 U.S. military aircraft won't be the only notable absence at this year's Paris air show; participation by the U.S. aerospace/defense industry also will be dramatically smaller than in the past.
A growingnumber of contractors are deciding to send far fewer representatives, and at least five major players won't be there at all. While official explanations vary across a wide spectrum--from cost containment to security concerns--lingering tensions between the U.S. and French governments in the wake of the Iraq war most definitely are playing a big role.
For example, Lockheed Martin Corp.--which builds the F-16, the F-117, C-130J and F/A-22--expects to scale back its presence by about half. One reason is due to signals the U.S. government--including the Pentagon, Commerce Dept. and some parts of the White House--is sending to industry leaders, Chairman/CEO Vance Coffman told Aviation Week & Space Technology. (Coffman also is chairman of the Aerospace Industries Assn.) "The basic thought is, 'Don't break any relationships--just send a message.'"
The gist of the message the government wants to send is that France's lack of support for the U.S. leading up to the Iraq war is no way to treat an ally.
But Coffman emphasized that management's assessment also took into account a desire to contain show-related expenses and the "ebb and flow" of Lockheed Martin's international business. "We've completed international partnerships on Joint Strike Fighter and other programs, so it's only natural that we will need fewer people in Paris this year," he explained.
Elsewhere in the industry, at least two sizable subsystem manufacturers are considering boycotting the show altogether due to bitter feelings toward the French government, according to some officials. "They need to understand their behavior was totally unacceptable," said one division president.
"That message clearly is coming out of [the Defense Dept.]," Aerospace Industries Assn. President John Douglass said.
The White House and Commerce Dept. are upset with the French and Germans, but they don't want to concede the international aerospace arena to the French, he added. "The consistent signal we've been getting is, 'Show the French we're not happy--send a lean team and withhold our best equipment,'" he said. "If the President of the United States didn't want us to go, he could make that happen. However, chief executives across the industry aren't getting calls directly from the White House."
Douglass noted that the government hasn't adopted a unified policy on how visible--or not--the industry should be at the show, which is scheduled to get underway June 15. The signals are mixed, with different departments taking different stands, depending on where a company is positioned in the marketplace. "It's mostly the large defense contractors who are getting the stronger signals to reduce their presence," he said.
In Paris, Yves Bonnet, commissioner of the air show, last week was under the impression that only a few U.S. small aerospace companies have canceled or reduced their participation, and the reason was based on economic considerations. The 2003 show will be no more than 3% smaller than the last one in 2001, when attendance reached a record level, according to Bonnet. Information provided by the U.S. Aerospace Industries Representatives in Europe lists 180 exhibitors, which is comparable to that at previous Paris air shows.
Bonnet's impressions notwithstanding, there's no question the U.S. presence will be greatly diminished. Among the no-shows will be L-3 Communications Corp., Harris Corp., Textron Inc., General Dynamics Corp. and Gulfstream Aerospace.
L-3 Chairman/CEO Frank Lanza said the principal reason he pulled out was because of concerns over security. "We expect a heightened risk, and it doesn't make a lot of sense to concentrate a large number of our employees in one or two hotels in the current climate," he said.
French government officials last week said the terrorist threat has significantly decreased. As a result, the country's anti-terrorism office has downgraded the threat to "1," the lowest level.
Meanwhile, in the U.S., Raytheon Co. President William Swanson also expressed security concerns, which he said is the reason his company will have a much smaller presence at the show.
At Northrop Grumman Corp., President/CEO Ronald Sugar said his company plans to send a substantially smaller delegation for two reasons: security risks and the fact that Northrop's principal customer will have little or no involvement at the show. The absence of any official U.S. military participation is also the reason Pratt & Whitney will be sending fewer representatives to Paris, according to Louis Chenevert, president of the United Technologies Corp. business unit.
UNLIKE L-3 and Raytheon, Boeing Co. has no security-related concerns. However, it does see an opportunity to fulfill a goal it has had for some time: spend less money on marketing through international air shows. "These events have been getting more expensive, and with the U.S. government cutting back its participation, this seemed like a good time for us to scale back too," Vice Chairman Michael Sears said.
Goodrich Corp. is another contractor that will have a smaller footprint in Paris. The company is looking to save money, President and Chief Operating Officer Marshall Larsen said. While its military business has been growing by double digits for the last four years, the corporation has been hit hard by the severe slump in the civil aircraft sector. As a result, management has been aggressively reducing costs, and the Paris air show is an obvious area where the company can spend less money, he said.
Larsen says he hopes the global aerospace industry can set personal feelings aside and avoid being pulled into the political fray. "This industry is too global, and we're all too dependent on international partnerships, to allow such disagreements to interfere with our business," he said. Swanson expressed similar feelings, pointing to Raytheon's strategic alliance with Thales, the French defense electronics manufacturer.
Coffman doesn't believe business partnerships will be seriously affected either. Debate between NATO allies is as old as the alliance itself, he noted. The volume goes up and down, depending on the issues being discussed, but he doesn't expect the current Franco-U.S. differences to "curtail" any of the company's strategic partnerships.
The AIA's Douglass has a somewhat different view. While no partnership may be scrapped per se, he doesn't believe that interaction between U.S. and French and German companies will be business as usual. "Relations will be fairly strained over the summer, but we'll try to keep the dialogue open," he said.
The AIA has arranged an executive roundtable between U.S. and European chief executives to coincide with the Paris air show. "The central question that we will address," Douglass said, "is what are the interests of the companies, quite apart from those of the countries themselves."
The macro-issue going on is that the Europeans want a much larger defense industrial base, but they don't want to invest in it, Douglass asserted. As a result, they would like a much larger portion of the U.S. defense market. Continental Europe looks upon the British with a great deal of envy, he believes, because of the success they have enjoyed. (For example, Washington-based BAE Systems North America is the U.S.' sixth largest military contractor, with $4.2 billion in sales.)
"Conversely," Douglass continued, "[Europeans on the Continent] have so little of their own that they can't allow any intrusion by the U.S. industry." He pointed to last week's decision by Airbus to award a European consortium a $3.4-billion contract to supply engines for the A400M military transport aircraft. Pratt & Whitney Canada was the losing bidder, even though it had submitted the lowest bid, and Pratt-Canada officials had been assured the contract was winnable if the engine manufacturer was the lowest bidder.
"CEOs of U.S. aerospace companies are not willing to walk away from globalization of the industry, but this attitude of what's ours is ours, and what's yours is partly ours is really aggravating the situation," Douglass said. "Add to that the fact that France has been so antagonistic of our position on Iraq, and you begin to get reactions like we're seeing now." |
