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US Doubles Down on Foreign Military Sales

Jul. 19, 2014 - 03:45AM   |  
By AARON MEHTA   |   Comments
Working the Show: Frank Kendall, US undersecretary of defense for acquisition, technology and logistics, speaks July 14 during a press briefing on the F-35 at Farnborough. (CARL COURT/ / AFP/Getty Images)
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FARNBOROUGH, ENGLAND — The United States military-industrial complex, battered by budget cuts and drops in domestic procurement, made it clear at this year’s Farnborough International Airshow that it is targeting the world market as never before.

There were more than 230 US exhibitors at the show, ranging from major companies such as Lockheed Martin and Boeing down to producers of small avionics. The American presence was impossible to avoid, with large “International US Pavilion” signs hanging from many booths.

More subtle, but perhaps more important, was the presence of top US government officials, in what attendees said were unusually high levels compared to past events.

Among those who appeared at the show: Frank Kendall, the Pentagon’s acquisition chief; US Air Force Secretary Deborah Lee James; Sean Stackley and William LaPlante, the acquisition heads of the Navy and Air Force, respectively; and Gen. Frank Gorenc, commander of US Air Force Europe and Africa.

Certainly some of the US presence was driven by the expected international debut of the F-35 joint strike fighter at the show, an appearance that ultimately was canceled. But it was also a coordinated attempt by the Pentagon and other government entities to show support for US industry.

“I made a conscious decision within the last year, year and a half, to increase our participation in these shows,” Kendall told Defense News. “We think it’s important to industry we show there is support for our products.

“It’s a great opportunity to meet with our international partners and have great discussions and do a lot of meetings in a very short period of time. It also gives us exposure to a lot of technologies we wouldn’t see otherwise,” he said. “So there are a lot of good reasons for us to be here.”

James told reporters she is actively seeking better relations with industry to understand where the service can become more nimble in its interactions with business.

“I also care about an industrial base, and I’ve been trying to bring the message with me that we collectively are working to streamline processes and procedures,” James said. “Get away from as much rigidity as we’ve had in the past, think about doing our requirements a little differently and having a more open dialogue with industry to try and jointly work those problems.

“Exportability of our US products is important,” she added.

The large government support did not go unnoticed by industry.

“There is a very strong DoD presence at Farnborough this year and industry appreciates it greatly,” said Marion Blakey, president and CEO of the US Aerospace Industries Association (AIA). “International sales normally form the backbone of interoperability with our friends and allies, as well as helping to keep pricing and costs down and manufacturing lines open. In a constrained domestic budget environment, our member companies increasingly are turning to the international market.”

The US government was largely absent from last year’s Paris Air Show, something Kendall said was regrettable but unavoidable.

“We were in an incredibly tight budget environment when sequestration was implemented,” he said. “We were cutting readiness, we were cutting all of our programs back, so anything else was something of a luxury we couldn’t afford.”

“DoD’s absence at the Paris Air Show last year due to sequestration cuts did register very negatively,” Blakey said.

She thinks the department’s appearance at Farnborough reflects its understanding that last year hurt industry’s attempts to make deals abroad.

“Our government partners are increasingly aware that it’s very much in their interests to back industry as we compete for opportunities overseas,” she said.

Export Control a Hot Topic

Perhaps nothing summed up the US government presence — as well as the challenges still facing industry — like the July 14 panel, put on by AIA, to discuss export reforms.

It featured three major players in that realm: Ken Handelman, deputy assistant secretary for defense trade controls in the State Department’s Bureau of Political and Military Affairs; Kevin Wolf, assistant secretary for export administration at the Commerce Department; and Beth McCormick, director of the Pentagon’s Defense Technology Security Administration.

Those three have significant control over what can and cannot be exported by US industries, and their presence at the show stood in contrast to previous international trade shows.

“We have tried to show our face here so we’re not ‘these horrible people who control technology,’ ” McCormick said. “We have started to have a presence by our agencies at these kind of international events, and started doing so about a year ago.”

McCormick added that the “face-to-face” interaction with the international community at these events is helpful.

Industry members asked the trio questions about how reform efforts for US export policy are going, including longstanding agree­ments that restrict the sale of unmanned systems.

“There will be a lot to say in due course that is very helpful to exporters and also to our allies who have been hoping to take advantage of the very good technology US companies produce, but right now that process is still internal to the US government,” Handelman said. “We have listened to that, we know it is important for industry to hear that, but please stay tuned.”

For US industry, though, the longer export reforms drag, the more market share is disappearing to foreign competitors.

“We have a tendency to wait until the market is half gone before the bureaucracy finally understands that the horse is not only out of the barn, but someone else is riding it,” said Joel Johnson of the Teal Group.

The need for clarity on exports is something the international community is looking for as well.

“In general, they would like clarity about what we are able to do with them,” Kendall said. “They like a responsive system that acknowledges their need and gives them answers to the questions they have.”

Overall, Kendall said international customers are still looking to the US to supply equipment.

“The thing I hear very often is they think the US has top-quality systems, and business deals with the US, when in place, are executed as planned, and the US does a very good job fielding the systems,” he said. “There are a lot of things that are attractive about US products to allies and I hear that very consistently.

“The message I am trying to communicate [is] that the US is standing behind the products that are offered,” Kendall said. “The message I’m getting is there is a high demand for those products, [but] people want to see us do a more expeditious process of getting their requests resolved.”

The international market may be fertile, but US companies may find challenges expanding their business there — even with a full-court press from government leaders.

“I think it is always wise to remember that foreign markets don’t expand because US and EU manufacturers need them to,” Johnson said. “Markets for defense products, like all others, depend on two things: needs and resources to meet those needs. In every US build-down I’ve seen, the combined ‘capture goals’ of the US companies invariably exceeds total foreign demand.” ■


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