Wednesday, February 21, 2018

Lockheed-Martin’s Unexpected Leverage



Vincent J. Curtis

21 Feb 2018


At a major press conference held on Dec 11, 2017, senior government officials solemnly intoned noises that sounded like Canada’s fighter capability gap was under firm control.  Turns out, it’s not.

The press conference was held, ostensibly, to announce that the competition to replace Canada’s aging fleet of CF-18 fighter aircraft was open for bidding.  Secondarily, and of more immediate concern, was the announcement of the stop-gap aircraft that would fill the “urgent capability gap” of Canada’s air commitment to NORAD and NATO.   The void, until the new fighters were built, was going to be filled by used Australian F/A 18A’s of the same vintage as Canada’s collapsing fleet.

The government said that Australia had made a formal offer that would be subject to negotiation, but the expectation was that the first “classic” Hornets would begin arriving in January, 2019.

Turns out, January 2019 is not going to be the case.  Assistant Deputy Minister (Material) Patrick Finn later told CBC News that “a final agreement is still months away.”  The summer of 2019 would see the delivery of the first two Australian aircraft, and maybe one more in December, 2019.  And maybe those first two might get pushed back later into the fall.

This slow and paltry delivery rate of the tired replacements is because Australia won’t release an aircraft until they take delivery of a brand new F-35.  The release rate is one for one: as Australia gets a new F-35, Canada gets one of their older but still functioning Australian F/A-18s.  Canada’s interim replacements arrive at a pace determined by the delivery schedule of Lockheed-Martin for its new F-35!

Who knew that the delivery schedule of aircraft that the Trudeau team said it would never buy holds Canada’s fighter capability gap hostage.  If Lockheed-Martin were of a mind, they could put the RCAF out of business simply by slowing down their rate of delivery to Australia.  Considering that Lockheed-Martin is in the fighter replacement competition, this situation gives them an unexpected leverage over the government for that big contract of 88 replacements.  If Canada is to fulfill its treaty obligations in NORAD and NATO between 2020 and 2025, it needs eat crow and place its order with Lockheed-Martin quickly, or everybody but Australia will get its order for F-35s on time.

The Trudeau government put itself – and Canada - into this bind.  It was Justin Trudeau who said during the 2015 campaign that a Liberal government would never buy the F-35, without having a clue what else there was.  “We’ll hold a competition!” he promised, without understanding the lay of the land in respect of fighter aircraft manufacturing.  “We’ll put the manufacturers through their paces!  We’ll make them spend lots of money trying to prove to us that they deserve our business!”  Such were the implications of promises made on the campaign trail.

Then came another unexpected blunder that gave leverage to Lockheed-Martin.  The Trudeau team intemperately took umbrage with Boeing for the trade action it took against Bombardier.  The Trudeau government publicly embarrassed Boeing executives and lambasted Boeing the company for “harming Canada’s economic interests.”  For the sin of engaging in tough business practices, Boeing was denied the chance of supplying Canada’s interim replacements with new F/A-18E/F Super Hornets from its idle production line.  It ruined Boeing’s enthusiasm for participating in the competition for the big replacement contract.  And it placed Canada more firmly into the hands of Lockheed-Martin.

If, in 2023 and the Trudeau team is still in power, and it wishes to buy a Block III F/A-18E/F Super Hornet from Boeing as the replacement for the then clapped-out forty year old F/A-18A’s, it will get its choice of colour scheme, take it or leave it.  Lockheed-Martin will happily supply Canada with all the F-35s it wants as quickly as it needs them, while the rest of us enjoy the look of eating crow on the faces of the Trudeau team.

And if the Trudeau team, to avoid these obvious humiliations, chooses to go outside of North America to replace the fighter fleet, it will be surprised to discover interoperability problems with American-standards systems in NORAD.  The Saab Gripen E, for example, was designed first and foremost to protect the skies above non-NATO member Sweden, not above the vast spaces of North America.  Saab is a much smaller company with fewer resources and fewer examples in service than, say Boeing.  All the smaller car companies of the 1950s were squeezed out of business because they couldn’t compete against the Big 3, GM, Ford, and Chrysler, and the same thing is already happening in the fighter space.  Where are General Dynamics (F-16), McDonnell-Douglas (F/A-18) Grumman (F-14), and Fairchild-Republic (A-10) now?

Because of its lack of knowledge of the military world and its emotional responses to ordinary affairs of business, the Trudeau team placed itself at the discretion of the very industry it said it would exploit to Canada’s benefit.
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