Keeping War Fighters Warm
Small Finnish Firm Has Big Client: U.S. Air Force
By GERARD O'DWYER
Published: 23 November 2009
HELSINKI - For U.S. companies, selling products and services to the U.S. Department of Defense (DoD) can be highly demanding. For a small supplier based in Finland, that same mountain to climb can be initially daunting, yet potentially fruitful.
Polartherm has established itself as Finland's biggest supplier of defense equipment to the U.S. Air Force (USAF), not a bad accomplishment for a minnow-sized company with 65 employees and annual sales of about $22 million. The privately owned company delivers portable aircraft air heating units and military shelter heating units to the Air Force, and with further orders in the pipeline, its USAF contracts carry a potential value of $100 million.
Polartherm's attainment of niche supplier status with the USAF required painstaking attention to detail and endurance. But the broader benefits transcend the pain by giving the company a strong sales foothold in the United States, and a valuable reference in pursuing defense contracts in Finland and globally, said Paavo Sorvakko, the company's CEO.
"Having a history of repeated contracts with the USAF, our equipment having passed the rigorous testing required prior to approval for delivery, and with 8,000-plus aircraft heaters and shelter heaters in use, the doors are open to all NATO air forces," he said.
"The USAF alone needs more ground support heating than [all] other allied air forces combined," Sorvakko said. "On the other hand, the shelter heaters are a different story: Those are needed not only by the Air Force but increasingly by ground forces deployed in cold areas requiring portable personnel and support shelters."
The USAF is Polartherm's biggest customer. The company also has exported heating products to South Korea and Singapore, aside from sales to Finland's military.
Lucky Strikes
Polartherm's sales track record with DoD demonstrates how European niche players can overcome their initial misgivings to successfully sell to the United States, said Erik Petersen, a Copenhagen-based industry analyst.
"For niche product suppliers, and especially those looking to sell to the U.S., success is often a question of having the right product at the right time," Petersen said. "It's not easy for European companies, whether big or small, to win U.S. defense contracts. What Polartherm proved is that by dealing with the fear factor, and persisting, success is possible."
Sorvakko described Polartherm's initial contacts as a "real strike of luck."
"When the USAF decided to renew their total fleet of ground support heaters in 1997, the Warner Robins Air Logistics Center conducted a market survey to find potential manufacturers," he said. "They came across a Polartherm advertisement in an airport trade magazine and faxed us with a capabilities survey. The rest is history."
The logistics center is at Robins Air Force Base, Ga.
Polartherm had a second strike of good fortune, since the logistics team assigned to the new-generation ground heater (NGH) procurement project consisted of seasoned professionals given the task to secure the best-value product, Sorvakko said. "With that in mind, they were willing to take the risk with a foreign company with what they saw as the best available technology."
Polartherm is the prime contractor in all three of its current contracts with the USAF. The "steep learning curve" it went through during its initial USAF contract was pivotal in managing subsequent orders, Sorvakko said.
"Being a first-timer, we had lots of things to learn," he said. "I have been told repeatedly that being a small operator has, if executed correctly, its benefits, too. Perhaps the most significant is that the contractor's decision-makers are always present in person during negotiations. ... All decisions can be made on the spot."
The company's annual defense sales are expected to grow in future years. During the past 10 years, defense sales have contributed between 45 percent and 60 percent of Polartherm's total revenues, the CEO said.
"Globally, we are the leading supplier of aircraft ground support heaters," he said. "I would say that more than 50 percent of all military [ground support] heaters currently in use have been produced by us."
The sales and market expectations for shelter heaters present a higher challenge.
"We still have a lot of ground to cover. Despite the success with the USAF, it has proven difficult to open discussions with other services within the [Pentagon]," he said, adding the company is seeking to modify its heaters to meet the needs of the U.S. Army and Marine Corps.
The market for military heaters contains a handful of main players, said Jan Eriksson, a technology markets analyst with Stockholm-based Swedbank.
"Price is a huge element in the military heater segment," he said. "Polartherm's main rivals include the U.S. company Hunter, Denmark's Dantherm and DRS Technologies, another U.S. supplier. In purely sales terms, Polartherm is smaller than its U.S. competitors, and yet the most successful in its niche areas and USAF contract victories over U.S. opposition."
Besides defense, the company serves the markets of commercial aviation, construction and agriculture. It has a production center in Kokemaki, Finland, and a U.S. plant in Valparaiso, Ind.
Polartherm will target the military market as its main strategic area, Sorvakko said. The company plans to broaden the array of products that it offers to armed forces, including artillery cleaning equipment geared to 20mm to 155mm cannon barrels. These systems are in use with Finland's Army, Navy and Air Force.
The company's immediate focus is on deliveries planned next year of improved NGH units to the U.S. Air Force. Polartherm hopes it can achieve sales to DoD in excess of $30 million over the next three years.
Sorvakko said he believes more small European companies can successfully bid for U.S. defense contracts. The X-factor is a "willingness for risk-taking," he said.
"The key word is niche. The DoD needs a huge variety of products and services. You only need to look at the FedBizOpps Web site to be able to see that," Sorvakko said. "Many Finnish companies are technically very advanced in their field and would, at least technically, stand a very good chance against U.S. domestic competitors." ■
E-mail: godwyer@defensenews.com.
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