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US Companies Look to Mideast To Pad Bottom Line

Sep. 3, 2013 - 08:12PM   |  
By PAUL McLEARY   |   Comments
In June, Boeing began delivery of 13 new CH-147F model Chinooks to Canada. Here, the first helicopter off the line demonstrates its capabilities Aug. 28.
In June, Boeing began delivery of 13 new CH-147F model Chinooks to Canada. Here, the first helicopter off the line demonstrates its capabilities Aug. 28. (Boeing)
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WASHINGTON — US defense companies, smarting from domestic spending cuts and looking overseas for opportunities, are rushing toward the Middle East to ink deals with regimes flush with oil money and looking to bolster their internal security.

On an Aug. 27 visit to the BAE Systems prototype facility in Sterling Hills, Mich., company executives told Defense News they are working with the US and Iraqi governments to negotiate the sale of 200 Bradley fighting vehicles to Baghdad sometime over the next 15 months.

The potential deal is expected to happen in 2014, and could come just before another expected agreement is reached with Saudi Arabia to buy Bradleys in 2015. The Iraq contract would provide brand new M2A2 ODS (Operation Desert Storm) variants to the Baghdad government, the same tracked vehicles the US Army National Guard uses.

“We’ve done all the upfront work for those sales,” said Mark Signorelli, vice president and general manager of vehicle systems for the company. He added that Iraq already has about 1,000 tracked M113 personnel carriers made by BAE.

The sale of the vehicles would be good news for BAE, which has been laying off employees in its Land Armaments sector since mine-resistant, ambush-protected vehicle sales dried up. But the decline in US defense spending overall is all but irreversible at this point, Signorelli said.

“We’re past the point where we can avoid layoffs,” he said at an event at BAE’s new glass-encased facilities.

Overall, the company has been forced to reduce staff from 650 employees to about 335 at the facility in Michigan, which mostly handles prototyping and research work for ground vehicles.

If the latest deals eventually go through, they’ll follow on about $4.3 billion worth of contracts the Iraqi government has requested in recent weeks from Washington for 50 General Dynamics-built Stryker infantry carriers and Bell helicopters, as well as ThalesRaytheon Systems and Boeing radars and radios.

There also is a pending $750 million deal covering maintenance work on Iraqi M113s, Humvees, M88s and other vehicles, which Signorelli said BAE will likely bid on as part of a team with industry partners.

BAE is concerned about the Bradley industrial base. Signorelli said the company has reached deals with the US Army to keep the production line in York, Pa., humming through 2014, but the work will run out about halfway through 2015.

“We mitigated the major risks in ‘14,” he said, but “we still can’t support the entire supply base. There will be layoffs.”

Elsewhere in the region, Libya, Saudi Arabia and Qatar head the list of countries looking to begin flying variants of the CH-47 Chinook helicopter in coming years, Boeing officials said Aug. 28.

If deals under negotiation between Boeing, the US government and these three countries come to fruition, projections are that at least 54 Chinooks would be shipped overseas, making up a good portion of the 168 Chinooks that foreign clients around the globe are considering buying in coming years.

In addition to the six CH-47D models and 16 CH-47Fs that Libyan officials are working on buying, Saudi Arabia has expressed interest in fielding one of the world’s largest CH-47F fleets, with at least 24 helicopters being considered for the oil-rich kingdom.

Mark Ballew, the director of business development for Boeing’s Chinook program, said the company is preparing to perform a flight demonstration in Saudi Arabia, and that Qatar is interested in buying eight of the F models, similar to the twin-rotor helicopters the company produced for Canada. They feature larger external fuel tanks and an upgraded electrical system.

Morocco, which purchased three D models, is talking about buying three more, and Egypt, which flies 18 D models, has inquired about buying six more from the US Army as the service retires them in the switch to the upgraded F aircraft.

Boeing also is involved in the competition for India’s heavy-lift requirement, which would mean 15 more F aircraft if the company wins.

The deals with these countries are still very early in the negotiation stage, Ballew and other executives stressed, adding that contracts for the birds aren’t expected soon.

Any deals several years down the road would be welcome news for Boeing, however, since the company’s $4 billion, five-year deal with the US Army for 214 more CH-47Fs ends in 2019.

That agreement would add to the 241 CH-47F helicopters the Army has in its fleet, eventually bringing the service close to its goal of 464 F models.

On Aug. 26, the US announced a $500 million deal to sell eight Boeing AH-64 Apache helicopters to Indonesia.

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