Center for Strategic Decision Research



International Cooperation: Providing the Technologies

Mr. Stefano Bortoli
Co-Director General for Strategies, Business Development, International
& Military Sales, Alenia Aeronautica, S.p.A.

During the past 10 years, the defense and aerospace industry in Europe and North America experienced vigorous consolidation, a process that has led on the one hand to the formation of giant conglomerates that are active worldwide and on the other to the start-up of many joint ventures and other forms of industrial cooperation. While the former has been unanimously greeted by economists, politicians, and public opinion as both necessary and welcome, industrial cooperation continues to be the subject of debate and sometimes criticism.

The question I should like to address today is this: Is there an alternative to cooperation between companies in a sector such as aerospace and defense? This is the real question we need to ask when looking at this subject.

We in the industry, at least as far as Europe is concerned, have already answered this question and the answer was a resounding “No.” There is no alternative; yet today this is not a sign of weakness on the part of the old continent but, rather, a sign of our strength. From Eurofighter to EH101, from NH90 to A400M, from ATR to Airbus and the Meteor missile, not to mention the Galileo satellite, we have an entire series of programs that are without rival in the world, programs that represent the state of the art in the industry and the finest technological and operational solutions for satisfying the ever-more-stringent requirements of both the civilian and the military fields.


Let’s cast our minds back down memory lane to Concorde or, even better, to Tornado and remember how European industry set this process in motion more than 30 years ago in the face of great political difficulties, bitter debate among the various political and social players and leading columnists, and the need to raise huge financial investments. The result of that decision is that we have succeeded in developing systems that both technologically and operationally are at the leading edge.

Put very simply, the aerospace industry was forced in the past to cooperate on the international level in order to foster innovation, stand at the forefront of technology, and invest in research and development in order to guarantee its own future. And that is what it must continue to do today.

Seen from this perspective, the subject of security requires us to reflect on a number of points. It is obvious that without guaranteed stability and security, there will be no economic or industrial progress. Security, therefore, is and must be a key objective for every government; but it is an objective that requires enormous resources and that today more than ever represents the final aim of seamless, indivisible, global well-being. Any initiative that seeks to protect and defend what security implies must be promoted and supported.

Since the end of the Cold War, there has been without question only one single superpower left on the international stage, the United States of America. Its economic, industrial, and military power is without equal in the world. In some cases, this power has as its companion a certain isolationism, which, in the eyes of some observers, is due in part to the inability of other countries, including those usually counted among the ranks of the technologically advanced, to keep up with the pace of American technological innovation and strategic thinking. At the same time, there are others who maintain that American isolationism is a specific strategy, one that reflects the unwillingness of the United States to accept the multilateral approach or to adapt to it only on a limited basis—the so-called coalition of the willing concept—and otherwise refrain from broader dialogue of any kind.


For years the question of whether Europe is capable of bridging the transatlantic gap in terms of military investment and therefore technological capabilities, especially when it comes to funding for research and development, has been the subject of much discussion. Since September 11, in view of the financial effort made by the United States and the relative stagnation of the budgets of the states in the European Union, this gap has become even wider.

As we have seen, Europe’s defense industries, especially Italy’s, have partnership in their chromosomes. As far back as the First World War, Italian and French industry cooperated in defining, developing, and producing aircraft that were flown successfully during the Great War. With the end of the Second World War and the disastrous post-war situation, Europe found itself forced, one might say, to cooperate in terms of defense, albeit at first with the financial support and under the guidance of the United States.

The NATO G.91 competition; the production of the F-104 on the old continent; the first bilateral programs such as Transall, Atlantic, and Jaguar; the Puma and Gazelle helicopter programs; and, on the civilian front, the first shy steps toward industrial collaboration marked by Mercure and, as I have already mentioned, Concorde—these were the forerunners of what is today an unquestionable reality: Europe’s defense industry does work together, sometimes with a certain amount of difficulty but always on the basis of a decades-old common interest and shared operational conditions that by now are consolidated at every level, from the young engineer who has just been hired to the armed forces to our governments, who in the face of lean defense and R&D budgets know that they have no choice.

In Europe, despite the fact that there still is some resistance to what should be by now an evident state of affairs, we have progressed very rapidly from being independent companies, each capable of developing its own advanced aircraft in complete autonomy, to forming a network of companies whose pooled capabilities have created systems that are successful in the market and that represent the leading edge of technology. And it cannot be denied that those who were unwilling or unable to take part in this great experience are now really feeling the pinch.


Europe’s defense industry has had to take up two major challenges, the one following the other in relatively short order. The first, which emerged during the early and middle 1990s, was how to reconcile the gradual budget shrinkage following the end of the Cold War with the need to provide systems that would meet the operational requirements of our governments. The second, which came out of the new, post-2001 strategic scenario and which continues to emerge today, is how to accelerate the process of orientation toward the innovative, so-called enabling technologies.

