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Danish Firms Want Bigger Slice of JSF Pie

Oct. 6, 2012 - 11:53AM   |  
By GERARD O’DWYER   |   Comments
Denmark's rankled industry chiefs claim the government has not done enough to help local companies win more systems and component contracts from the F-35 Joint Strike Fighter development program.
Denmark's rankled industry chiefs claim the government has not done enough to help local companies win more systems and component contracts from the F-35 Joint Strike Fighter development program. ()
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HELSINKI — Denmark’s center-left minority coalition has come under renewed fire from rankled industry chiefs, who claim the government has not done enough to help local companies win more systems and component contracts from the F-35 Joint Strike Fighter (JSF) development program.

Danish defense companies have secured a paltry $138 million in JSF-related orders since the Scandinavian country signed up as a Tier-3 partner in the U.S.-led stealth fighter jet development program in 1997, said Jan Jørgensen, CEO of Danish Aerotech.

“We have managed to scrape together a few small orders for ourselves, but it’s really peanuts,” Jørgensen said, adding that the industry view is that the government could be doing more to support defense companies in securing JSF contracts.

A total of $138 million in contracts is an even more meager return for Danish industry, given that Denmark has invested more than $210 million in the JSF program since 1997, said Unity Red-Green Alliance (URGA) Parliament Member Nikolaj Villumsen, a member of the Parliamentary Committee on Defense (PCD).

“Industry leaders had much higher expectations when we joined the JSF,” Villumsen said. “By 2009, the government was still talking about contracts for Danish firms potentially worth up to $4.5 billion. This hasn’t happened. The contracts that have emerged have been relatively small.

“The question must be asked if the money invested by Denmark in the JSF could have been spent more wisely by Danish governments to promote exports in other ways,” he said.

Danish Aerotech’s biggest JSF-related contract, signed in June 2011, covered the delivery of mechanical parts for the F-35. The company gave no value for the order.

The perceived low order flow from the JSF program has become a growing concern within Forsvars & Aerospaceindustrien (FAD), the Danish defense and security industry federation. Jørgensen is a member of FAD’s Danish Industry Fighter Aircraft Team steering committee, along with representatives from other major Danish defense companies, such as Systematic and Terma.

“Danish governments have probably been a little too unassertive and reluctant, compared to Norway,” Jørgensen said.

Despite the scarcity of JSF orders, Danish Aerotech hopes that order flows can gain greater momentum behind more cohesive and determined industry-government cooperation, Jørgensen said.

The URGA intends to discuss the concerns raised by Danish industry chiefs within the PCD in coming weeks. The government will be urged to offer more robust political support to the defense sector, Villumsen said.

No JSF Commitment

From the perspective of Denmark’s defense industry, the full benefit of the anticipated U.S. countertrade spinoff from JSF was to some extent pinned on the expectation that the government would likely select the F-35 as the Air Force’s next-generation fighter, said Troels Lund Poulsen, the Liberal Party’s spokesman on defense and a member of the PCD.

“The reality is that the fighter acquisition program is delayed, and even when it resumes, possibly in 2013, there will be two to three other candidate aircraft, apart from the F-35, in contention to win the eventual contract,” he said. “Denmark’s partnership agreement with the JSF never committed the country to actually buying the aircraft.”

The general uncertainty over the country’s fighter replacement program (FRP), and the outcome of any eventual aircraft selection process, is reflected in the slow flow of JSF-related contracts to Denmark thus far, Poulsen said.

A resumed FRP is expected to include four candidate aircraft, including the F-35, Boeing’s F/A-18E/F Super Hornet, Saab’s Gripen-DK NG and the Eurofighter Typhoon.

Denmark’s political connection to the JSF program has fluctuated in terms of the interest shown by governments in openly supporting bids by Danish companies, said Karl Strobel, a Frankfurt-based industry analyst.

“Large orders are unlikely to roll out of the JSF development program in the absence of a contract to purchase the aircraft,” Strobel said. “This has been the main difficulty for Danish subcontractors. Norway is also a Tier-3 partner that will purchase the F-35.

“Even so, the Norwegian government has battled long and hard to help industry win U.S. orders,” the German analyst said. “What Norway has achieved has come by way of hard negotiations, as can be seen by the many months of tough talking that preceded the U.S. agreeing to collaborate with Norway on integration of the Joint Strike Missile on the F-35. Denmark isn’t even a buyer partner.”

Shrinking Fighter Buy

The real countertrade value for Denmark’s defense industry will materialize once the Danish government selects a new fighter and confirms the number of aircraft to be purchased, Strobel said.

“The acquisition program initially covered the purchase of 48 aircraft,” he said. “For economic reasons, this was reduced to around 30 in 2011. The latest indications from the government suggest that the number will likely to be cut further to 22 before a decision on selection is made in 2014. The actual number will determine the long-term potential for countertrade gains linked to any purchase deal.”

Lockheed spokeswoman Laurie Quincy said Denmark “will continue to benefit from being a partner on the program as additional foreign military sales countries join the program.”

The company expects Denmark to make “in excess of $5 billion,” said Quincy, who also expressed faith in Denmark’s capacity to meet large-order requirements.

“The involvement of Danish companies will not be just in the construction of the aircraft, but in sustainment for the entire lifecycle of the program,” she added.

Michael Holm, CEO of Systematic, said he supports Jørgensen’s view that a wide gap exists between what the industry expected in 1997 in terms of orders, and what he describes as the “disappointing” flow of contracts since then.

“Danish industry had the expectation that we would enter the JSF project on an equal footing with U.S. industry,” Holm said. “In fact, as it turns out, that is not the case. We are not on an equal footing; we are seen as foreign and do not create American jobs.”

Defense Minister Nick Haekkerup has urged his country’s defense sector to be patient and continue to bid for JSF contracts.

“Denmark will continue to invest in the JSF. We still see significant contract potential for Danish firms. More contracts are in the pipeline,” the minister said in a statement.

Terma, the aerospace, aircraft and naval protection and surveillance systems group, has been the best performer in the country’s defense sector in securing JSF contracts. The company accounts for two-thirds of all Danish orders obtained thus far.

“We have invested some 200 million kroner [$34.6 million] in our aircraft parts production facility in Grenaa,” said Jens Maaløe, Terma’s CEO. “The orders from the JSF-project are the reason we have a plant there and can provide work for suppliers. Danish firms need to show more patience if they want to generate contracts from JSF.”

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Aaron Mehta in Washington contributed to this story.

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