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Aviation History
1989
1989 - 0407.PDF
^ Boeing has to place contracts worth $1 • 5 billion with UK companies to offset the A WACS purchase UK minister defends AWACS offsets by Eric Beech UK Secretary of State for Defence Procurement Lord Trefgarne has broadly defended Boeing's AWACS offset record, although nearly half the company's latest submissions have been referred back to Boeing by the Ministry of Defence. In its second report, covering June to December 1987, Boeing sought offset credit totalling $191 million on contracts let to British industry during that period. So far the MoD has rejected $33 million, accepted $66-9 million, and referred the remaining $91-1 million back to Boeing, requesting "fuller and better particulars", says Trefgarne. Included in the outstanding amount is $50 million of offset credits for Rolls-Royce com mercial engine sales. Boeing did not claim offset credits for such business in its first report ing period. The reason, the US company says, was that "the audit on engine data by Boeing was the last to be completed, and the company chose not to include a claim for engines in the period covered by the first report". The remaining submissions involve contracts which were either signed before the offset programme started, or are with second-tier contractors not listed in Section 10 of the Department of Trade and Industry's register of quality- assessed UK companies. Trefgarne says: "It is the case that Boeing has been improving its understanding of our requirements. Each case has to be looked at on its merits... It is therefore not surprising that from time to time we get some misunder standing with Boeing ... These are getting less and less. One problem we have found is getting new British firms suit ably cleared to bid into Boeing programmes: Security clearance is not dished out overnight." Flight has found that, of the 29 companies which received business from Boeing during the first and second report periods, ten were existing Boeing suppliers and had been awarded follow-on orders. Six of these ten companies were sole- source suppliers to Boeing for their respective products, and so would have received the business irrespective of the offset programme. Further more, Flight understands there is no upper limit to the percentage of follow-on work which Boeing can count against its total offset commitment. NEWS IN BRIEF • MDC profits up Lower combat-aircraft pro duction costs offset high research and development expenditure associated with the Advanced Tactical Fighter, and helped boost McDonnell Douglas profits to $350 million in 1988. Reve nue was $15-072 billion last year, up from $13-676 billion in 1987, when profit was $313 million. • Grumman earnings up 1988 reversed four years oJ declining earnings for Grum man. The delivery of 17 F-14s to the US Navy, up from eight in 1987, helped push sales up 8 per cent to $3-65 billion, and net income to $86-5 million. D Lockheed improves Rundown of C-5B airlifter production was partially offset by higher missile,- space, and information systems sales in 1988, says Lockheed. Sales for the year declined to $10-6 billion, from $11-2 billion in 1987, but profits rose .to $442 million from $427 million, despite higher cost sharing on Advanced Tactical Fighter development and provision for anticipated cost increases on C-17 wing production. Commenting on the level of offset credits given to Boeing's longstanding UK suppliers, Trefgarne says: "This has been one of the trickier aspects. We have, of course, been looking for new business wherever prac ticable ... but to have totally excluded follow-on orders would have been unfair." Reviewing the new business which the MoD has counted towards AWACS offset, Flight has found that 12 of the 29 companies have supplied existing-technology items, many "off the shelf". The stated purpose of the AWACS offset programme is to facilitate the development of high tech nology in the UK defence and aerospace industry, and to stimulate innovative and imagi native projects for venturing and contracting. Lord Trefgarne says: "It is not the case that products have to be especially developed for this programme. It was never going to be the case that we could have 100 per cent tech nology compensation. It is up to Boeing to provide the necessary bidding opportunities at a sufficiently important level of high technology so that they can meet their commit ments ... I think we already have a respectable situa tion . . . That's not to say that there is not room for improvement." FLIGHT INTERNATIONAL, 18 February 1989 13
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