Posted on 04/21/2006 7:20:13 AM PDT by FerdieMurphy
It was in his 2003 State of the Union Address that President George W. Bush expressed his administration’s objective to “strengthen global treaties banning the production and shipment of missile technologies.” It was thereafter, between 2003 and 2004, in which the Committee on Foreign Investments in the United States (CFIUS) allowed the last manufacturer in the U.S. that provided a key element instrumental in cruise missile guidance, to be relocated to the Peoples’ Republic of China. During this week’s U.S. visit of China President, Hu Jintao, and his meetings with President Bush and his advisors, it would be apropos to revisit a strategic corporate deal which occurred over a period of several years. With its finality in 2004, the U.S. now remains totally dependent upon China for key rare earth metals and their production necessary in the manufacture of the most crucial of U.S. military warfare.
The CFIUS decision in January 2006, regarding the approval of the Dubai Ports World Company, to take over port operations of the six largest East Coast ports in the U.S., not only raised many U.S. Congressional eyebrows but set off a strew of newly proposed legislation, to include more transparency between CFIUS and the U.S. Congress. But CFIUS has long had a precedent of approving such business transactions, and the ports deal was only the latest of such. As the deal approval became known to the public via AP reporter, Ted Bridis, in February 2006, apparently even he was more in the loop than the lawmakers on Capitol Hill. However, there have been close to 2,000 other deals approved by CFIUS since its inception in 1988, many of which should have involved and concerned the U.S. Congress much sooner.
It is the lack of accountability of the secret CFIUS committee, presided over by the Secretary of the Treasury, which has only of late concerned the U.S. Congress, and with its machinations just recently disclosed to the public. And it was the Dubai Ports deal which exposed the seemingly arbitrary fashion, and unanswerability to any other branch of government which was disturbing. For the decisions CFIUS makes ultimately becomes the responsibility of the U.S. federal government, while possibly compromising its best interests, including U.S. national security.
As it is, the Department of Defense has problems procuring necessary equipment and manufacture of parts from foreign entities, where national security must be weighed over acquisition of parts from offshore. Yet at the same time, the U.S. government has pushed the concept of global trade, often in direct conflict with the protection and national security of the U.S.
Producing powdered neodymium-iron-boron permanent magnets is critical to enabling control of aircraft and more specifically cruise missiles guidance systems as well as the Joint Direct Attack Munition or JDAM bomb, used prominently in the 2003 bombing of Baghdad, which preceded arrival of U.S. ground troops there. Magnequench UG, although still headquartered in Indianapolis, IN, is the sole provider of specialized magnets for military aircraft systems. But it closed down its manufacturing arm permanently in 2004 and finished relocating operations to China at that time, with its operations now solely controlled by Chinese companies with direct ties to the Chinese government.
Magnequench magnets are produced from a unique patented process of sintering specialty metals. They are used by various electronics and aviation companies, but Magnequench’s primary client is the Pentagon, leaving the U.S. in a rather precarious position with China. Enjoying 85% ownership of the world’s market of rare earth metals, required for its magnet production, Magnequench’s factories are now located in Batou, China. It is there that the world’s only operating rare earth mine exists. Thus, China now owns a monopoly on the manufacture of missile magnets which the U.S. military is dependent upon for its most sophisticated technology and weaponry.
Magnequench’s relocation culminated following several years of what started out as a General Motors subsidiary company in 1986. General Motors was responsible for the development of the manufacture of a permanent magnet material in the early 1980’s and began its production in 1987. In 1995, Magnequench’s majority interest was purchased from General Motors by the Sextant Group, which was comprised of two Chinese companies, San Huan New Material and the China National Non-Ferrous Metals Import and Export Corporation. It is reported that few in the industry or in the federal government knew which companies formed Sextant at that time.
Three years later, after commitment from Magnequench CEO, Archibald Cox, Jr., that its two Indiana-based plants would not be shuttered, its assembly line for magnets in Anderson, IN was shipped to China. In 2000, GA Powders, a subsidiary of Magnequench, originally a Department of Energy project, was relocated from Idaho Falls, ID to Tianjin, China. And in 2004 Magnequench’s other Indiana plant in Valparaiso, IN, responsible for production of elements of the JDAM bomb was shut down and shipped to China. Although there was an “agreement with GM” from Cox that the plant would remain in Anderson, IN according to Clyde South, a negotiator for the United Auto Workers Local 662, Magnequench proceeded to eliminate all of its domestic manufacturing jobs anyway.
Under the 1988 Exxon-Florio Amendment to the Defense Production Act, President Bush could have ordered San Huan New Materials to divest its holdings in Magnequench, as it manufactured a strategic asset. The President was pressed to do so by Congressman Even Bayh and Congressman Pete Visclosky, both of Indiana in 2003, but the President chose not to intercede. In 1990, however, President George H.W. Bush ordered China’s government-owned National Aerospace and Export Company to divest its interest in Mamco Manufacturing of Seattle, WA. At that time it was feared that China would use Mamco to acquire its jet fighter technology.
