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WASHINGTON — The US Navy’spush to increase the lethality of the

littoral combat ship (LCS) is get-ting a major and somewhat unex-pected boost with word that an

over-the-horizon (OTH) surface-to-surface missile will be installedon-board the next LCSs to deploy.

Rear Adm. Pete Fanta, directorof surface warfare at the Pentagon,issued a directive on Sept. 17 call-

ing for the installation of an un-specified OTH missile aboard theFreedom and the Coronado, the

next two LCSs scheduled for de-ployment. The Freedom is to de-

ploy to the Western Pacific duringthe first quarter of calendar year2016, while the Coronado is to fol-

low in the second or third quarter.“The objective is to install the

See LCS MISSILES, Page 6

US Littoral Combat Ships To GetMissiles for Next Deployment

By CHRISTOPHER P. CAVAS

MC2 ZACHARY BELL/US NAVY

More Lethal LCS: A Kongsberg Naval Strike Missile launches from the LCS Coronado ina simple test demonstration. Operational installations of the NSM and the BoeingHarpoon are expected to be made on the LCSs that will deploy in 2016.

WASHINGTON — Adm. John Rich-

ardson, in office as the US Navy’schief of naval operations (CNO)for just over a month, has spent

nearly half of that time on a worldtour, traveling to Hawaii, Japan,South Korea, the Arabian Gulf and

Italy to gauge the state of globalseapower and meet his interna-tional counterparts.

He’s also been assessing the ac-tivities of the Russian and Chinese

navies, both of which are challeng-ing the international scene in nu-merous ways. Richardson was

asked about a Chinese admiral’sclaim in early September aboutone tension point, the South China

Sea, where China has been build-ing island bases and where territo-rial disputes involve several

nations.In those remarks, Vice Adm.

Yuan Yubai, commander of the

Chinese Navy’s northern fleet,said, “the South China Sea, as thename indicated, is a sea area that

belongs to China. And since theTang Dynasty a long time ago, theChinese people have been work-

ing and producing around the seaarea.”

In that Sept. 14 address, Yuan

also spoke of China’s efforts to be-come a guarantor of safe passageover international waters — a role

long embraced by the US.

Richardson isn’t buying it.“What is coming into clear focus

is that the defendant of the guaran-

S. China SeaIs ‘Everybody’sSea,’ New US CNO Says

By CHRISTOPHER P. CAVAS

See RICHARDSON, Page 6

WASHINGTON, VICTORIA, British Co-lumbia, LONDON, PARIS and TEL AVIV— In a move that promises toshake up the fighter jet market,

Canada’s new Liberal Party gov-ernment is widely expected to pullout of the Pentagon’s F-35 pro-

gram.

Although the remaining interna-tional partners are standing by

their commitment to the Joint

Strike Fighter, Ottawa’s potential

exit is not exactly a vote of confi-dence in the fifth-generation fight-er jet.

If Justin Trudeau, the newlyelected prime minister, follows

through on his pledge to cancel the

country’s planned 65-plane pur-chase, Canada would become thefirst country to reject the fifth-gen-

eration fighter – and, potentially,the first industrial partner to with-draw participation in the program.

Such a move would reverberateacross the globe, with all remain-

ing partners forced to pay higher

prices for F-35s.For Canada’s supply base, the

stakes are high. Many Canadian

companies have spent years build-ing components for the new planeand stand to lose as much as

CDN$11 billion (US $8.3 billion) inwork over the life of the jet.

On the other hand, the new Liber-

al government argues that an opencompetition for Canada’s fighter-jet replacement would more than

make up for the loss of the F-35business.

Trudeau does not become prime

minister until Nov. 4, and details

about how he will proceed with thewithdrawal from the F-35 program

are still unclear.

See CANADA F-35, Page 7

Canada’s F-35 Pullout WouldShake Up Fighter Jet Market

STAFF REPORTS

EUROPE

A New Cold War?The growing presence of Russianand NATO forces in the Mediter-

ranean and Black Sea regionsrecalls earlier East-West confron-tations. Page 4

NORTH AMERICA

Studying the StructureThe National Commission on theFuture of the Army is peering

deeply into operational and struc-tural issues. Page 10

11 US: Global naval activity surges.

ASIA & PACIFIC RIM

Eyeing Radar UpgradeSouth Korea seeks global help to

develop active electronicallyscanned array radar. Page 16

MIDDLE EAST

Future ArmorIsraeli company is producing thefirst prototype of a future fightingvehicle. Page 4

INTERVIEW

Maj. Gen.Guy ZurThe commander,

Israel GroundForces Com-mand, discusses

his Ground Horizon concept forthe IDF, lessons learned from the

Gaza War and joint force combat.

Page 22

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www.defensenews.com October 26, 2015 DefenseNews 3

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InBrief

WASHINGTON — Despite concernsover the safety of lightweight pi-

lots flying the F-35, the vast major-ity of pilots do not face excessiverisk of neck damage during an

ejection, the chief of the Penta-gon’s Joint Program Office (JPO)argued in front of Congress.

In response to questioning fromRep. Jackie Speier, D-CA, rankingmember of the House Armed Ser-

vices oversight and investigationssubcommittee, JPO chief Lt. Gen.

Christopher Bogdan said there isno elevated risk of injury for F-35pilots “in the heart” of the weight

range during an ejection.“We have done the risk analysis

on the test points that we have had

on the ejection seat, and what wehave found is the only area wherewe have a problem today is with

the lightweight pilot below 136pounds,” Bogdan said during anOct. 21 hearing of the House

Armed Services tactical air andland forces subcommittee. “Butthe areas that we have tested indi-

cate that, in the heart of the enve-

lope, for the heart of the pilot

population, there is not any in-creased risk of injury at all.”

Bogdan’s remarks appear to con-

flict with a recent Air Force state-ment that acknowledged an“elevated level of risk” for pilots

between 136 and 165 pounds. Thestatement noted that the risk ofcritical injury during an ejection is

higher for the F-35 seat than legacyfighter ejection seats.

“While the probability of an ejec-

tion in this slow speed regime re-mains very low, estimated at one in

100,000 flight hours, the risk of acritical injury in that circumstanceis currently higher than legacy

fighter ejection seats,” accordingto the Oct. 16 statement. “The AirForce has accepted risk of similar

magnitude in previous ejectionseats.”

Based on the remote probability

of an ejection, the airworthinessauthorities recommended — andthe Air Force accepted — allowing

pilots between 136 and 165 poundsto continue operating the F-35, thestatement notes.

That same statement officially

announced that Air Force leadersrecently decided to restrict pilots

weighing less than 136 poundsfrom flying the plane due to con-cerns about ejection safety, a deci-

sion first reported by DefenseNews on Oct. 1.

During the hearing, Speier re-

ferred to reports that an internalPentagon assessment found a 23

percent chance of major injury ordeath for F-35 pilots between 136and 165 pounds during ejection.

Bogdan refuted those reports be-fore the panel.

“Ma’am, that is incorrect. The da-

ta that you have came from a re-porter who got a copy of anofficial-use-only internal DoD doc-

ument that my team put togetherto assess the risks of a lightweightpilot and a pilot between 136 and

165 pounds. That document shouldhave never been publicly re-leased,” Bogdan said, referring to a

recent Congressional Quarterly ar-

ticle.Bogdan went on to lay out the

probability of neck injury for F-35pilots in different weight classes. Apilot who weighs less than 136

pounds has a one in 50,000 chanceof neck injury from an ejection,whereas one between 136 and 165

pounds has a one in 200,000chance of incurring the same dam-

age, he told the House panel.But after the hearing, Bogdan

said these figures account for the

low probability that a pilot willhave to eject at all and not the like-lihood of injury in the event of an

ejection.“So the 23 percent is when he

ejects, but the probability of that

[pilot ejecting] is one in 200,000,”Bogdan said, adding that the latterfigure “is no different than the risk

that we see in legacy airplanes to-day.” N

Email: lseligman@defensenews.com

Bogdan Denies ExcessiveRisk to Most F-35 Pilots

By LARA SELIGMAN DARIN RUSSELL/LOCKHEED MARTIN

No Excessive Risk: The chief of the Pentagon’s Joint Program Office argued in front of

Congress last week that most pilots do not face excessive risk of neck damage during an

ejection.

$784M Radar ContractLockheed Martin has beaten out

Raytheon and Northrop Grumman

to build a new long-range discrimi-nation radar (LRDR) for the Mis-

sile Defense Agency, a vital

component to intercepting possi-ble intercontinental ballistic mis-

siles from North Korea and Iran.

The Missile Defense Agency(MDA) awarded a $784 millioncontract to build the radar.

MDA leaders have called the ra-dar one of their biggest priorities inbeefing up homeland ballistic-

missile defense, along with im-proving the Exoatmospheric Kill

Vehicle, a key part of the Ground-based Midcourse Defense Systemin California and Alaska.

The radar is expected to be posi-

tioned in Alaska.

A Pitch for the RafaleDassault Aviation Chairman Eric

Trappier said he had written a let-ter of congratulations to JustinTrudeau, the expected new elected

Canadian prime minister, andpitched an offer of the Rafale fight-er if Ottawa pulled out of the US

F-35 program.

“We have to wait and see what hedecides now he is in office,” Trap-

pier told the association of aero-

space journalists. “I wrote a letterto congratulate him and to remind

him that if the F-35 were canceled,the Rafale would be potentiallyproposed.”

Dassault sees India as the nextexport client for the Rafale, he

said.The French aircraft builder

hopes a deal for 36 Rafales will be

sealed with India by the end of the

calendar rather than the financial

year.

NATO Official: ‘Arc of Instability’ A senior NATO figure has con-

ceded that “more could be done” toimprove cooperation between the

alliance and the European Union.Gen. Petr Pavel, chairman of

NATO’s influential Military Com-

mittee, said during a hearing in theEuropean Parliament that EU ca-

pabilities could better comple-

ment NATO’s military efforts. TheCzech official also said that the se-curity environment has changed to

the “most complex, unpredictable,and challenging security situationEurope has seen in decades.”

“It is not a moment, but an era,”Pavel said. “For us at NATO and for

the European region, this situationmaterializes through two distinctsecurity challenges, the East and

the South. There is an arc of insta-

bility surrounding much of

Europe.”

Dispute Over Iran Missile TestRussia’s UN envoy questioned

US and European claims that Iran’srecent missile test violated UN res-

olutions, saying the test-launchshould not be treated as a “sensa-

tional” issue, according to Agence

France-Presse.Britain, France, Germany and

the United States asked a UN Secu-

rity Council sanctions committeeto investigate an Oct. 10 test-launch of a medium-range missile,

calling it a serious violation. ButRussian Ambassador Vitaly Chur-kin indicated that Moscow had

made no such determination.US Ambassador Samantha Pow-

er told the council that the medi-um-range ballistic missile wascapable of delivering a nuclear

weapon. N

FOR THE RECORD

n Heidi Shyu, US Army assistant secre-tary for acquisition, logistics and technology,discusses budgets, development of newtechnology, equipment modernization andsupplying troops worldwide.n Mackenzie Eaglen of the AmericanEnterprise Institute and Todd Harrison ofthe Center for Strategic and InternationalStudies discuss what’s next for the budget,debt limit and new house leadership.TV.DefenseNews.com

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On the WebRussia Shows Early Success, New

Capabilities in Syria

After a week of heavy ops over Syria, Russia’sAir Force is scaling back efforts to so it cananalyze progress and identify new targets.DefenseNews.com

On VideoDefense News TV: Russia and Europe

Lt. Gen. Ben Hodges, commanding general ofUS Army Europe, discusses Russian military ca-pabilities and the needs of US Army Europe.DefenseNews.com

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cept in Europe

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4 DefenseNews October 26, 2015 www.defensenews.com

WorldNews

TEL AVIV — Israel’s Tank Produc-

tion Authority is producing its firstprototype of Eitan, an eight-wheel-drive armored fighting vehicle de-

signed to weigh nearly half asmuch as the new Namer heavy car-rier.

The locally developed Eitan —Hebrew for “steadfast” — will bedeployed alongside new Namers

and will replace old M113s that stillsupport the bulk of Israeli infantry.

Sources here said it will weighno more than 35 tons and will in-corporate a new generation of ac-

tive protection, an advanced turretand a full complement of muni-tions and sensors.

Field demonstrations are slatedto begin by the end of next year,

with initial serial production ex-pected to begin by 2020.

“It will be a lot lighter [than Nam-

er] and will be designed to cost,”said Maj. Gen. Guy Zur, command-er of the Israel Defense Forces

(IDF) Ground Forces Command.“It may be less good [than the Nam-er], but it will be affordable and al-

low us to equip a large part of ourforce.”

Defense and industry sources

said the MoD-owned Tank Produc-tion Authority has one prototype in

production and another in its ad-vanced planning phase.