Industry responded to the first challenge by initiating a robust rationalization and consolidation process to create economies of scale and pool capabilities and resources. Our flagship corporation, Finmeccanica, of which Alenia Aeronautica is a wholly owned subsidiary, was a leader in this European process, assuming the role of strategic aerospace and defense player in Europe and forging collaborative partnerships for structural agreements and programs with other European partners. In turn, Alenia Aeronautica has played a key role in the main European programs, either as a full partner, such as in Tornado or Eurofighter, or as a major subcontractor promoting its own technological capabilities, as with Airbus.

Europe’s defense industry is responding to the second challenge by launching an internal reorganization process designed to put itself forward to the end user as a supplier of complex solutions and systems architectures capable of meeting government’s security and defense requirements. Here, too, Finmeccanica, as Italy’s leading high-technology group, is committed to asserting its own identity by focusing on its core business—aerospace and defense—and by forming strategic alliances and strengthening its own areas of excellence. And what are the group’s recent acquisitions, such as its acquisition of 50% of AgustaWestland, the agreement with Alcatel in the space sector, and the agreement with BAe Systems in the key defense electronics sector, if not the clearest signal of the determination of Italian industry to continue down the road of industrial cooperation?

The acquisition of a company cannot, however, determine a sudden change of mind or an operating method if it is not accompanied by a clear desire for integration at all levels. This is exactly what is required in these huge partnerships, those that have successfully developed such excellent systems as today’s Eurofighter. This intra-European dynamic is mirrored in the Finmeccanica Group’s determined targeting of the United States market, in which our presence is now taking the form of structural investment. This includes, for example, the recently opened AgustaWestland plant in Pennsylvania; that company’s successful bid, together with Lockheed Martin, in the US101 program for the future presidential fleet; and, above all, since Alenia Aeronautica itself is involved, the competition for the U.S. Army and U.S. Air Force Joint Cargo Aircraft in which we are tendering our C-27J twin-engine tactical transport aircraft. To achieve this goal, the Global Military Aircraft Systems (GMAS) Team, a joint venture developed together with L# Communications and Boeing, is proposing an aircraft with outstanding operating characteristics, the only one in its category on the market that has been specifically designed for tactical transport. In practice, with this program, Alenia Aeronautica is promoting an industrial cooperation model in the United States that has already been thoroughly tested and that would have Boeing not as prime contractor, as many would have expected, but simply as a partner capable of contributing its own specific industrial and production experience to the success of the program.


Alenia Aeronautica and Boeing know each other well. We have worked together for over 40 years, starting from the days of the DC-9 of what was then Douglas and gradually gathering momentum through the B767, B777, and B757 programs right down to the great B787 Dreamliner project of today, an innovative program for which Boeing has chosen the path of international collaboration in a decisive step forward in its relationship with its partners. The fact that most of the fuselage—which, with its structure made entirely of composite materials, is surely the most innovative component of the new aircraft—is to be produced in Italy is a clear sign that Boeing has fully absorbed the joint venture culture.

Unfortunately, the same cannot always be said of other transatlantic programs, and here I would like to return to isolationism, which I mentioned earlier. The fact that the Joint Strike Fighter program has had problems is no industrial secret. Steered from the start by Lockheed Martin, the program has been characterized by an innovative approach to cooperation, one based on an investment requirement that did not use traditional offset policies but instead called for competition between the venture partners for components and systems to be developed within the framework of the project. This approach called for a considerable initial commitment by the governments that decided to join the project and then by the companies themselves.

But the approach has had difficulty surviving the normal everyday shifts in policy, those due to changes in government needs and desires, especially considering the number of countries involved. Indeed, it is not hard to understand why, in the face of their own domestic industry and domestic public opinion, the Netherlands, Norway, Turkey, the United Kingdom, and Italy are underlining the need to have, alongside the partners, a specific, precise investment program. The history of successful European cooperation shows that the prime contractor’s readiness to grow in technological terms along with its partners leads to a successful product. In practice, only a network of cooperation will bring the desired results.

We too accept the fact that the time of the offset being a magic word for gaining market entry anywhere and at any time is approaching the end of its useful life. The world of the aerospace industry is evolving—today we have to follow another model. Cooperation must start at the project definition phase, involve the partners in development, and favor real growth in technological capabilities, not just in industry but also at the universities and in the fundamental research and development sector. This will enable us to respond immediately to the demands that will come from our political and military authorities and from civil society.

On this foundation rests the starting point for a new phase in the process of consolidating Europe’s aerospace and defense industry and in its collaboration with partners from across the Atlantic, a relationship that holds the promise of making the systems still more efficient and competitive. This process can be stimulated and facilitated by our European governments through procurement action, where far-reaching reforms are needed so that we can move toward a Europe whose armed forces are organized on more rational lines, a Europe that, if not exactly united, will at least be a little more relevant on the geopolitical stage. It can also be facilitated through research and development to reduce the handicap our companies inevitably have when facing their American counterparts.


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