and space can be counter-cyclical, but are constrained by export controls.
The AIA's greatest concern is with commercial space, expected to the fastest-growing sector, and the potential impact of ill-conceived export controls on the US industry's ability to compete in the market. It wants the aerospace industry to be allowed to "self-police" exports, to simplify and speed the licensing process, and cites the example of the Federal Aviation Adminstration, which designates industry representatives to certificate aircraft on its behalf.
The AIA paints the picture of a government in danger of severely harming the industry that contributes more to its balance of payments than any other. U-turns on mergers have halted domestic consolidation and could prevent US companies benefiting from European restructuring; political meddling with export controls could deny the DoD commercial technology and US industry commercial sales.
Without a coherent strategy on these issues, the US Government could see its star industrial performer fade as the global economy takes a downward turn - no matter how well the US domestic economy continues to fare. It is time for the government to wake up to the fact that aerospace has gone global.
Source: Flight International