In parallel, MoD’s MAFAT Re-

search and Development Bureau isworking on a demonstrator pro-gram called Carmel aimed at driv-

ing the design of Israel’s futuretank, a follow-on to the 65-ton Mer-

kava Mk4.Sources say Carmel — a Hebrew

acronym for Advanced Ground

Combat Vehicle — will not be aMerkava Mk5, nor will it replacethe Mk4, which is expected to re-

main in production through 2020.Rather, it is a research-and-de-

velopment program aimed at a

state-of-the-art, medium-weightcombat vehicle. It will most likelybe treaded, not wheeled, and de-

signed to weigh around 32 tons. “It won’t be Merkava Mk5. The

operational requirement will besomething entirely different,” onesource said of the envisioned fu-

ture tank.Defense and industry sources

anticipate development and dem-

onstration testing will extend overthe coming decade or more, de-

pending on the maturation of light-weight materials, advancedtechnologies and a spectrum of

planned subsystems.“Carmel is much longer-range. It

will not compete with the ongoing

production program [of Eitan] orwith the Merkava Mk4,” a defensesource told Defense News.

Sources noted that just as Eitanwill be deployed alongside the

heavier Namer in future groundmaneuvering scenarios, the fruitsof the Carmel demonstrator pro-

gram will eventually be deployedalongside Merkava Mk4s.

Both new vehicles are intended

to be integrated with existingheavy armor into the same digi-

tized command-and-control net-work, providing war planners withmore scenario-tailored options for

maneuvering war, they added.Zur said both vehicles are part of

his Ground Horizon plan, a strate-

gic blueprint for designing Israel’sfuture ground force up to 20 yearsfrom now.

In a recent interview, he saidPlan Horizon anticipates initial

fielding of the wheeled Eitan “inmuch less than 10 years, perhapseven five.” In contrast, the Carmel

future tank demonstrator is not ex-pected to enter service until 2025or 2027, Zur said. N

Email: bopallrome@defensenews.com.

ABIR SULTAN/WIKIMEDIA

Lighter Fighting Vehicle: A new armored fighting vehicle being produced by Israel will

only weigh about half as much as the Namer, above.

Israel Builds First Prototype Of Future Fighting Vehicle

By BARBARA OPALL-ROME

MADRID — Is a new Cold War brewing in theMediterranean and Black seas? Russia’s mil-

itary intervention in Syria has suggested thisscenario, along with its growing display ofwarships and submarines around the Medi-

terranean, in the Black Sea, and at the Syrianport of Latakia, 28 miles from the Turkishborder, a main “homeport” of the Russian

Navy.This geostrategic situation is evolving as

NATO leads Trident Juncture 15, its biggest,

most ambitious exercise in more than a decade.

“We are very concerned about the Russian

military build-up,” NATO’s Deputy SecretaryGeneral Alexander Vershbow told reporters.“The increasing concentration of forces in

Kaliningrad, the Black Sea and now in theeastern Mediterranean does pose some addi-tional challenges.”

At the exercise’s opening ceremony at Tra-pani Air Base, Sicily, NATO showed off itsairstrike power with Typhoon, F-18, F-16,

Tornado and AMX aircraft and MQ-9 Reaperdrones.

But two other remarkable events, linked to

the Mediterranean scenario, also occurred. On Oct. 20, the US Navy announced the de-

stroyer Ross successfully intercepted a bal-

listic missile in the North Atlantic Ocean as

part of an integrated air and missile defense

demonstration with eight other nations.Ross is based in Rota, Spain.

“This is the first time a Standard Missile-3

Block IA guided interceptor was fired on anon-U.S. range and the first intercept of a bal-listic missile threat in the European theater,”

the Navy confirmed only two weeks afterfour Russian warships launched 26 cruisemissiles from the Caspian Sea to supposed

targets in Syria. A top military official told Defense News:

“That launching was a surprising Russian

show of force that could have aftermathsalso in the Mediterranean Sea where, don’t

forget it, four US Navy guided-missile de-

stroyers are based nearby, in Rota. Four de-stroyers equipped with the Aegis combatsystem.”

Also on Oct. 20, the destroyer Porter ar-rived in Batumi, Georgia, a country thatfought a war against Russian forces in 2008

and is attempting to join NATO. Porter is alsoone of the four destroyers based in Rota.

“Porter’s operations in the Black Sea are

meant to enhance maritime security and sta-bility, readiness, and naval capability withour allies and partners,” a Navy release said.

Is NATO facing a new Cold War scenario?“We don’t believe Russia wants a military

conflict with NATO,” a NATO official told De-

fense News, “but yes, we have ongoing activ-

ities at other low levels like in Cold Wartimes: management of information, cyber at-

tacks, military spying. ... However there are

two essential differences now: There is notan existential threat in Europe and it is now a

more regional issue than a fight between two

superpowers. This concern has increasedwith the Russian military intervention in Syr-ia and the threat in Turkey.”

The Black Sea, which borders Turkey, Romania and Bulgaria, all NATO countries,and also Russia, Ukraine and Georgia, ap-

pears to be a key factor in this new NATO-Russia scenario.

In Trapani, a senior official who declined to

be identified told Reuters that Russia is usingthe Syrian war as a pretext to increase itspresence in the Mediterranean Sea.

“We have to take into account that Russia

is going to have a much more substantialpresence, with the ability to impede our free-dom of maneuver and our freedom of naviga-

tion,” the official said.The Crimean peninsula, which Russia an-

nexed from Ukraine in 2014, has become “an

armed fortress,” the official said.No NATO official has publicly claimed Rus-

sia is a problem in the southern flank. Versh-

bow denied the exercise is aimed at aRussian threat.

“Indeed, it is inspired by African coun-

tries,” he said.

The exercise simulates a conflict in an area of the Horn of Africa and Sudan, with

Kamon, Lakuta and Tytan as imaginary countries. N

Email: evillarejo@defensenews.com.

Trident Juncture: Toward aMediterranean Cold War?

By ESTEBAN VILLAREJO

FRANCISCO LEONG/AFP/GETTY IMAGES

NATO Operation:US Marines disembark

from craft deployed by

the USS Arlington

amphibious transport

dock during NATO's

Trident Juncture

exercise at Pinheiro da

Cruz beach, south of

Lisbon.

A-29 Super Tucano.Proven excellence in attack and training missions.

The A-29 Super Tucano is the perfect combination of attack and training capacity in a single aircraft. It was designed according to the Brazilian Air Force operational requirements. Persistence and survivability in a counter-insurgency scenario and in day and night missions make the A-29 Super Tucano the best attack platform in its category. Produced in Brazil and in the United States, the A-29 Super Tucano has been proven in combat and is used by several air forces around the world. It was selected and certified by the United States Air Force in the Light Air Support (LAS) Program. The A-29 Super Tucano is an innovative project, designed to protect people, territories and assets.

6 DefenseNews October 26, 2015 www.defensenews.com

WORLD NEWS

OTH missile system aboard all in-service

LCS deploying to forward operating stationsstarting in fiscal year 2016,” Fanta wrote inthe directive, “as well as on all under-con-

struction LCS prior to their commissioningceremonies.”

The LCS has been without a surface-to-

surface missile since the cancellation in 2010of the Non-Line-of-Sight (NLOS) missile, aprogram managed by the US Army that

would have provided LCS with a significantweapon. The service has been searching fora suitable replacement, and a shipboard

launch system for the Hellfire missile is be-

ing developed for smaller targets. Thatweapon, however, is unable to inflict signifi-

cant damage on larger ships -- a role the OTH

is meant to fill.An OTH weapon is to be included in the

LCS frigate variant now under development.The Navy has issued a request for informa-tion to industry for the frigate missile, and a

request for proposals is expected later thisyear, but no missile has yet been chosen.

Fanta’s directive does not mention a spe-

cific missile, but it’s understood from sourc-es that the missiles for the initialinstallations will be the Boeing Harpoon and

Kongsberg Naval Strike Missile (NSM).The idea, sources confirmed, is to try out

both kinds of missile on both LCS variants,

each ship deploying with only one model of

missile installed.The Harpoon is a tried-and-true weapon

that has armed most US warships since thelate 1970s. The missile is mounted in launchcanisters, usually grouped in a quad pack.

Most ships carry two quad packs, for a totalof eight weapons — the maximum numberof weapons per ship specified in Fanta’s di-

rective. Boeing has been at work to improvethe weapon, in particular to give it longerrange.

The Norwegian-built NSM, by contrast, isnot a US program of record and is not in ser-vice with any US platforms, although it is in

service with the Norwegian Navy. It is theonly naval strike missile to be fired from anLCS, however. In a simple demonstration

test, a single missile box launcher was load-

ed aboard the Coronado and fired on Sept.23, 2014. The launcher sat on a rudimentary

platform exhausting over the ship’s flight

deck, and the missile was not integrated intothe Coronado’s combat system.

Fanta’s directive, in fact, notes that “full in-tegration with the LCS combat system is notrequired. A stand-alone console or comput-

er terminal capable of consummating an en-gagement is sufficient for initial fielding.”

The directive, to the Program Executive

Officer for Littoral Combat Ships (PEO LCS)and Program Executive Officer for Integrat-ed Warfare Systems (PEO IWS) at the Naval

Sea Systems Command, calls for the instal-lation of “the maximum number of missilespossible within the space, weight, power

and cooling margins available. The initial de-

sign should be able to spiral to an eventualgoal of eight missiles per ship.”

The missile system chosen, Fanta stipulat-ed, “must be technologically mature with ademonstrated range.”

Fanta acknowledged in the directive thatthe missile installation on ships about to de-ploy is ahead of previous guidance, but not-

ed the action is in line with moves toincrease the lethality and survivability of theNavy’s small combatants.

The first priority for the new LCS frigate,he noted, is for an OTH surface-to-surfacemissile capability.

Numerous proposals have been providedby industry on how to fit missiles into theLCS designs. Lockheed Martin has offered

vertical launch systems (VLS), usually in

eight-cell groups, for the LCS 1 Freedomclass, and such an installation is being pro-

vided on versions of the design approved for

sale to Saudi Arabia.Austal USA, builder of the LCS 2 Independ-

ence class all-aluminum variant, has also of-fered designs that include VLS.

Fanta, however, is said to prefer box

launchers for LCS -- simpler, less costly andwith less of an impact on a ship’s design.Drawbacks include the general inability to

modify box launchers to accommodate im-proved or different missiles over the courseof a ship’s service life.

The Freedom — the oldest LCS in service— is preparing for its second deployment tothe western Pacific, where it will relieve the

Fort Worth. The Coronado will be making

the first deployment for the Independenceclass, which has been focusing on develop-

ing the mine-countermeasure mission mod-ule.

One element of the missile installation yet

to be determined is how the shipboard sys-tem will be managed — either by the crew orthe mission detachment that comes aboard

to operate the modules.The OTH system will be considered part of

the surface warfare package, a Navy source

said, and might also be carried when the shipis fitted with the anti-submarine warfarepackage. Out of the question, however, is its

use when the mine countermeasure moduleis embarked. The greater weight of the minemodule, the source said, precludes carrying

the missiles.

It is also not clear what effect the directivewill have on ships now under construction

or set to enter service.

The Milwaukee, third ship of the Freedomclass, was accepted by the Navy on Oct. 16

and is to be formally commissioned Nov. 21in a ceremony in her namesake city. The

Jackson, third ship of the Independence

class, was delivered to the Navy on Aug. 11and is to be commissioned Dec. 5 in Gulf-port, Mississippi.

More ships are nearing completion both atFincantieri Marinette Marine, which buildsthe Freedom-class ships in Marinette, Wis-

consin, and at Austal USA, building Inde-pendence-class ships in Mobile, Alabama. N

E-mail: ccavas@defensnews.com.

LCS MISSILESFrom Page 1

tor of prosperity and access is thesystem of rules and norms that weall abide by,” Richardson said. “It’s

interesting that some of the folksthat are making contrary claimsnow … are the very nations who

prosper the most under the cur-rent system of international rulesand norms.”

Richardson spoke from Venice,Italy, where he was attending a re-gional seapower symposium.

“You talk about coalition ap-proaches, national approaches. Iwould advocate for a system that

is inclusive, that levels the playingfield as much as possible. Thatdoesn’t talk in terms of my sea or

your sea. That is everybody’s sea.You know 30 percent of the world’strade goes through the South Chi-

na Sea. Nobody owns that. It’sopen. It’s international waters.”

The US Navy has been preparing

for a South China Sea demonstra-tion cruise close to China’s newly

constructed artificial islands. Ac-cording to Pentagon sources, thedestroyer Lassen has been on

standby to make the transit, but sofar hasn’t done so. Asked aboutwhen that would happen, Richard-

son declined to provide details.“But,” he said, “in terms of rein-

forcing the United States — as a

global nation and our Navy as aglobal Navy able and willing to

transit and pass through interna-

tional waters — that’s a commit-ment we stand pretty firmly by.From the president on down, we

iterate that position pretty clearly.Using the system of internationalnorms and rules, none of this

should be interpreted as provoca-tive or responsive, this is just busi-ness as usual in the international

system.” Richardson has gotten a good

dose of international seapower on

the trip, which included a visit toJapan on the eve of a major fleetreview.

