Ellen Lord, president and CEO of Textron Systems (Textron Systems)
WASHINGTON — Q. Textron has been very vocal about its efforts to increase non-US business. What’s the strategy been and how has that process worked?
A. We actually have been consistently building our overseas sales for the last five years. It was part of a strategy we had knowing that domestic spending would be constrained moving forward, as we’re seeing and knowing that we have fielded multiple products through the US armed services that would definitely generate interest overseas.
For example, we have been selling our air-to-ground 1,000-pound smart sensor-fuzed weapons quite a bit in the Middle East. We’ve sold to the United Arab Emirates, we’re executing a contract right now with Saudi Arabia, we’ve also sold to India, and we’re discussing sales to [South] Korea.
We are very much focusing on the Middle East and Asia.
Q. You’re not alone in targeting those international markets as US budgets look grim. What are you doing to give Textron a leg up on the competition?
A. Our strategy has always been to be close with the customers, and what we’ve done over the last year is really rethought our business development organization. Instead of having people flying over from the States to our customers overseas, what we’re doing is putting people in country, so we have a Textron employee in Riyadh, we have one in Abu Dhabi, we have one in Stuttgart, and a variety of places around the world. We’re doing more and more of that so that we are a part of these communities, and we really understand the dynamics of what the requirements are and so forth.
Q. That emphasis on a local presence is something that European companies have touted for some time, saying that it gives them an advantage in an increasingly international defense market. They argue that it’s difficult to gain that local foothold in a short timeframe. Has it been difficult to create those kinds of local bases?
A. I believe one has to think carefully about the individual that you put in country. You want someone who speaks the language, who hopefully has had experience there. We find when you have individuals with strong military backgrounds, it’s helpful. It’s just a process of understanding what the requirements are for the job, and then going and sourcing the correct individuals.
Q. Where are you seeing the most interest on the international market for UAVs, and what types of products are the most sought after?
A. There is interest for lots of different sizes and capabilities for UAVs, so we are talking about sales of actual products, as well as fee for service. We’ve had successful programs in Sweden, for instance, where we had Saab as our prime; that was an excellent relationship on Shadow. We are getting very close to making some deliveries in Italy.
Q. Where are you investing your research and development (R&D) dollars right now?
A. We are being very thoughtful about R&D dollars in the environment in which we’re in because we often see now that we’re not going to get the development dollars from our customers, so we have to demonstrate a capability before someone buys. So we’re taking a lot of our R&D dollars and focusing on new variants of established products.
What we’re trying to do is give our current customers the capability to upgrade what they have in their installed base. Basically, [we’re] making an incremental investment and getting a step function change in capability.
We are continuing to come up with new products and we may sell some of those products internationally initially, and the hope and expectation is those lines will still be hot and we will still have new improvements coming off of them that our domestic customers will buy when the money comes back in some areas.
Q. How has communication with the Pentagon been recently? Are you getting the feedback you need?
A. I find with all of our customers, they are making a huge effort to communicate. Let me give you an example. I was at [the Association of the US Army conference], and I was astounded by the number of general officers that attended and made an effort to stop by, even if they didn’t have meetings and really spend time in discussions focused on our products, our concerns, our questions. I found that same thing at [the Air Force Association conference], and I see industry days now that are happening at the [combatant commands]. In this environment, what I’ve seen is that each of the services is making a huge effort to reach out to industry because they understand that it’s a partnership and we need to get through this together.
Q. What are you projecting as far as the US defense budget?
A. I think no one knows for sure, but it appears that in ’14, everyone is planning for budgets that are down, that we’re going to see sequestration continue. I think it’s healthy that we’re seeing the services look at those cuts and actually plan those cuts. Everybody is being pretty direct about what might be at risk. So we’re looking for cuts, frankly, and trying to understand what the priorities will be and what the opportunities will be.
Q. What do you think those opportunities will be?
A. I think it looks like anything that’s involved in intelligence or cyber are opportunities. So we look at that and look at what we have to offer and are trying to gear it that way.
I think there are opportunities for manned/unmanned teaming moving forward. We believe that there’s an opportunity with fewer aircraft out there to really take some of the unmanned systems to go out and be eyes on the ground as to what’s happening, identify targets. And really, the way to do that is to provide streaming video, not only back to ground stations but right into the cockpits of helicopters, so that you can bring weapons and put them on target without initially putting those helicopters in harm’s way. I believe there are assets today, deployed, that can do that with minimal upgrades.