In addition to this particular example of guidance missile manufacture, the acquisition of titanium is also becoming a problem for the military in procuring spare parts and for its manufacture of its aviation vehicles. The Pentagon continues to have conflicts with the Congress on waiving the Berry Amendment. Enacted in 1941 and updated in 1972, it requires that specialty metals, including rare earth metals, titanium and super alloys, be manufactured in the U.S. for its weapons systems, unless otherwise unattainable. But as more and more American companies relocate offshore, the lines drawn become less and less clear.
And while not appropriate to put the blame of the offshoring of strategic assets on any particular President or branch of government at this time, it is appropriate, however, to see how various factions of the three branches of government, along with the loosening of corporate and industry regulations over the years, have cumulatively jeopardized the interests of the U.S. It is important that lawmakers therefore not become hawkish over the observance of our laws only when it becomes convenient to win political capital, but to how best serve the interests of the U.S. For the ramifications of business as usual when it comes to strategic assets could do irreparable future harm to America’s most vital asset, that being the American people.
Thanks for the ping!
Yes Ma'am!
Dumbasses or traitors!
Perhaps some of both?
Nitpicking.
Then why aren't we using samarium cobalt instead of reliance upon COMMUNIST China?
(Just as a matter of interest: does your keyboard sometimes omit the letter "t"?)
We think this as we whistle whilst walking past the cemetery.
That's what the morons or traitors who put us in these positions hope we continue to think.
The gates have been outsourced to the barbarians.
The reality is that when Magnequench was sold there were only a few years left on the patents. It is common practice in business to sell patents in this manner because it allows the buyer to penetrate and gain market share before the patent expires. This is old technology. While it may have defense applications it is more important for battery powered hand tools. Plus, at the time, and continuing today, there is a huge amount of infringement taking place.
The second piece if misinfo in the article is that the US is totally dependent on China to mine the rare earths. In a few days there will be an companion article published at Sierra Times about how the feds/EPA/BLM shut down Molycorp's Mountain Pass mine, ending the US's ability to produce rare earths. Bull crap. Molycorps settling ponds on BLM land were shut down because of the egregious spill. Those settling ponds, along with Molycorps entire mining and processing operations are now located on Molycorp's private property. As such, San Bernedino county is the lead agency in permitting, not EPA. As such, only an environmental impact assesement, rather than statement is required. Whatever Molycorp wants, the county will give them.
The truth is that Molycorp has no interest in gaining their thirty year permit/restarting operations since rare earth prices are depressed because of a worldwide oversupply.
See #49
bttt
We require material certifications WITH parts attesting to the source of materials, as well as Lockheed and Boeing approved sources when it comes to any processes performed on these materials.
I don't know what this article is talking about, but I have first hand experience in this area and see the documentation for materials that go into fighter jets, missiles, helicopters various weapons systems, motion control devices etc, and they meet the domestic source requirements.
I recently rejected and returned thousands of dollars worth of gears from a supplier who mistakenly used alloy steel from Taiwan.
I've never seen any materials come from China.
As major Govt contractor and supplier for the DoD I can tell you that our company and our all of our suppliers comply with all requirements of DFARS.
I must agree that there is some misinformation in this story. Many companies that build Audio speakers, use speakers that employ rare earth elements such as Neodymium (sp) magnets. I have some very expensive speakers that also have Neodymium magnets. I will admit that they make for an extremely strong magnet. I'm sure if this material was as rare as said, that Audio speakers would not be using this material. This story sounds kind of like the Cynthia McKinney story that Bush New the World Trade Centers were going to be blown up. I'm sure with all the transfer of American Industry to other areas of the world has put the American Military in a tight spot if this country were to get involved into a long and treacherous Non Nuclear World War.
With just about all American Textile companies overseas now, the idea of dressing a big military from Home sources might be difficult. Todays outsourced material world, has made for some confusing problems should the countries of the world go into isolation.
Every last screw, washer and fastener?
Maybe, but I don't think so.
Perhaps our government and the ChiComs are too smart for you.
You are an inspector for A company. There are other companies involved in these contracts and you can't know what they're bringing in and inspecting.
Right now the DFARS specialty metal requirements for us, are applied to gears, machined parts and any raw materials we purchase which could be used to make parts that end up in Lockheed, Boeing or Govt units.
When it comes to purchasing things like motors, synchros etc. it is extremely difficult, if not impossible at this point to flow down DFARS requirements to our suppliers, their suppliers etc to cover EVERY part that goes into the product we buy.
Traditionally screws, washers and other hardware items have been bought from commercial sources and have been exempt from First Article Inspection requirements including documentation like material and finish certifications.
In fact the Military Specs and Standards governing their manufacture are being turned over to commercial control, because the Government doesn't want to keep spending the money to maintain them.
I really doubt the they will push DFARS to cover ever screw, washer and fastener simply because it wouldn't be economically feasible at this point.
The government has been holding up shipments from some of the primes until either:
1) They prove 100% compliance or
2) Pay a penalty.
Guess what happens.
Not so amazing. What is amazing is that they have to fork over 50% control to a Chinese Partner who may or may not do anything other than take the partnership monies, and pay the help...pocketing a good chunk on the side...so what was supposed to be pay of say, $1.00 an hour, miraculously gets knocked down to 37 cents an hour. Can we say embezzlement?
And the U.S. partner can't get rid of their Chinese "partner" who is usually a party princeling, or a PLA reservist who "owns" 50% of the operation...
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