“When you do this type of a tripand you start in Asia and workyour way through the Middle East

and now Europe, you see the USNavy present worldwide in so in-fluential a way that it is inspiring

to see that,” the new CNO said.“We probably talked to 15,000 sail-ors around the world. They are

just so ready to do their mission.They’re fired up, you can justsense that they identify with the

nobility of the mission, the com-mitment to the peace and prosper-

ity of the region that they’reoperating in. So that has been veryinspirational.

“The other thing is the interna-tional approach. In every theater Iwent to there were multinational

maritime coalitions at work. Andthey were doing terrific work to-gether. And what is happening is

how these teams of widely varyingcapabilities from different nations

can come together. If they concen-

trate on what they can do togetherand don’t focus on these obsta-cles, we can really have an effec-

tive combination of maritimepower, of maritime influence.

“You can really sense, in your

gut, how the maritime is a globalsystem,” Richardson said. “For in-

stance, here in Venice we have the

chief of the Singapore Navy. It’sbecause this is all an interconnect-ed global system that connects

and touches every nation.“[Regarding] Russia and China,

both of them seek to influence

events in their favor — China may-be from a prosperity standpoint,

Russia maybe for other motiva-

tions — they also are turning tothe maritime. If you’re going to tryto be a global power, at some point

you must go to sea to increaseyour influence, your reach andprosperity.” N

Email: ccavas@defensenews.com

RICHARDSONFrom Page 1

MC2 CHARLES OKI/US NAVY

International Waters: Adm. John Richardson, the US Navy’s new chief of naval operations, speaks with sailors on the Manamawaterfront in Bahrain on Oct. 18. Richardson has been on a round-the-world tour to visit sailors and meet with foreign counterparts.

www.defensenews.com October 26, 2015 DefenseNews 7WORLD NEWS

Asked about the impact on Cana-dian firms, a Liberal spokesmanpointed to the party’s election plat-

form, which argues that such com-panies stand to gain more workfrom an open competition for Can-

ada’s fighter jet replacement. Theplatform noted that, under a Cana-da-run competition, Canadian

firms would be guaranteed work –unlike under the F-35 program.

Impact to F-35 PartnersIn 2010, Canada committed to

buying 65 F-35s on a sole-source

basis as the replacement for itsfleet of CF-18s. Two years later,then-Prime Minister Stephen Har-

per paused that purchase amid ac-cusations that his government hadlied about the true cost of the fight-

er program.Trudeau has promised to pull out

of the F-35 program and to move

quickly on replacing Canada’s ag-ing CF-18s with another plane

through a competition. He has saidthat Canada does not need astealth fighter for its defense needs

and that the F-35 is too expensive.In Washington last week, US Lt.

Gen. Christopher Bogdan, F-35

Joint Program Office chief, saidthe remaining international part-ners can blame Canada for a $1mil-

lion price increase per jet if Ottawascraps its 65-plane buy.

“If any partner or any service

moves airplanes to the right ortakes airplanes out, the price of theairplane” will rise, Bogdan told

lawmakers Oct. 21. “We have esti-mated that the increase in price toeveryone else is about 0.7 to one

percent [or] about $1 million acopy for everybody else.”

If Canada pulls out, there would

be no impact to the current devel-opment program, which ends in2017, Bogdan stressed. However,

the international partners wouldbe forced to absorb Canada’s 2.1percent share in the cost of future

sustainment and follow-on mod-ernization, he said.

But what would happen to the

Canadian supply base, which has

spent millions to help developtechnology and components for

the plane?

Bogdan said the JPO does nothave a “set rule” to deal with this

scenario, but said the internationaland industry partners should havea “discussion” about what to do

with the Canadian companiesbuilding parts for the F-35.

Global ReactionDespite a potential price in-

crease, the other international

partners remain committed to theF-35 program.

An Israeli defense source said he

was “certainly not happy” about

prospective cost growth as a result

of Canada’s presumptive with-drawal, but insisted that such ascenario would not affect Israel’s

interest in pursuing follow-on or-ders for the F-35I.

The Israeli source noted that

additional squadrons of F-35Is —and the US military grant aid to payfor them — will be high on the

agenda of Defense Minister MosheYaalon when he visits Washingtonthis week to discuss Israel’s en-

hanced security needs. Yaalon’s discussions with US De-

fense Secretary Ash Carter and

other top Pentagon officials pre-cedes a scheduled Nov. 9 meetingfor Israeli Prime Minister Benja-

min Netanyahu and US PresidentBarack Obama – their first talkssince conclusion of the so-called

P5+1 Joint Comprehensive Plan ofAction.

Israel has 33 F-35Is on order,

with a contractual option for an-other 17. The first aircraft is ex-pected in December 2016, with

initial operational capabilityplanned by the end of 2017. Even-

tually, the Israeli Air Force expectsa full force strength of 75 F-35Is.

Italy, which is planning to buy 90

JSFs, stands to fork out $90 millionextra should Canada leave the pro-gram.

“We’ll negotiate on the price,”said a senior Italian defense sourcewhen asked about the possibility.

But one fighter-industry execu-tive in the UK, who asked not to benamed, said the F-35’s problems

went deeper than a possible pricehike caused by any Canadian with-drawal.

“If the only problem the F-35 hadwas that the aircraft was $1 millionmore expensive, they wouldn’t

have a problem,” he said. “Theproblem is the aircraft is tens ofmillions of dollars more than they

originally told people it would be,and that’s just the acquisitionprice. It’s the sustainment cost that

will destroy air forces.”Norway’s government is show-

ing no deep anxiety that costs re-

lating to acquisition will spiral to alevel where it may want to re-nego-tiate on price or reduce its agree-

ment to buy 52 aircraft. Maj Gen.

Morten Klever, director of Nor-way’s Fighter Replacement Pro-

gram, said that Norway would

conduct its own analysis on costand the overall development of the

F-35 program. However, the latest wrinkle in

the F-35 development has been

greeted with interest next door inSweden where Saab is expected tore-establish contact with Canada

about the single-engine Gripen NGfighter, which has notched up sev-eral export successes lately, most

notably in Brazil, where a contractfor 36 aircraft became effectivelast month. Sweden is also certain

to try and garner advantage from

the F-35 project’s woes in efforts tosell the Gripen to Finland, whichhas started its fighter replacement

program.A Saab spokesman would not

say whether the company would

bid the Gripen NG for a Canadianrequirement if Ottawa bails out ofthe F-35. However, he emphasized

the low cost of the aircraft as a rea-son for Canada to look more close-ly at the Swedish fighter.

In Denmark, which is due toreach a decision on its multirole

aircraft by the end of 2015, the Min-istry of Defense last week suggest-ed that Canada’s departure might

add $50 million more to the overallF-35 acquisition cost, but the com-petition’s short-listed candidates

also include Boeing’s F/A-18 E/FSuper Hornet, Dassault’s Rafaleand the Eurofighter Typhoon. The

MoD has asked the office in chargeof the competition to conduct adeeper cost assessment.

Doug Barrie, the senior air ana-lyst at the International Institutefor Strategic Studies think tank in

London, said the potential impactof a price rise caused by a Canadi-an withdrawal from the program is

a bit of a red herring. Virtually all ofthe F-35 price escalation is downto US issues, he said.

The biggest danger posed byCanada’s presumptive exit is thepressure it puts on potential cus-

tomers to look at other solutions,he said.

“It’s the precedent, not the price,

that is the bigger danger for F-35exports,” he said. “If I was in a rival

fighter company, I’d be thinking

this development gives me a littlemore market leverage.”

What’s Next for Canada?Canada’s expected decision to

drop the F-35 was mixed with poli-

tics, as the cost for the fifth-genera-tion fighter had dogged Harper’sgovernment. But Trudeau has posi-

tioned the argument as one of ne-cessity, emphasizing that Canadashould focus more on homeland

defense than power projectionwith its new fighter buy.

Richard Aboulafia, an analyst

with the Teal Group, points to Tru-deau signaling he’ll withdraw Can-ada from military operations

against the Islamic State group as

proof that the new government isfocusing inward, rather than out-ward, with its security decisions.

“It was form fitting function – it’snot about if it’s a good fighter, but,rather, if this is a role Canada

should have,” Aboulafia said. “TheF-35 is the perfect plane if Canadais going to be part of coalition war-

fare. If they just want somethingthat provides air protection forsovereignty, something else fits

just fine.”Gene Colabatistto, group presi-

dent for defense and security atCAE, the largest Canadian-owneddefense company, agrees that the

primary mission set Canada needsto fulfill is the sovereignty mission.

The question now becomes what

jet will fill that mission.Trudeau has previously suggest-

ed that the F-35 would not be con-

sidered in any competition, buteven if it were invited back in, itseems an unlikely winner. Any new

competition immediately becomesa plum prize for jet producers, asthere are few large-scale fighter

procurements expected in thenext few years.

The obvious choice to replace

the Boeing-made CF-18 fleet wouldbe the procurement of Boeing’s F/A-18 Super Hornets, said Aboula-

fia. The familiarity of pilots withthe jet, interoperability with theolder fleet, and the military ties be-

tween the US and Canada make itan easy choice.

And, while it seems unlikely Can-

ada would pick a non-Americansupplier, Aboulafia says not to besurprised if the Dassault Rafale,

Eurofighter Typhoon and Saab’s

Gripen NG enter any competition.Rafale and Eurofighter have

mounted strong marketing cam-

paigns in the last six months as un-certainty over the F-35 grew.

Dassault aviation chairman EricTrappier said Oct. 22 he wrote a let-ter of congratulations to Trudeau

that included a pitch for Rafale.A spokesman for Eurofighter Ty-

phoon declined to comment, other

than to say that officials are closelymonitoring the political develop-ments in Canada.

If Canada selects the Super Hor-net over the European fighters, itwould be a huge win for Boeing,

which has sought to extend the life

of its manufacturing facility in St.Louis.

“That buys Boeing three more

years,” Aboulafia said, while not-ing it could also have an impact onUS procurement. The Navy has ar-

gued for the procurement of moreF/A-18s, and having the Canadianjets on the line could make the eco-

nomic case that helps the Navy dojust that.

A Boeing win “works out very

well for the carrier part of the Na-vy,” Aboulafia said.

But the decision to have a fullcompetition instead of the sole-source selection of F-35 will result

in a delay in getting the new fleetsonline, CAE’s Colabatistto said.

That, in turn, means the existing

training infrastructure – includingthe CAE-run NATO Flying Trainingin Canada (NFTC) program which

trains pilots for the Canadian mil-itary – will likely need to be ex-tended.

“The net is that [the competition]will delay the acquisition of a newfighter program,” he told Defense

News on Oct. 22. “It’s not going tostart in a year or two, which meansthat the fleet will start to be re-

placed in the early mid-2020s.Therefore, the training enterprise[will] extend the current training

programs to get ready for that.”And, while Canadian firms tied

to the F-35 base released a Sept. 25

statement warning a cancellationwould cost “current and futurejobs,” Colabatistto does not see

reason to panic.He sees more of a “reallocation”

of defense funds than a major cut

coming under Trudeau’s govern-ment. Funding that may have gone

in the short term to fighters will

now instead be shifted to maritimeassets, he said.

“It’s all one budget, and they will

have to accommodate that,” Cola-

batistto said. “But I think the mostvisible part will be the delay, or the

stretching, of the fighter pro-grams.” N

By Lara Seligman and Aaron Mehta in

Washington; David Pugliese in Victoria,

British Columbia; Andrew Chuter in

London; Pierre Tran in Paris; Barbara

Opall-Rome in Tel Aviv; Gerard

O’Dwyer in Helsinki; and Tom Kington

in Rome.

CANADA F-35From Page 1

LOCKHEED MARTIN

Fighter Competition: Is the sun setting on F-35 in Canada? The newly elected Liberal government plans to open up competition to

replace its CF-18s.

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www.defensenews.com October 26, 2015 DefenseNews 9

W ASHINGTON — After yearsof declining investments in

maintaining military trans-port fleets around the world, ex-perts now expect the global airlift

and mobility sustainment marketto grow for the first time since2011.

The global military mainte-

nance, repair and overhaul (MRO)market, which supports aircraft

from the Air Force’s C-130s to un-

manned helicopters, is set to risesteadily from now until 2020, ac-

cording to Hal Chrisman, vicepresident with services firm ICFInternational.

