Australian advanced materials company Quickstep has started 2011 with a bang in the form of a A$700 million ($700 million) long-term agreement with Northrop Grumman to manufacture parts for the Lockheed Martin F-35 Joint Strike Fighter.
The 20-year agreement with Northrop has been a long time coming, with a memorandum of understanding signed with Northrop and Lockheed Martin in November 2009. The JSF contract redefines the concept of a shot in the arm.
Quickstep has developed what it - and its investors - believe will prove to be one of the most efficient methods available for manufacturing composite components. The development process has seen the company survive with minimal revenue by drawing down shareholders' equity since it raised A$6 million on its Australian initial public offering in October 2005.
At 30 June 2010, the end of its financial year, cumulative losses were nearly A$35 million, an amount sustainable with the aid of A$32.2 million in equity raised in the previous 12 months with new share offerings, sales of options and debt to equity conversion.
To fulfil the JSF contract, which calls for first parts deliveries - and first cashflow - in 2012, Quickstep is to move across Australia from its long-term home of Perth to the former Boeing Australia Bankstown facility in Sydney, thanks to what is believed to be a generous support package from the New South Wales government.
The move will boost the state's aerospace manufacturing capability. Quickstep aims to become "the largest independent aerospace composites manufacturer in Australia", says chief executive Philippe Odouard. He expects the JSF programme to deliver an annual turnover of A$50 million by 2015.
The JSF parts will be manufactured using traditional autoclaves, although Quickstep is qualifying its innovative fluid-based "Quickstep" curing process for the JSF under a contract with the US Department of Defense.
"It is likely that we will be manufacturing some of those parts using Quickstep when the qualification occurs, although it is still a few years away," says Odouard. The Quickstep process, using a rigid mould suspended in heat transfer liquids, requires 25-30% less time to produce composite parts than traditional autoclave methods and is cheaper.
SKILLS ARE SCARCE
Quickstep is offering its existing employees - many of whom were recruited from the eastern states - the option to relocate to Sydney. Odouard expects that eventually it will require a 400-strong workforce in Australia, many of whom are likely to be former Boeing employees.
He says: "Skills in composite manufacturing are very scarce. Most of the 20 employees we recruited in the last 12 months were imported from eastern Australia or overseas. The availability of a large workforce that is being made redundant in Bankstown through the move of Boeing to Melbourne was a major factor in the move."
Another major factor in the move is an unspecified amount of New South Wales government support. Quickstep is investing at least A$15 million in the move, which will start early this year and culminate in production from mid-2012, while A$10 million has been provided by the federal government.
But Odouard stresses that the decision to move was not based only on state financial support, which Western Australia was unable or unwilling to match.
Western Australia, whose economy is natural resources-based, cannot match New South Wales for workforce skills or business opportunities, he says, and in addition the cost of operation is lower in Bankstown.
"We had lengthy discussions with them [the Western Australia government] for over a year. As a whole, the NSW package in Bankstown turned out to be a lot more favourable," he says.
Odouard says a number of additional business opportunities are "progressing positively". Quickstep has a second JSF MoU with Marand Precision Engineering for up to A$50 million of contracts to manufacture vertical tail skins. The partners are working to firm up that agreement.
In addition, Quickstep has been working with Composites Technology Research Malaysia - a major supplier to Airbus and Boeing - on the Quickstep Process, as well as Eurocopter.