Economic Implications of European Security: A Perspective from the Boeing Company

Mr. Michael M. Sears
President, Military Aircraft and Systems, The Boeing Company

SHARING COMMON VALUES

NATO, the most successful alliance the world has ever seen, has lasted longer than any other alliance in this century. And we in America value it. We also value forums like the Workshop that help to build a better understanding of key issues and foster the kind of cooperation so essential in successfully meeting NATO’s enduring challenges.

Alliances that endure do so because the partners have shared cultural values. NATO partners believe in freedom, both political and economic, and in security. When called upon, they are ready to defend these beliefs. Our Alliance shares a common approach to military affairs and shares the same values in the way we do business.

But sharing goes both ways. That’s why, as a leading member of the international defense community, we at Boeing believe that understanding and cooperation have now become essential to industry’s ability to deliver high-quality, low-cost systems to our NATO forces. We must understand our military customers’ requirements and cooperate with local industry. Cooperation in the form of expanded industrial partnerships, we believe, is where true economic opportunities exist for NATO partners.

BOEING AND THE DEFENSE ACQUISITION PROCESS

When it comes to the defense acquisition process, we at Boeing believe we have several responsibilities:

• First, to really understand the objectives and requirements of our military customers—not to tell them what they should have, but to listen to what they want and need;
• Second, to turn loose our technological creativity;
• Third, to make the necessary investments in plants, equipment, and people;
• Fourth, to lead or participate in the best industrial team for each program;
• And fifth, to be relentless in our commitment to better quality and lower costs.

That’s what we’re in business to do. And therein lies one of the most important economic implications for European security.

When we look to carry out those responsibilities in the NATO marketplace, we understand that we cannot be effective in Europe unless we work at it day in and day out, on the ground, full time—not simply as a provider from afar, but also working with European governments, and as a partner with European industry. We must become part of the fabric of life in the communities and countries in which we intend to do business. Our Chief Executive Officer, Philip Condit, has said publicly on more than one occasion that Boeing must go further than it has ever gone before in expanding its international presence. And we must work vigorously to enlist cooperation and participation in the design, development, and production of new generations of aerospace products.

Plain and simple, we are committed to significantly expanding our participation in customer markets. In fact, the process has already begun:

• Boeing Company is an important export customer for many European countries. In the UK, for example, Boeing buys more aerospace exports than any single nation. In 1997, we bought 1.5 billion pounds’ worth of UK aerospace products, supporting over 70,000 UK jobs and more than 225 separate UK companies.
• Our partnership with the Czech Republic aircraft manufacturer Aero Vodochody is a signature example of the way we intend to participate globally. Through this partnership, we’re working hard to better understand the Czech Republic and its military and civilian markets. We’ve identified a partner capable of designing and producing high-quality, low-cost aerospace products that will help us compete more effectively around the world. Right now we are in the process of transferring 25 to 30 Boeing executives and technicians to work in this Czech aerospace company—day in, day out.

DEVELOPING GLOBAL PARTNERSHIPS

Establishing our presence among our European customers to better understand their expectations and requirements is one of the economic implications of European security. But it is only part of the answer. The products we in the aerospace industry provide NATO must be of the highest quality possible, at a price member-countries can afford. To do that, we in the industry must develop a network of global partnerships. And that statement leads me to one key truth: None of us can provide for the security of NATO alone. No one country, no single industrial enterprise, has all the know-how, all the resources, and all the answers. Whether it’s aircraft, missiles, or any other defense system, it is an industrial team that is out there developing and producing equipment that will do things never done before, at levels of reliability and accuracy never achieved before, and with cost pressures beyond any we have experienced before.

It is tough and demanding work—on the technical and the management sides of the equation. And to be done right, this work requires the best of NATO’s industrial base. None of us has a monopoly on leading-edge technology or brilliant scientists. That is not to say that competition is somehow going to go away. Competition will remain strong and tough, as it should. It will continue to make all of us in the industry better, urging us to find ways to advance technology, lower costs, improve program performance—and to deliver all that to our armed forces.

My main message is simple: Strong transatlantic industrial partnerships generate economic and technological benefits for all of us. These partnerships:

• Provide direct work on aerospace products;
• Advance the technological development of member-nations; and
• Strengthen economies.

And we all know that strong economies contribute immeasurably to the security of the Alliance and generate resources to focus on other important needs.

We at Boeing, and many of you in this audience, have seen it work. We have a history of developing successful partnerships with European industry, partnerships that have developed and produced some of NATO’s best peacekeeping equipment. These partnerships have also brought economic benefits to both sides of the Atlantic. For example, McDonnell Douglas, now the new Boeing Company, has been a close partner of British Aerospace for many years—each of us builds half of the T-45 trainer and half of the Harrier. These two programs are excellent examples of European involvement in products used by American defense forces. In the future, programs such as the Joint Strike Fighter will offer true growth opportunities for continued industrial and military cooperation of this kind.

There are a number of other successful industrial/military partnerships:

• The partnership of CASA, Alenia, BAe, and Boeing developed a radar-equipped Harrier—the Harrier II Plus, which is in service in Italy, Spain, and the United States.
• GKN Westland in the UK is building 67 Apache helicopters. Boeing in Mesa, Arizona, produces Apache kits, powered by Rolls Royce engines, and nacelles and horizontal stabilizers are built by Shorts in Northern Ireland. Assembly is in Britain. Westland is the prime contractor; Boeing is the sub contractor. This is a partnership all the way around.
• Then there’s the Harpoon. Many of us here know that the Harpoon anti-ship missile system is the result of a leading long-term international development and production collaboration.

Boeing partnerships on the commercial side are just as striking:

• Snecma builds the engines for our next-generation 737—a program expected to generate about $7 billion in revenue for Snecma during the first eight years of the program.
• Half of Boeing’s newest jetliner, the 100-passenger 717, is built by European companies, including Austria’s Fisher Advanced Composite Components.
• The Boeing Commercial Airplane Group expects to provide almost $14 billion in revenues to European partners over the next five years, supporting more than 90,000 jobs in Europe annually.
• The International Space Station, a 16-nation partnership, has 11 partners from the European Space Agency.

All told, Boeing works with more than 435 European companies, large and small, in 19 countries. We are the prime contractor on some programs and a subcontractor on others—just as it should be. And from all of this work, from our perspective, it is abundantly clear: When we “think global” and “act global,” our customers get the highest quality product, produced by the most skilled teams, wherever those teams may be, and they get it at the best price.

CONCLUDING REMARKS

Understanding our customers and their requirements, developing transatlantic links and industrial partnerships, providing higher-quality and lower-cost defense systems—to accomplish all this takes time, and it takes dedication, commitment, and vision. The commitment is demanding, but the rewards are worth it. If we do our jobs right, the security benefits for NATO, and the economic opportunities for its member-countries, will continue to grow. And we can all look forward to the new century with hope and confidence in the future of this great Alliance.