The forecast market growth isdue to strengthening defense bud-gets across the world, healthier

economies in Europe and a spikein global conflicts — particularlyin the Middle East and Ukraine,

Chrisman said. A growing threatfrom China is also driving US mil-itary spending in the Pacific, he

added.

The MRO sector peaked in 2011

at $66 billion, while casualtieswere declining in Afghanistan andthe US was pulling out of Iraq,

Chrisman said. Themarket has sharplydeclined each year

since and bottomedout at $55.6 billionin 2015, he said.

The US draw-

down in Iraq, aswell as budget

crunches across

Europe, primarilydrove the market’s steep decline

in past years, Chrisman said, not-ing that the US makes up almosthalf of the MRO market.

“What was happening was thatutilization was dropping prettyfast,” Chrisman said. “Now we be-

lieve that has leveled off.”Experts now believe the market

will grow to $59.4 billion in 2020,

according to ICF International’slatest forecast. Some of that ex-pected growth is due to aging

fleets, like the C-130 and C-17

transport jets, Chrisman said.

“[Depots are] going to find morework to do. They do their inspec-tions, they are going to find more

corrosion,” Chris-man said. “So youget a couple per-

centage points in-crease in the costof maintenance ev-

ery year – not from

inflation, but justby the fact that

they find more un-

scheduled workthat needs to be done.”

One potential area of growth forthe MRO market is the Air Force’slegacy C-17 transport fleet, built

by Boeing. Current contracts onthe C-17 ended in the third quarterof 2014, and Boeing delivered the

last plane in September.Although right now the Air

Force does not anticipate the need

for a full C-17 service life exten-sion program, the service may re-evaluate based on future need, ac-

cording to one top general.

“Tomorrow may change the sto-

ry, because we may be — whoknows what’s going on in theworld,” Gen. Carlton Everhart,

commander of Air Mobility Com-mand, said last month. “We willcontinue to do continuous studies

on that to make sure we got thisright.”

Conversations the Air Force has

had with Boeing engineers indi-cate the C-17s may be able to safe-ly fly more than 45,000 hours, well

past initial estimates for the fleet’s

service life, according to one AirForce official.

The C-17 was originally deliv-

ered with a service life of 30,000flight hours, which equates to

1,000 flight hours per year for 30years, according to Col. MarkMacDonald, chief of the require-

ments division at HeadquartersAir Mobility Command. In 2013,the Air Force extended the C-17’s

service life limit to 42,750 hours,he added.

“Right now, we don’t anticipate

the need for a C-17 full service lifeextension program,” MacDonaldtold Defense News in an email last

week.

However, the Air Force does an-

ticipate the need to address spe-cific structural issues in the mid-to late-2020s, for example with up-

per wing and aft fuselage re-skinproblems, MacDonald said.

“Other targeted fleet programs

can eventually be used to refreshaging components, but we’ll makesure the C-17 continues to operate

safely and reliably,” MacDonaldsaid. “It’s been a workhorse for thepast 22 years and continues to ex-

cel in a wide range of scenarios.”In the meantime, major airlift

suppliers, like Lockheed Martin,

Boeing and Airbus, will also look

to capture international sustain-ment opportunities, Chrisman

said.“[Original equipment manufac-

turers] at Lockheed, Boeing, Air-

bus are looking at what can we doto capture more of this interna-tional sustainment opportunity

and what value proposition canwe put out there,” Chrisman said,

noting that in many countries, a

large percentage of the fleet is un-available as aircraft wait for main-

tenance.

“A lot of places around the globedon’t do a great job with sustain-ment.”

Still, Chrisman cautioned thatexperts had anticipated the mar-ket would stop falling in 2013 – a

prediction that turned out to befalse.

“In 2013, we thought it had bot-

tomed out at about $60 billion, andturned out that it didn’t,” Chris-man said. “It kept going down an-

other 3 to 5 percent over the nexttwo years.”

Email: lseligman@defensenews.com.

Experts: Global Conflicts BoostAirlift Sustainment MarketCould Grow for the First Time Since 2011

STAFF SGT. SHEILA DEVERA/US AIR FORCE

New Engine: Members of the 8th Expeditionary Air Mobility Squadron change a C-17 engine in southwest Asia.

USAF MOBILITYREQUIREMENTS

FOCUS

By LARA SELIGMAN

SUE SAPP/US AIR FORCE

Sustainment: A C-130 Hercules

undergoes maintenance at Robins Air

Force Base in Georgia.

10 DefenseNews October 26, 2015 www.defensenews.com

NORTH AMERICA

WASHINGTON — With just threemonths left before the NationalCommission on the Future of the

Army must turn in its report toCongress, it is taking deep, analyti-cal dives into force structure and

meeting operational demand.The commission has also decid-

ed to peel back the onion on mod-

ernization objectives, even thoughCongress did not explicitly ask thecommission to look into it.

“It’s so foundational to every-thing else that the Army does, wethought we’d spend a little bit of

time and attention understandingthat,” retired Army Gen. CarterHam, commission chairman, said

last week at an open commissionmeeting in Arlington, Virginia.“Obviously, the resourcing impli-

cations are pretty significant.”Congress established the com-

mission in its fiscal 2015 NationalDefense Authorization Act be-cause the Army and National

Guard were deadlocked in a fightover how many soldiers shouldserve in each component, as well

as what kinds of capabilities eachshould have.

The law requires the commis-

sion to assess the size of the activeArmy and the reserve forces — in-cluding the Guard and Army Re-

serve — and recommend anymodifications “related to currentand anticipated mission require-

ments … at acceptable levels ofnational risk and in a manner con-

sistent with available resourcesand anticipated future resources.”

The commission is also required

to study the Army’s plan to re-structure its aviation assets, par-ticularly its plan to move all AH-64

Apache attack helicopters out ofthe Army National Guard and intothe active force. This is said to be

the biggest point of contention be-tween the two service compo-nents.

The commission has until Feb. 1to deliver a full report to Con-gress.

Earlier in October, the commis-sion spent two days at the Insti-tute for Defense Analyses

conducting its own analytical re-view. It was joined by analystsfrom inside the commission, as

well as from Rand, the US Trainingand Doctrine Command, and oth-

ers, Ham said.“The focus of the review was on

the size, the balance across com-

ponents, the deployment and mo-bilization ratios,” Ham said,assessed in “various scenarios to

get a sense of how well the variousforce constructs meet the opera-tional demand.”

The commission applied a “va-riety” of alternatives against theArmy’s operational plans to in-

clude anticipated requirementsand geographic combatant com-mander needs, using the “time-

phased force deployment” data-

base as a starting point, accordingto Ham.

“We did include both [continen-tal US] and [outside of the conti-nental US] scenarios and various

sequencing to try to get at, inside,to the stresses that were on theforce, on the Army, at various

force levels and various capabilitymixes and various other factors ...such as deployment length, mobi-

lization to dwell periods and thelike,” Ham explained.

Ham noted that the commission

has decided to include a classifiedannex to the unclassified reportthat it will deliver to Congress so

that those with clearance can see

the origin of some of the commis-sion’s rationale based on classi-

fied information.The chair of the commission ac-

knowledged that part of the analy-

sis looked at alternatives to theArmy’s current plan to transferApaches from the Guard.

“That was an important piece ofthe modeling that we did,” Hamsaid, “to see how that affected the

operational requirements of com-batant commands.”

Ham’s takeaway from the two-

day analysis is that there is “nomagic solution.”

“There is no ‘Boy, if we just turn

this dial a little bit, all of this stuffgets better,’ ” he said. “These are

very, very complex, intertwinedmatters that if you make even aslight adjustment, whether it’s

[boots on the ground] to dwell[time at home], whether it’s mobi-lization rates or componency,

those changes have broad-rangingconsequences to the ability of theArmy to accomplish these mis-

sions.”The commission has, for the

most part, finished its fact-finding

mission. Members have visited

over 18 states and 180 differentunits — 63 active Army, 72 Nation-

al Guard, 37 Army Reserve, andeight multi-component units con-sisting of both active and reserve

forces — in the US and abroad.And the team has met with everygeographic combatant command,

as well as US Transportation Com-mand, US Cyber Command, US

Space Command, US Forces Ko-rea and US Forces Japan.

The commissioners also have a

working list of about 69 questionsthey are focused on, such as“should the Army increase Patriot

[air and missile defense] batteriesdue to demand,” and “what is theimpact of Pacific Pathways and

other approaches to Army ‘rebal-ance,’ ” according to a slide pre-sented at the commission’s

meeting last week. N

Email: jjudson@defensenews.com.

US Army Commission Takes Deep Dive Into Force StructureBy JEN JUDSON

SPC. TRISTAN BOLDEN/US ARMY

Covering the Commands: US Army Sgt. Dietrich Smith looks down the scope of his M4

assault rifle during a mission rehearsal exercise at the Joint Multinational Readiness

Center in Hohenfels, Germany. Army commission members met with every geographic

combatant command.

WASHINGTON — US Secretary of State John

Kerry last week pledged to renew a push forthe US to ratify the Comprehensive NuclearTest Ban Treaty, but the way forward ap-

pears rocky.Speaking at an Oct. 21 event organized by

the National Nuclear Security Administra-

tion (NNSA), Kerry pledged to spend his last

year in office making the case for why the USshould sign onto the CTBT.

“I am determined that, in the months to

come, we’re going to reopen and re-energizethe conversation about the treaty on Capitol

Hill and throughout our nation,” Kerry said.“Because there should be no doubt that it isin the best interests of our country to join the

treaty and to urge others not to wait, but togo ahead and do so themselves as soon aspossible.”

That may be easier said than done, howev-er.

The last major push to ratify the CTBT

came in 1999, when it failed in the Senate 51-48. Kerry believes concerns among senatorsabout the US ability to do non-explosive

testing and the question of whether the ca-

pability exists to make sure others are not vi-olating the treaty are no longer valid, thanksto technological improvements.

“The factors that led some senators to op-pose the treaty in 1999 have changed, and,so, choices should change as well,” Kerry

said.

Kingston Reif of the Arms Control Associa-tion says there is a “pretty clear understand-

ing that there aren’t 67 votes in the Senate atthe current moment for the agreement,”something he and others blame, at least in

part, on the lack of institutional knowledgeabout the issue. Less than a fifth of the Sen-

ate remains from the 1999 fight.

“Any future Senate vote will require a sig-nificant amount of groundwork to be laid, in

terms of education and outreach,” Reif said.

“The administration, at least to this point inits tenure, has not launched the kind of effortnecessary to ultimately achieve CTBT ratifi-

cation. So it’s very good to hear they are con-

sidering stepping up their engagement.”Talking on a panel before Kerry’s speech,

Brian McKeon, principal deputy undersecre-tary of defense for policy, said the Clintonadministration needed to do more ground-

work in the Senate before launching the

CTBT fight, calling the timing “a little prema-ture.”

“The lesson is, we need to lay a lot of

groundwork, both in the Senate and even inthe executive branch,” said McKeon, whowas chief counsel for the Democrats on the

Senate Committee on Foreign Relations dur-ing the last CTBT fight.

“With any treaty, but particularly with an

arms-control treaty or security treaty, thereare so many more people paying attention

closely in the Senate and in the broader pub-

lic arena than is the case with most othertreaties the Senate works on,” McKeon add-ed. “It really takes a major investment both

in the executive branch and the Senate oftime, energy, will.”

Adding to the challenge is a general senti-

ment in the Senate against signing large in-ternational agreements and treaties,something that was already underway dur-

ing the Bush administration, which hit road-blocks on treaties such as the Law of the Sea.

“There is hostility to the president, but the

bigger problem is the hostility to interna-tional treaties and agreements writ large,”Reif said.

Another challenge is whether the Depart-

ment of Defense would support a push for a

new treaty. Franklin Miller, who held a num-ber of top Pentagon roles during the originalCTBT fight, said during the event that the

Pentagon was “always skeptical about theCTBT.”

“The fundamental question we will have to

wrestle with at some point is, what is thetreaty’s purpose now?” Miller, now with theScowcroft Group, said.

Developing trust with both DoD and Con-gress is key for any CTBT push, agreed

Charles Curtis of the Center for Strategic

and International Studies.“There is a continuing obligation on the

Department [of Energy] and on NNSA to

share with the Department of Defense thesuccess of its work,” Curtis said. “Trust inthe Congress is probably the hardest to

achieve of all of the important elements.”Entry into the CTBT would legally prohibit

the US from performing nuclear explosive

tests, something the government has beendoing on a de facto basis since 1992.

Reif points to a security argument, as well.

The US has a long history of nuclear testingin its back pocket, more than any other na-tion. Locking other nations out of doing live

testing would ensure the US maintains a leadin nuclear knowledge. N

Email: amehta@defensenews.com.

