This is the third part of the transcript from yesterday’s press conference with F-35 program chief Brig Gen Heinz. He had explained that his current models can not accurately project the benefits of a competitive engine war between the Pratt & Whitney F135 and the General Electric/Rolls-Royce F136. But I questioned his reasoning. Since the F135 and F136 are already funded, wouldn’t the competitive benefits already be built into the baseline program? Click on the jump to read Heinz’s reply.
ME: Isthere anyway to calculate – and have you calculated – how those competitivebenefits – you know, how it can improve that margin, and how many tails are youtalking about, plus or minus?
HEINZ: Thereis no specific way. What happens is you have to make some number of assumptions.And the aussmptions are tha tcomep wil have some benefit. Now I think I willhave some historic precedence, if you go back to the engines wars for the F-16.I think I can see from the timeframe of when there was no competition to thetimeframe of the early years when it started there was almost a 20% pricereduction. And so can Ithen translate that to what was the potential for f135 vs f136? I don’t know but at least we should some otherassumptions. … I do believe there will be a difference in benefits from competition. I can’t tell you what thatwill be today.
I actuallybelieve it’s okay to go forward with the premise that at some point in thefuture we make an assumption that says it’s cost neutral and take the cost partout of the equation and weight the rest of the benefit.
REUTERS: So[reducing] operational risk is one benefit?
HEINZ: Ithink operational risk is one benefit. I also truly believe that you’ll see muchmore technology push from 2 manufactures because they are always going to becompeting with each other to try to win back more quantity. And part of the wayyou do that is you either produce more efficient blades, introduce fuelsavings, you introduce thrust growth –a whole bunch of other benefits thatresult. Lower operating cost. More technology insertion sooner because thecompanies are willing to make the investment to try to get market share.
ME: To playa little devil’s advocate with that -
ME: — inthe original engine war you had a single company that started out and thenanother company that was called on to enter the market and was funded, and thenthe price came down. In this case you already have two manufacturers alreadycompeting. So how would you get that – presumably, the competitive benefit hasalready been built in to their program since they are already in competition.And if one goes out, could the price of the one that’s not in competition anymorerise 20%? Wouldn’t the competitive benefit already be built into the program?
HEINZ: Ithink because of the difference in the development timeline that it has not yetbenefited. Pratt is not truly competing with GE yet for the market sharebecause I only have Pratt engines up through LRIP 4. or through LRIP 3. We’regoing to introduce, if Congress fully funds in the FY10 budget, 4 GE motors butthat’s four out of over 30 motors I am buying next year. So they are justbeginning to have competition. My point is that I do not believe yet that Prattfeels compelled to act as though they are in competition, which they would saydifferently – I’m sure they would. But I think the real competition occurs whenno kidding you’re both making the engine, and you’re both getting a chance tobid on that price in a particular lot and that’s when you see the real benefit.And that’s what has not yet occurred.