Rough Path Ahead for Nuclear Test Ban TreatyBy AARON MEHTA

www.defensenews.com October 26, 2015 DefenseNews 11NORTH AMERICA

WASHINGTON — In a gambit to pressure Re-

publicans into a larger budget deal, Presi-dent Obama vetoed the 2016 National

Defense Authorization Act last week over

what he called a Republican “gimmick” tofund defense — the use of a wartime ac-

count known as overseas contingency oper-ations (OCO).

“I’m going to be vetoing this authorization

bill, I’m going to be sending it back to Con-gress and my message to them is very sim-ple: Let’s do this right. We’re in the midst of

budget discussions,” Obama said in an OvalOffice signing ceremony. “Let’s have a bud-get that properly funds our national security

as well as economic security, let’s make sure

that we’re able in a constructive way to re-form our military spending to make it sus-

tainable over the long term.”Acknowledging his responsibility to keep

the military properly funded, Obama said

the bill “does a number of good things,” but

“falls woefully short in key areas.” Chiefly, itkeeps in place the sequester and “resorts to

gimmicks that has not allowed the Pentagon

to do what it needs to do,” he said.The president and Democrats have op-

posed the 2016 NDAA because it supports a$38 billion plus-up to defense through OCO,which skirts Budget Control Act caps. Re-

publicans claim a veto not only sends the

wrong message at a time when the US facesmultiple national security dilemmas, but it

endangers the bill’s policy provisions, partic-

ularly those aimed at acquisition reform.The chairmen of the Senate and House

Armed Services Committees — Sen. JohnMcCain, R-Ariz., and Rep. Mac Thornberry,R-Texas — held a news conference with 12

members of Congress who served in the mil-itary. They vowed to press ahead with a voteto override the veto, though it appears not to

have the votes to succeed.“In all my years in the United States Sen-

ate, I have never witnessed something so

misguided, cynical and downright danger-ous than vetoing the defense authorizationfor reasons that have nothing to do with de-

fense,” McCain said.As the NDAA’s proponents like to note, the

bill does not appropriate funding, but sets

policy, creating authorization to spend on a

range of acquisition programs across the

services. The bill also contains measuresthat authorize lethal aid to Ukraine, banning

torture, reform to troop pay and benefits,

and limiting the president’s ability to closethe Guantanamo Bay Detention Camp.

Democratic leaders have condemned theworkaround as detrimental to the federalbudget deal they are seeking with Republi-

cans, one which eases sequestration budgetcaps and matches any defense increase on

the non-defense side.

Defense Secretary Ash Carter, in a WallStreet Journal op-ed this week, reiteratedhis support of the veto. He said the OCO wor-

karound “papers over the defense-fundingshortfall caused by sequestration,” prevents

the military from long-term planning and

maintains sequestration for non-defenseprograms vital to national security. N

Email: jgould@defensenews.com.

After Obama Veto, NDAA Heads Back to CongressBy JOE GOULD

WASHINGTON — For many years,it’s been fashionable for some USradio stations to refer to the year’s

10th month as “Rocktober.” Thistime around, there is little ques-tion that — in the maritime world,

at least — naval forces the worldover have been rocking out.

From the western Pacific to the

Indian Ocean, from the Mediterra-nean to the eastern and northernAtlantic, all the way to Latin Amer-

ica, naval forces have undertakenan explosion of major exercises —many of them much larger than

normal. Dozens of countries, thou-sands of military personnel andthree US aircraft carriers have

been taking part.This burst of simultaneous mil-

itary activity is not the result of acoordinated effort. The exercisestake many months to plan, and the

timing of each is set by a numberof factors. It would be difficult, ifnot impossible, to coordinate so

many events on such a scale.Nevertheless, it’s clear there are

more military forces on the move

than usual.“It seems a heightened state of

activity above steady-state is tak-

ing place,” observed BryanMcGrath, a US naval analyst andlongtime carrier champion, when

asked what was going on. “Thisstuff goes on under the radar, qui-etly, most of the time. But this is

probably a heightened level thannormal.”

Exercises taking place over the

past few weeks alone include:n The Japanese Maritime Self-

Defense Force’s fleet review, a ma-

jor event held every three years.

The event culminated on Oct. 20with a parade of nearly 40 war-

ships from five countries, includ-ing the Izumo, a “destroyer” that isreally a helicopter carrier, the larg-

est warship Japan has built sinceWorld War II. Taking part in a“pass-in-review” were the ships of

the US Navy’s Forward DeployedNaval Force in Japan, led by theaircraft carrier Ronald Reagan.

Symbolic of Japan’s growing will-ingness to join in active militaryoperations, Shinzo Abe came

aboard the Ronald Reagan on Oct.18, the first time a serving Japa-nese prime minister visited a US

aircraft carrier at sea. The reviewcame about a month after Japanenacted new security laws that al-

low the country to provide armedaid to allies under attack.

n The Ronald Reagan and otherUS warships also took part in theRepublic of Korea’s Fleet Review

on Oct. 23, a smaller — but no lesssymbolic — affair to mark theSouth Korean Navy’s 70th anniver-

sary. n Off the eastern coast of India,

Exercise Malabar took place from

Oct. 13 to 19. Hosted by India, theexercise with some of the IndianNavy’s most modern units fea-

tured the US aircraft carrier Theo-dore Roosevelt and its escorts,along with the littoral combat ship

Fort Worth and aircraft carrierCity of Corpus Christi. And, for thefirst time since 2007, a Japanese

warship, the destroyer Fuyuzuki,also took part. n Another US aircraft carrier,

the George Washington, is cruis-ing around Latin America on herway to the US East Coast after sev-

eral years of service in Japan. The

cruise, dubbed Southern Seas, iscoinciding with annual UNITAS

exercises, the US Navy’s longest-running international exercises,held every year in several phases

around Latin America. UNITASrarely features a carrier, but theGW’s participation has given the

exercises a much higher profile.n This year’s Joint Warrior exer-

cises, held twice a year off Scot-

land, were larger than usual. Thespring exercise in April saw morethan 50 ships taking part in what

NATO said was the largest-everJoint Warrior, while the fall exer-cises in September and October

featured more than 30 ships. n Just after Joint Warrior’s con-

clusion, frigates and destroyers

from six nations took part in thefirst-ever live test of a sea-based

ballistic missile defense (BMD)system in Europe. The US destroy-er Ross successfully engaged a

BMD target on the Hebrides

Range off western Scotland, whileanother US destroyer and ships

from Canada, Italy, the Nether-lands, Norway and Spain also tookpart.

n The biggest exercise of all isExercise Trident Juncture 2015, ahuge NATO combined effort in-

volving 36,000 personnel engagingin air, land and sea exercisesacross Europe, Mediterranean

and Atlantic waters and even Can-ada. Featuring what NATO says isthe largest air exercises in over a

decade, Trident Juncture saw USNavy and Marine Corps forcestake part in an amphibious assault

in Portugal and numerous NATOwarships operating throughoutthe European theater.

All this is happening with a

background of singular naval ac-tivities. European Union navies

have been active since the latespring, engaged in migrant-patrolmissions in the mid- and eastern

Mediterranean, even as a steadystream of Russian warships and

support ships have moved manytons of equipment from the BlackSea into Syria. The surprising

cruise-missile attack on Oct. 7launched from small Russian war-ships in the Caspian Sea against

targets nearly 1,000 miles away inSyria is changing the way militaryplanners look at what were

thought of as small, inexpensiveand relatively inconsequentialships.

Navies have always carried outshow-the-flag missions, visits intointernational waters to demon-

strate their country’s interest andability to deploy abroad. This year,however, two burgeoning navies

are setting a higher bar. India,which is engaged in a major fleetmodernization and expansion pro-

gram, fielded several warships atonce to visit countries in Africaand Europe, venturing for the first

time into the Black Sea.

The Chinese Navy is also rang-ing further afield. The three ships

of its 20th Escort Force, an effortto provide a task group on anti-pi-racy and maritime-security patrol

in the Gulf of Aden, concluded afour-month mission not by head-

ing back to China, but by continu-ing on to Sudan, Egypt andnorthern Europe on an ambitious,

round-the-world cruise — the firstever by a Chinese naval squadron.

After spending several weeks

showing the Chinese flag in Co-penhagen, Stockholm, Helsinkiand Gdynia, Poland, the task force

visited Portugal before continuingacross the Atlantic, where it willcall at Mayport, Florida, before

visiting Mexico and heading backto the Pacific.

The new level of naval activity

may not be just a bubble.“We probably are seeing a new

normal, unlikely to drop off,”

McGrath said. “It’s because greatpowers are beginning to contendwith each other again. Great pow-

er competition is back on the me-nu.” N

Email: ccavas@defensenews.com.

Unusual Level of Naval PowerOn Display the World Over

By CHRISTOPHER P. CAVAS

TORU YAMANAKA/AFP/GETTY IMAGES

Global Naval Displays: The Japanese destroyer Kurama, left, passes another line of

warships, including the aircraft-carrying destroyer Izumo, during Japan's fleet review off

Sagami Bay on Oct. 18. Thirty-six Japanese warships and naval ships from Australia,

India, France, South Korea and the United States took part.

12 DefenseNews October 26, 2015 www.defensenews.com

EUROPE

HELSINKI — Swedish and Brazilian govern-ment and industry officials will meet in No-vember to discuss how a US $4.7 billion

Gripen NG deal may create significant in-

dustrial investment opportunities.Under the deal, Sweden-based Saab will

deliver 36 Gripen NG multirole aircraft (28single-seat Gripen Es and eight twin-seatGripen Fs) to Brazil.

The agreement comes with a strong tech-nology commitment from Sweden to trans-

fer “everything” that Brazil will need to

develop its own next-generation militaryjets.

Saab is in dialogue with a number of Bra-

zilian defense-engineering companies, in-cluding Embraer and Akaer, to finalizeproduction arrangements and identify pos-

sible new areas for cooperation and capital

investments in Brazil. It is expected thatabout 29 of the 36 aircraft on order will be

fully manufactured in Brazil.The deal, which arose from Brazil’s Pro-

ject F-X2 fighter replacement program, has

not been without its controversies since the

Gripen NG was selected in late 2013 to re-

place the Brazilian Air Force’s 12 aging Das-

sault Mirage jets. The Project F-X2 programhad short-listed three candidate aircraft, in-

cluding Boeing’s F/A-18E/F Super Hornetand Dassault’s Rafale.

Brazil’s State Prosecutor’s Office (SPO)

opened a corruption investigation into the

Gripen NG deal in April after the acquisitioncost rose by more than US $1 billion due to a

substantial drop in the currency exchange

rate of the Brazilian real against the Swedishkrona. The SPO ended its inquiry in Septem-

ber after finding insufficient evidence tosupport allegations of financial kickbacksconnected to the Project F-X2 competition

and selection decision.

Brazil’s President Dilma Rousseff offered“solid reassurances” that the Gripen NG

deal and the fighter replacement program“were firmly on track” when she led a high-level state-industrial delegation to Stock-

holm on Oct. 18-19 to discuss the deal'sbroader economic and investment poten-

tial.

“We are facing difficult economic times inBrazil, but we have large dollar reserves and

a strong industrial base,” Rousseff said Oct.

19 at a news conference in Stockholm. “TheGripen NG is one of our key projects. This issomething we have budgeted for and can af-

ford.”

Mikael Damberg, Sweden’s economic de-velopment and innovation minister, identi-

fied technology transfer, industrialcooperation and financing elements in theGripen NG bid as pivotal factors in winning

the deal.

“The Gripen NG contract with Brazil is thebiggest Swedish export deal to date. It paves

the way for a long-term strategic partner-ship with Brazil in a whole range of areas

ranging from defense to civilian industry-re-

lated projects,” Damberg said.Under the financing arrangement, the

state-owned Swedish Export Credit Corpo-

ration (SECC), in consultation with Swed-ish Export Credits Guarantee Board, isproviding two separate loans to Brazil to fi-

nance the Gripen NGs and purchase weap-ons systems for the aircraft.

The SECC, which loaned US $6.8 billion to

support the overseas contract attainment

activities of Swedish exporters in 2014, hasapproved a $4.8 billion credit to Brazil to

cover the cost of acquisition for the Gripen

NGs.In addition, the SECC has extended a

$245.3 million credit to allow Brazil to ac-quire weapons systems for the aircraft. Theloans, which were green-lighted by the Bra-

zilian Federal Senate on Aug. 5, carry a ne-

gotiated interest rate of 2.19 percent.In Sweden, questions have arisen over the

Sweden, Brazil Pursue Deeper Cooperation With Gripen NG DealBy GERARD O'DWYER

KATSUHIKO TOKUNAGA

Big Deal: Sweden’s Saab will deliver 36 Gripen NG

multirole aircraft to Brazil for US $4.7 billion.

See BRAZIL GRIPENS, Page 16

ROME — As Finmeccanica edges

closer to introducing its new divi-sional structure by year’s end, CEOMauro Moretti is about to finalize a

management team that sourceshave said combines company vet-erans with staff he has brought

with him from his previous stintrunning Italy’s railway network.

The new lineup, which will be

confirmed at a board meeting Nov.3, is set to offer few surprises, butwill give Moretti greater powers

over established managers accus-tomed to more autonomy.

One big change that could come

in the new year is Finmeccanica’sname. Speaking earlier this month,

Moretti said: “We are changing thecompany and we will have tochange the name.”

“We need to strip Finmeccanicaof everything that is traditional,” hesaid, explaining that after selling

off its bus and rolling stock units,“we will have a company in whichtwo-thirds of the staff think and a

third manufacture.”The idea of dropping the name

Finmeccanica, considered to be

unwieldy and hard to pronounce,has been considered by previousCEOs, but the change was never

made.As for the managers who will run

the new firm, company sourcessaid Daniele Romiti, the currenthead of helicopter unit AgustaWes-

tland, would be confirmed head ofthe new helicopters division, whileFilippo Bagnato, current head of

aircraft unit Alenia Aermacchi, willcontinue to run aviation opera-tions.

Bagnato’s domain will be splitinto two divisions, military aircraftand aerostructures, which handles

Finmeccanica’s work on civil air-craft structures with partners Boe-ing and Airbus.

The likely candidate to take overthe aerostructures division is Ales-sio Facondo, an Alenia manager

who has previously worked at fel-low units Selex and Agusta-

Westland.“The head of the military aircraft

division will be known on Nov. 3,” a

source said.Bagnato was brought in by Mo-

retti to replace former Alenia boss

Giuseppe Giordo, who is now car-rying out consultancy work out-side the defense sector.

Selex CEO Fabrizio Giulianinialso will feature in the new setupoverseeing a number of divisions,

most of which mirror current sec-tors within Selex — airborne andspace systems, security and infor-

mation systems, and land and navaldefense electronics.

The heads of those divisions arelikely to be the current Selex man-agers running the equivalent Selex

sectors — Andrea Biraghi for secu-rity and information systems, Lo-renzo Mariani for land and naval,

and Norman Bone for airborne andspace systems.

But in addition to those three di-

visions, Giulianini will also overseethe defense systems division,which will group torpedo-maker

WASS and naval and land cannonfirm Oto Melara.

The merged entity comprising

WASS and Oto Melara will be runby the CEO of Oto Melara, RobertoCortese, rather than Finmeccanica

veteran Alessandro Franzoni, whois currently running WASS, a

source said.Also featuring in Moretti’s new

close-knit team will be current

strategy chief Giovanni Soccodatoand CFO Gian Piero Cutillo. Along-side them will be HR manager Do-

menico Braccialarghe and legaland compliance manager AndreaParrella, who both worked along-

side Moretti at the Italian railways,which he ran until he moved to Fin-meccanica last year.

Also confirmed as head of inter-nal auditing is Marco Di Capua, aformer official with Italy’s tax po-

lice and national tax agency, whoMoretti has entrusted with ferret-

ing out corruption at the company.As he has settled on his team, Mo-

retti has released a large number ofveteran managers, many of whomhave moved to work with smaller

Italian aerospace and defensefirms. One observer who attendeda recent industry conference in

Rome jokingly pointed out howMoretti was confronted by a room

full of ex-Finmeccanica managerswhen he entered.

Some managers left before Mo-

retti took over, including formerDirector General Giorgio Zappa,who now runs electronics firm Vi-

trociset. Former Alenia managerCarlo Logli, who was involved with

UAV work and Finmeccanica’s Su-

perjet joint venture with Sukhoi,has moved to run Piaggio Aero, theItalian firm now owned by Muba-

dala, the Abu Dhabi-based strate-gic investment and developmentcompany.

Former Aermacchi veteran Mas-simo Lucchesini, who had joined

Aermacchi in 1976 and was consid-ered one of the engineering brains

behind the M-346 jet trainer, hasmoved to engineering firm IDS fol-lowing Moretti’s shake-up. His exit

prompted complaints that Finmec-canica was sacrificing crucial ex-perience for the sake of renewal.

Ex-Aermacchi manager CarmeloCosentino is now head of the in-

dustrial organization that coordi-nates aerospace firms in thenorthern Italy’s Lombardy region.

Giovanni Bertolone, a formerhead of Alenia, joined Piaggio thisyear, while former Alenia manager

Gian Carlo Anselmino is now at theItalian Ministry of Defence.

Former CEO Pierfrancesco

Guarguaglini is now a consultant,while Simone Bemporad, the man-ager he sent to run Finmeccanica’s

operation in the US, is now head ofexternal relations at Italian insur-ance firm Generali. N

Email: tkington@defensenews.com.

TIZIANA FABI/AFP/GETTY IMAGES

New Leaders: Mauro Moretti is finalizing his new Finmeccanica management team.

Moretti Puts Stamp on NewFinmeccanica Leadership Team

By TOM KINGTON

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EUROPE

LONDON — British Ministry of De-fence plans to invest £166 billion

(US $257 billion) in buying newequipment and support over thenext 10 years have been labeled

largely affordable by the NationalAudit Office (NAO).

The government spending

watchdog warns, though, thatwhile the 10-year equipment planlooks more stable than it did last

year, challenges remain.The audit highlights underesti-

mated support costs and the risks

posed by some high-value pro-grams not yet under contract asareas of concern.

The NAO annually runs the ruleover the 10-year equipment plan tocheck how MoD’s numbers actual-

ly stack up. This is the third time the watch-

dog has audited the affordability of

the equipment plan as part of thegovernment’s effort to keep a reinon defense spending, which had

crashed out of control when the

Labour Party was in powerpre-2010.

The NAO publishes its findings

on the equipment plan in parallelwith its annual investigation into

whether major defense programsare running to time and budget.Publication of the documents

comes just weeks before the gov-ernment is set to roll out its spend-ing review, followed within days

by a strategic defense and securityreview.

The NAO makes no comment on

whether the spending plan is ade-quate for military needs, onlywhether it is affordable.

The government confirmed in

July that defense would get an an-

nual 1percent equipment spendinghike in real terms up to 2020, anddespite a favorable settlement in

the summer budget, it is expectedsome tough decisions will have tobe made if the military is to fill key

capability gaps, such as a fleet ofnew maritime patrol aircraft.

Jon Thompson, the MoD’s top

civil servant, has already signaledthe governmentwide spending re-view will demand big efficiency

savings from the department.Thompson, the permanent un-

dersecretary, told a parliamentary

Public Accounts Committee hear-ing recently, “There is more tax-payer value to be driven out [of the

MoD]. I would expect us in thespending review to come forwardwith a significant further financial

efficiency package of between £15billion and £20 billion over the next10 years,” he said.

Under the plans outlined for de-fense by the chancellor in the sum-

mer, some of those savings could

be plowed back into equipmentand other spending.

Despite some caveats, the plan

for the 2015-2025 period generallygot the thumbs up from the audi-tors.

“The equipment plan looks morestable than last year and there areindications that it will remain af-

fordable for the rest of the Parlia-ment [which ends in 2020] if thisstability is maintained,” NAO boss

Amyas Morse said. “However, thedepartment’s need to make roomin its budget for the support costs

of a range of new equipment is justone of the future challenges itfaces in maintaining the affordabil-

ity of the plan.”

Howard Wheeldon, of Wheeldon

Strategic, said it was welcome tohear the NAO express far less con-cern over MoD spending than it

has for a long time. “But it does not harbor any room

for complacency,” he said. “The

last five years have been spent bal-ancing the books, adjusting, reor-ganizing and making defense more

affordable and efficient. The nextfive years in terms of procurementwill all be about capability en-

hancement, making our armedforces more resilient, providingmore capacity and filling serious

capability gaps.” The equipment plan envisages

spending £84 billion on support

and £69 billion on procurementover the 10-year period, about 40percent of the MoD’s total budget

for that time.Other important finance num-

bers to know are that the MoD

holds a central contingency re-serve fund of £4.3 billion and an un-allocated equipment budget of £9.5

billion.

The equipment and support bud-get is planned to reach £14.6 billion

next year, rising to £17.3 billion in

the 2024-25 financial year.The 10-year equipment program,

updated by the MoD on a rolling,

yearly basis, forecasts defenseequipment and support spending

of £3.5 billion higher than lastyear’s plan. That increase, though,is mainly the result of bringing

2025 into the planning period, rath-er than a rise in program costs, theNAO said.

“There was little sign of in-yearcost growth or increase in forecastcosts of the 10-year equipment

planning period,” the audit team

said.

The plan forecasts include sur-face warship spending of £19 bil-lion over the 10 years. Submarine

spending will total £43 billion, landequipment £17 billion, complexweapons £13.2 billion, combat air

£17.4 billion, ISTAR £3.2 billion, in-formation systems and services£18.9 billion, air support £12.6 bil-

lion and helicopters £10.6 billion.Principal among those projects

is the Successor nuclear missile

submarine program. Thompsonacknowledged to the Public Ac-counts Committee that estimating

the cost of the program is a hugelycomplex task and the largest finan-cial risk facing the department.

The audit office report alsopointed out other areas wherethere was cause for concern on fu-

ture equipment spending.Estimates by the MoD’s cost as-

surance and analysis service reck-

on that procurement costs couldbe underestimated by as much as£2 billion. Three-quarters of that

figure is attributable to four pro-grams: Successor, the Astute hunt-

er-killer nuclear submarine, theType 26 frigate program and afourth project that was not named.

The NAO also pointed to supportcosts as a possible problem for thespending plans. According to the

report, the cost-assurance serviceestimates that the level of under-statement of support costs within

the equipment plan is £2.8 billion.After years of major cost over-

runs and slippages in the delivery

of equipment, performance at theDefence Equipment & Support or-ganization has been steadily im-

proving recently. That trendcontinued last year, with overallproject costs falling by £247 mil-

lion, and the Astute hunter-killersubmarine program being the onlynotable project to buck the trend,

the NAO said.Time slippages also declined last

year, with the one notable excep-

tion being a 52-month deferment ofthe final stage of nuclear core pro-duction capability due to the un-

foreseen need to replace thepower plant for the nuclear missilesubmarine Vanguard and to retain

the option to do the same for the

Victorious for safety reasons.Defence Procurement Minister

Philip Dunne said the performance

of the MoD had taken a huge swingupward. “This is the third consec-

utive year of improving perfor-mance,” he said. “The NAO reportwe inherited recorded a £1.2 billion

in-year overspend and 93 monthsin-year project overruns. By con-trast, today’s report for 2014-15

shows an in-year cost reduction of£247 million and underlying deliv-ery eight months over forecast — a

remarkable turnaround by anystandards." N

Email: achuter@defensenews.com.

Auditors: UK 10-Year EquipmentPlan Is Affordable for Now

By ANDREW CHUTER

BAE SYSTEMS

Cost Estimations: The Type 26 frigate is one of four programs cited as being responsible for about three-quarters of underestimated UK

equipment procurement costs.

www.defensenews.com October 26, 2015 DefenseNews 15WORLD NEWS

HELSINKI — The significant spend-ing increase sought by Finland’sArmed Forces Command (AFC) is

unlikely to happen in 2016 as thenewly elected center-right govern-ment grapples with how to reduce

a hefty budget deficit and re-ener-gize a recession-hit economy

Although government parties the

Center, National Coalition and theFinns favor raising defense spend-ing against a backdrop of growing

aggression by Russia in the region,the fiscal priority is focused onausterity measures to cut the pro-

jected US $6 billion budget deficitin 2016.

“The budget for 2016 is unsur-

prisingly tight, and savings will belooked for in all core areas ofspending,” Finance Minister Alex-

ander Stubb said. Finland’s overalldebt burden is forecast to increaseto $121 billion in 2016. The govern-

ment is aggressively pursuing pub-lic spending cuts of $1 billion to$1.5 billion.

The armed forces has seen a

steady decline, in real terms, in itsannual budgets since 2006. The

military budget accounted for 1.4

percent of GDP in 2006, droppingto 1.34 percent in 2014 and 1.28 per-

cent in 2015 when total defensespending slumped by about 2 per-cent to $2.9 billion.

For 2016, the government will

ask the military to proceed withfurther cost-savings measures to

free up capital that can be chan-

neled into core operating areaswhile bolstering procurementspending capacity.

The government is expected torequire the armed forces to find$80 million to $100 million in sav-

ings on military staff and admini-stration functions alone in 2016.Additional capital savings are to be

transferred from non-core func-tions to operating units, materiel

procurement, and conscript and

reservist training.“Transferring monies from one

area to another is counterproduc-

tive. Bolstering materiel invest-ments while cutting back on

operations is also foolish,” Mika

Oranen, chairman of the Finnish

Non-Commissioned OfficersUnion, said.

The armed forces made its case

for a substantial real increase inthe 2016 budget on the groundsthat apart from force moderniza-

tion, readiness capability andtraining costs, its economic situa-tion needed to improve ahead of

future big-ticket expenditures toreplace the Air Force’s 60 F/A-18Hornet jets and the Navy’s core sur-

face fleet. Defence Minister Jussi Niinistö

has offered assurances that the ex-

isting level of spending on con-script and reservist training will bemaintained.

However, the cutbacks could

restrict force training and exercisebudgets, reducing the active role of

equipment, such as F/A-18 Hornetfighters and NH90 tactical trooptransport helicopters, in future op-

erations and exercises. “Training of Finnish conscripts

and reservists will not suffer. Next

year’s budget ensures 2.5 trainingstaff for every conscript unit. Addi-tionally, we intend to maintain our

reservist training levels at 18,000participants every year,” Niinistösaid.

Notwithstanding, Niinistö hasyet to outline whether the cutssought will be limited to 2016 or ex-

tend over the period of the presentgovernment’s four-year term in of-fice, which ends in 2019.

If this is the case, then the mili-tary is facing static annual budgetlevels and added pressure to re-

duce its operating-base cost levels

up to 2020.The projected level of funding in

2016 and up to 2020 will also fall

short of a recommendation to gov-ernment by the Parliamentary De-

fence Committee (PDC), whichsupports a program of spending fo-cused on modern equipment and

bolstering the armed forces’ war-time strength from 230,000 closerto its previous level of 350,000

trained soldiers.“Finland needs to maintain a

credible defense capability. We

cannot afford to make more cuts tothe training and exercise budgetsor leave the armed forces without

the modern equipment they need

to do their job properly,” Mika Kari,the PDC’s deputy chairman, said.

The project to replace the Air

Force’s 60 Hornet fighter jets,which are due to be retired duringthe period 2025 to 2030, is set to be-

gin by the end of 2015. The formalprocurement phase is set to com-mence in 2020. The Navy’s new

fleet is expected to be in service in

2025. The total cost of these two pro-

grams is expected to exceed $8 bil-lion, with the fighter programcosting an estimated $6 billion.

The proposed cost-savings drivecould also hurt the military’s abilityto fill vacant posts across the

Army, Navy and Air Force, whichremain empty due to a lack offunds. This could exacerbate the

military’s ability to contract offi-cers and NCOs to train conscripts.

The development of the cyber

defense unit (CDU) will also belargely funded through cost-sav-ings and related capital transfers.

The armed forces is expected to in-vest around $100 million into theCDU project in 2016-2017.

The planned savings push willnot affect the military’s interna-tional force commitments, such as

peacekeeping and crisis manage-

ment contributions to the UnitedNations. These are generally fund-

ed out of the Foreign Ministry’s

budget.In September, Finland pledged

over 200 soldiers, mainly specialforces, to strengthen the UN’s BlueHelmets’ peacekeeping capacity to

40,000 troops and law enforcement

officers. N

Email: godwyer@defensenews.com.

Finnish Defense Faces New Wave of Spending CutsBy GERARD O’DWYER

1ST LT. CHRISTOPHER MESNARD/US AIR FORCE

Replacement Pending: A Finnish F-18 Hornet rejoins the fray during the Arctic Challenge

exercise in 2013. The Finnish armed forces hoped to improve their financial condition

ahead of future big-ticket programs, such as replacing the Air Force’s F/A-18 Hornets.

ANKARA — Turkey witnessed the worst ter-ror attack in its history Oct. 10 when two sui-cide bombers’ explosions erupted during a

peace rally outside the capital’s main trainstation, killing more than 100 people and in-juring hundreds more.

Two important messages are emerging af-ter the attack: Turkey’s assertive MiddleEast policy since the Arab Spring’s after-

math has created major threats to homelandsecurity; and the country is not sufficientlyprepared for terror threats in urban areas.

“Sadly, it’s payback time for Turkey whoonce got too close with jihadists operating inSyria and Iraq,” said one Western ambassa-

dor. “Obviously, Turkey’s capabilities to dealwith the evil men of the Middle East are wellbelow [where] it thought they were. Turkey

should rethink its Middle Eastern ambi-tions.”

Turkey has been ambitiously supporting

Sunni Islamist regimes in Tunisia, Libya andEgypt since violence broke out in these

countries after the Arab Spring.

Most obsessively, Ankara has sought tooust Syria’s pro-Shia president, Bashar al-

Assad, and install his replacement through“mildly Islamist” Sunni groups. That goal un-til this year was widely believed to have in-

cluded logistical support and armsshipments to radical Islamist groups operat-ing in Syria.

Under pressure from its Western allies,Turkey earlier this year decided to open itsair bases to the allied military campaign

against the biggest jihadist group, the Islam-ic State group, that has captured largeswaths of land in neighboring Syria and Iraq

since summer 2014, and later it joined itselfin air raids against the group know as ISIL orISIS. In return, ISIL vowed to fight Turkey.

Prime Minister Ahmet Davutoglu said Oct.14 that the suspects in the Ankara bombingshad links with ISIL and possibly with Kurd-

ish militants.Since July, Turkey’s security forces have

been fighting militants from the Kurdistan

Workers’ Party (PKK) after the group endeda unilateral cease-fire it had declared in 2013.

The PKK ended its cease-fire after another

ISIL-linked suicide bombing July 20 killed 33activists at a pro-Kurdish meeting in a small

Turkish town on the border with Syria.More than 150 Turkish security forces and

hundreds of PKK militants have been killed

since then in clashes mostly in Turkey’s pre-dominantly Kurdish southeast and in Turk-ish air raids against PKK strongholds in

northern Syria.“Turkish intelligence and pre-emptive

strike capabilities against the PKK are fairly

reliable,” said one security expert here. “ButISIS and similar groups running clandestinecells in big cities are a more difficult fight

and relatively uncharted territory for the se-curity system.”

One Western security analyst in London

said: “The attack highlights Turkey’s failuresin urban anti-terror warfare, including its cy-ber and intelligence capabilities.”

One industry official said that the attackwould make Ankara an eager buyer of “anysystem” that could bolster Turkey’s anti-ter-

ror fight.“In addition to reviewing its operational

and administrative capabilities the Turks

will hope to reinforce their [urban] anti-ter-

ror gear. Any system designed to boost intelcapabilities would be welcomed, especiallybut not necessarily locally developed sys-

tems, ” he said.But one procurement official refused to

comment. “The nation mourns its dead. It is

too premature to talk about new systems. Intheory, Turkey has always been threatenedby various types of terror and in need of anti-

terror capabilities.” N

Email: bbekdil@defensenews.com

Ankara Attack Reveals Turkish VulnerabilitiesBy BURAK EGE BEKDIL

ADEM ALTAN/AFP/GETTY IMAGES

Victims Remembered: People gather on Oct. 12 at

the site of the explosions to pay tribute to a street

vendor who was killed in the Oct. 10 blasts.

16 DefenseNews October 26, 2015 www.defensenews.com

EUROPE

SEOUL — South Korean defense of-

ficials are in a quandary over howto acquire an active electronicallyscanned array (AESA) radar, a key

component for the country’s fight-er development program code-named KF-X, following the US re-

fusal to transfer the advancedradar technology.

South Korea had expected to

learn the AESA technology for theKF-X jet through offset deals con-nected to its F-X III contract to buy

40 Lockheed Martin-built F-35As. South Korea seeks to develop a

twin-engine KF-X fighter jet on par

with the F-16 and produce 120 unitsstarting in 2025 to replace its F-4and F-5 fleets. The project is esti-

mated to cost some US $16 billion. But the US government refused

to transfer four of the 25 fighter

technologies South Korea wanted,citing the International Traffic inArms Regulations. Those technol-

ogies concerned AESA, an electro-optical targeting pod, infrared

search-and-rescue systems, and a

radio frequency jammer. During the Seoul International

Aerospace and Defense Exhibition

(ADEX), which ran Oct. 20-25, Eu-ropean radar makers sought towoo South Koreans apparently

disappointed by the US. Sweden’s Saab offered to devel-

op an AESA with South Korea.

“We’ve done the flight test withthe backend system and antennaelements,” said Tom Bratt, market-

ing executive of Saab ElectronicDefence Systems. “We’re ready togo to the next phase once we have

a platform available. Then we canstart to make all the proper inte-grations.”

Bratt said Saab could complete

the development of the AESA sys-tem with South Korea, as the com-pany had been engaged in a joint

study on the radar with the Agencyfor Defense Development (ADD),which is affiliated with South Ko-

rea’s arms agency. “Once we have a contract, it will

take about two years to deliver the

first system,” he added.Finmeccanica’s Selex is pitching

its Captor-E radar fitted for the Eu-

rofighter Typhoon. The British andItalian aerospace group recom-mends Seoul adopt the Selex radar

and then localize it in phases.“The bottom line is we’ll try to

meet the Korean demands as much

as we can,” a Selex official said oncondition of anonymity.

“The best option right now is for

Korea to produce the Captor-E ra-dar under license first, and withSelex’s tech transfer, Korea would

be able to localize the AESA tech-nology,” he said.

Israel also has joined the radar

competition, capitalizing on itsprevious works with South Korea.

Israel Aerospace Industries (IAI)

supplied its EL/M-2032 pulse Dop-

pler radar for the FA-50 jet, a lightarmed variant of the T-50 super-

sonic trainer aircraft. The compa-

ny now is offering the EL/M-2052airborne AESA fire control radar

for the KF-X plane.“We’re willing and looking for-

ward to cooperating with Korea,”

said Igal Karny, deputy director ofElta Systems’ marketing and salesdivision. “The whole radar is our

radar. We’re exporting the radaraccording to our regulations,” Kar-ny said, apparently referring to Ko-

rea’s wariness of AESA exportcontrol.

Unlike European and Israeli

firms, US radar manufacturers

were cautious when talking aboutAESA cooperation with Korea.

“I can only tell you that right now

we don’t have a license requiredfor us to discuss KF-X radar coop-eration,” a Raytheon official said.

Northrop Grumman was a bitmore active in participating in theKF-X effort, as it seeks to sell its

scalable agile beam radar to Korea.“We’re very interested in it, and

we’re following the [KF-X] pro-

gram actually,” said Paul Kalafos,vice president of Northrop Grum-man’s electronics systems. “We

have a long partnership with Ko-rea, and we want to be here for along time in the long-term view.”

Korea Aerospace Industries(KAI), which is in charge of KF-Xintegration, puts a priority first on

reducing risk before locally devel-oping an indigenous AESA system.KAI favors buying an AESA either

from the US or other nations to de-velop a KF-X prototype.

“We favor a two-track approach

toward acquiring AESA technol-

ogy,” a KAI spokesman said. “Wecan develop a KF-X jet equipped

with either US or European AESAsystem over the next five years,”he said. “In the meantime, the ADD

and a foreign radar company couldpush for developing an indigenousAESA within 10 years at the earli-

est, so the next KF-X block models

would be fitted with the locally de-veloped radar.”

The presidential office backs the

two-track approach as a way ofeasing public anger over US rejec-

tion of tech transfer. “I believe we can develop our

own AESA and other key technol-

ogies within 10 years,” National Se-

curity Adviser Kim Kwan-jin saidin a National Assembly audit on

Oct. 23. “We’re seeking technical

assistance from a foreign partner

in order to manage or reduce risksof independent development ofkey systems.”

The ADD has implemented re-search and development of AESAsince 2006, he said.

The ADD has been in contactwith radar companies from the US,Europe and Israel to find ways of

purchasing an AESA system andgaining technical cooperation, ac-cording to sources. A selected

partner company is expected towork with precision weaponsmaker LIG Nex1 to develop an in-

digenous AESA.

Engine Contest Competition is also heating up

between US and European enginecompanies. Eurojet Turbo is push-

ing its 4.5-generation EJ200 engineto power the KF-X, touting theproduct’s exportability and growth

potential. “We’re delighted to offer the

EJ200 engine for the KF-X pro-

gram. This is the latest, proven en-gine,” Eurojet CEO Clemens

Linden said. “The engine has aneasy maintenance concept with 15modules that can be exchanged at

the base without going back to thetest house.”

Linden stressed Eurojet would

offer lenient technology transferso Korea could export Eurojet-based engines to third nations free

of US export control.“When the KF-X program ad-

vances and grows, we can have

joint development with the Koreanindustry to grow the engine fur-ther,” the CEO said, adding that his

company will help Korea learn en-gine integration skills.

General Electric is pitching its

F414 engine, highlighting its expe-rience producing engines under li-cense with the Korean industry.

GE stresses the developmentroadmap for the F-414, which pow-ers the US Navy’s Boeing F/A-18

E/F Super Hornet, and GE’s suc-cesful work on a number of inter-national programs, including KAI’s

T-50, the Saab Gripen and the Hin-dustan Aeronautics Tejas.

“KF-X is the largest-ever military

weapons development program inKorea’s history, and it will require

low-risk solutions in terms of cost,

technology and life-cycle manage-ment,” Al Dilibero, vice presidentof GE Aviation, said. “GE will bring

the best and the most diverse fight-er engine integration experiencearound the world to KF-X, which

will lower overall risk of KF-X de-velopment.”

KAI issued the request for pro-

posals for the engine weeks agoand responses are due Nov. 4. Thewinner is scheduled to be an-

nounced by February and standsto sell about 400 engines. N

Email: jsungki@defensenews.com.

Seoul Debates Best StrategyTo Acquire AESA Radar

By JUNG SUNG-KI

SON MIN SEOK/SOUTH KOREA MINISTRY OF DEFENSE

FighterDevelopment:South Korea

wants to

develop a

twin-engine

KF-X fighter jet

on par with its

F-16s.

absence of a clause in the SECC’scredit facility that would compelBrazil to buy Swedish weapons.

“It is incomprehensible thatSweden issues a credit to Brazil topurchase weapons systems for the

Gripen and does not include a re-striction clause,” said Allan Wid-man of the Liberals Party, who

chairs the Swedish ParliamentaryDefense Committee. “Brazil is nowfree to buy its weapon systems

from Germany, Israel or South Af-rica with Swedish money.”

The technology transfer and in-

dustrial components in the GripenNG deal can be expected to gener-ate additional value-added ave-

nues for cooperation betweendefense and technology firms inSweden and Brazil, Damberg said.

“This is a long-term partnershipthat will create new investmentopportunities in Sweden and in

Brazil. It will mean jobs, growthand productivity, as well closer co-

operation in the areas of technol-ogy, innovation and research,” hesaid.

Currently, some 200 Swedish-owned companies operate in Bra-zil, employing more than 70,000

workers.In the medium term, the Gripen

NG deal will generate 1,000 to

2,000 new jobs in Sweden, mainlycentered around Saab’s aircraft-manufacturing base in Linköping.

Saab is currently constructingthe first of several intended pro-duction units in Brazil directly

connected to the Gripen NG. Thefirst unit is being built in São Ber-nardo do Campo. The technology

transfer component of the deal,and future production of GripenNGs in Brazil, is expected to create

2,000 to 3,000 jobs.The Brazil deal brings Saab clos-

er to its objective of selling more

than 300 Gripen NG aircraft overthe next 20 years.

Saab CEO Håkan Buskhe said

the defense group remains confi-dent it can win new orders in Asia,where Thailand already operates a

modified version of the Gripen, as

well as in Europe, South Americaand sub-Saharan Africa.

The Brazil sale marks “an impor-

tant milestone,” Buskhe said. Thedeal supports the company’s long-

term plan to use the industrialstructures around the Gripen NGproject to make Brazil a platform

for generating additional aircraftsales in Latin America.

“Our partnership with Brazilian

industries strengthens Saab’s posi-tion in Latin America and supportsour strategy for growth through in-

dustrial cooperation,” Buskhesaid. N

Email: godwyer@defensenews.com.

BRAZIL GRIPENSFrom Page 12

ASIA & PACIFIC RIM

www.defensenews.com October 26, 2015 DefenseNews 17ASIA & PACIFIC RIM

NEW DELHI — The Indian Air Force has askedthe Ministry of Defence to buy unknownnumbers of S-400 Triumf air defense systems

from Russia, but Russian diplomats heresaid Moscow is unlikely to agree until Indiaclarifies its position on the joint Fifth Gener-

ation Fighter Aircraft (FGFA) program.A final agreement on development of the

FGFA is still pending despite an initial agree-

ment inked in 2010 because the Indian AirForce still has not finalized how many air-craft it would order, and because work-share

issues between India and Russia on produc-tion of the FGFA are not settled. India willrelease its share of $10 billion toward devel-

opment of the FGFA — which is based on theRussian T-50 platform and is in the prototypestage — only after final agreement is ap-

proved.A Russian diplomat, however, said Mos-

cow wants greater clarity on whether the rul-ing Narendra Modi government wouldproceed with joint development of the FGFA

or limit its purchases of the aircraft. The dip-lomat, however, would not say if there wouldbe a trade-off between the S-400 and the

FGFA deal.

The Indian Air Force made a request toMoD early this month to buy the S-400 sys-

tem, a Defence Ministry source said, addingthat the request will be on Defence Minister

Manohar Parrikar’s wish list when he visitsMoscow next month. India proposes to buythe S-400 through a government-to-govern-

ment deal, the source added.The Air Force wants the S-400 to fill holes

in its fledgling air defense systems and pro-

vide capability to strike multiple targets, in-

cluding ballistic missiles and stealth aircraft,said an Air Force official. The S-400 Triumf

can intercept and destroy airborne targets ata distance of up to 400 kilometers and simul-

taneously engage up to six targets.“The intention to go ahead with the pur-

chase of S-400 Triumf indicates that the

homegrown capability to build an effectiveanti-missile missile system is not in sight inthe near future,” said defense analyst Nitin

Mehta.

India is developing its own anti-missile sys-

tem that includes the Prithvi for high-altitudeinterception (above 75 kilometers) and theAdvanced system for low-altitude intercep-

tion (below 15 kilometers).The first phase of the system, which will be

able to kill ballistic missiles at a range of

2,000 kilometers, was scheduled to havebeen in operation by 2012. No official fromthe Defence Research and Development Or-

ganisation (DRDO), which is developing thePrithvi system, would comment whether thesystem is in operation.

The MoD source said that the secondphase of the system, intended to provide thecapability to kill missiles at a range of 5,000

kilometers, is now in development. Thesource would not comment on whetherPhase 1 is in operation.

In addition, India and Israel are developinga medium-range surface-to-air missile(MRSAM) project, which would have a range

of 70 kilometers, but the project has been de-layed by more than three years, and no MoDofficial would comment about when it would

be completed.The Indo-Israeli MRSAM is being jointly

developed by India’s DRDO and Rafael and

Israel Aerospace Industries of Israel.Another project being developed jointly

with the Israelis is a long-range surface-to-airmissile, which would have a range of morethan 100 kilometers and is meant for the Indi-

an Navy. This effort is also over two years be-hind schedule. N

Email: vraghuvanshi@defensenews.com.

Russia May Link S-400 Sale to IndiaWith Future Fighter’s Development

By VIVEK RAGHUVANSHI

VITALY V. KUZMIN/WIKIMEDIA

Sought by India: The Russian S-400 Triumf air defense system on parade.

MIDDLE EAST

TEL AVIV — Israel’s high-resolutioneyes in space are keeping close

track of Russian efforts to fortifythe flailing regime of Syrian Presi-dent Bashar al-Assad, as evidenced

by imagery obtained by DefenseNews from just one satellite.

Images captured earlier this

month from the Eros-B, a dual-useimaging satellite owned and oper-ated by ImageSat International, re-

veal high operational tempo atLatakia International Airport,where Moscow has based some 12

Su-25 fighters, a similar amount of

Su-24 bombers, 16 Mi-35 attack he-licopters and a small number of

Su-30 and Su-34 aircraft.

Outsized Antonov 124 and Ilyush-in Il-76 cargo aircraft are seen

offloading additional cargo, all ofwhich is protected by at least one SAM-22 surface-to-air missile

system.In an image dated Oct. 10, sup-

port vehicles and open cockpit

canopies indicate high levels ofalert while another image taken onthe same day shows a foursome of

Su-30 attack fighters in so-calledfast launch positions at the end ofthe runway.

Such imagery taken by the rela-

tively low end of Israel’s satellite

force represents a mere snapshotof the Jewish state’s persistent abil-ity to monitor areas of interest

throughout Syria and beyond. With more than a handful of satel-

lites orbiting the Earth at 90-min-

ute intervals, Israel has multipleopportunities every day to revisitsuspected sites.

Sources here note that as sharpas the imagery of Eros-B may seem,the satellite actually represents the

low end of Israel’s Earth orbitingarsenal.

Electro-optic and radar imagery

taken respectively from Israel’s

Ofeq family of spacecraft and TecSAR synthetic aperture radar

satellites provide much higher res-

olution and yield a far greateramount of data for Israeli intelli-

gence analysts, they say.“Eros is a commercial derivative

of the much more powerful mili-

tary assets that the Israel DefenseForces [IDF] and the intelligencecommunity are using every day and

every night,” said a former officialof the Defense Ministry’s militaryspace bureau.

“Each satellite can revisit thesame point of interest at least daily.And when you have quite a lot of

satellites, it means your coverage

of that area is fairly persistent. Theimpact of these capabilities are sig-

nificant,” said the former official,who did not agree to be named dueto his ongoing work as an officer in

the IDF reserves.

IDF officers and their Russiancounterparts plan to hold their sec-

ond round of so-called deconflic-tion talks in Moscow later nextmonth, with an eye toward estab-

lishing a mechanism to prevent un-

intended consequences in theevent that Russian and Israeli air-

craft are flying in the same air-space. N

Email: bopollrome@defensenews.com.

Israeli Spy Satellites Keep Sharp Eyes on Russian Forces in SyriaBy BARBARA OPALL-ROME

COURTESY PHOTO

Poised for Action: Satellite imagery dated Oct. 3 shows extensive Russian presence at Syria’s Latakia International Airport, including

four Sukhoi Su-30 attack jets in fast-launch positions at the end of the runway.

18 DefenseNews October 26, 2015 www.defensenews.com

BizWatch

WASHINGTON — As aerospace and de-fense firms began reporting their third-quarter results last week, mergers and

acquisitions – past, present and poten-tial future deals – loomed large.

Lockheed Martin, Boeing and Rayth-

eon all reported stronger-than-expect-ed 3Q results, bumping up theirearnings per share slightly.

Marillyn Hewson, Lockheed’s chair-man, president and CEO, said duringan Oct. 20 call with analysts that regu-

latory reviews of the company's $9 bil-lion acquisition of Sikorsky Aircraft

have been completed in seven jurisdic-tions, with only China remaining. Lock-heed expects that review to proceed

quickly, paving the way for a quickcompletion of the deal.

“With the progress of the regulatory

reviews, we now expect to close in thefourth quarter,” she said.

Lockheed is also continuing with

plans to divest or spin off $6 billion ofgovernment information technology,infrastructure services and technical

services businesses, and expects tomake a decision by the end of the year.

Hewson said she disagreed with Pen-

tagon acquisition chief Frank Kendall’srecent assertion that too much consoli-dation could reduce competition in the

defense industrial base.“There's really no evidence to sup-

port that. There's no evidence to sup-

port that with our Sikorsky acquisitionthat we reduce competition or inhibitinnovation in any way,” she said.

In an analysis for investors, Bank ofAmerica’s Ron Epstein compared thestrategy underlying the Sikorsky deal

to Lockheed’s acquisition of GeneralDynamics' military aircraft business in1992.

“This acquisition was the foundation

of Lockheed’s dominance in fighter jetsand improved the company’s compet-

itive advantage for the F-35 program,

the only US fifth-generation fighter jetin production,” he noted. “With Sikor-

sky, LM is now the premier manufac-

turer of military fixed-wing and

rotary-wing aircraft. In the long-term,we would not be surprised if LM is ableto extract value from the Sikorsky ac-

quisition as it had done with GD’s mil-itary aircraft business.”

Raytheon’s results were bolstered in

part by a strong performance by Rayth-eon|Websense, the cyber business cre-ated after Raytheon acquired

Websense in May. But Raytheon CEOTom Kennedy and Chief Financial Offi-cer Anthony O’Brien suggested no

more big deals are on the horizon.“We don't have sitting here today any

$1 billion-plus deals that we're contem-

plating for any part of the portfolio, in-cluding our commercial cyberventure,” O’Brien said. “It would be the

more niche, targeted type of acquisi-tions that fill technology gaps or prod-uct gaps or customer gaps.”

In a research note, Robert Stallard ofRBC Capital Markets noted that Rayth-eon’s capital deployment strategy ap-

pears to have shifted back towardshare buybacks and dividends for in-vestors.

“We think there has been concernthat Raytheon is [on] an acquisition

binge following Blackbird and Web-

sense, but we think management madeit clear on the call that the big deals

($1bn+) are done,” he wrote. “We may

see some bolt-ons, but 80-90 percent offree cash looks set to be returned toshareholders as buybacks and divi-

dends going forward.”

Boeing’s strong quarter was driven

largely by the performance of its de-fense, space and security division.

“The strength of our defense and

space business stems from our invest-ments in technology and innovationthat have established a portfolio of reli-

able, proven and affordable productsand services,” said Dennis Muilenburg,Boeing’s president and CEO. “We con-

tinue to invest in organic growth areasthat are priorities for our customerssuch as commercial derivatives, space,

unmanned systems, intelligence, sur-veillance and reconnaissance, and thecritical few future franchise programs

like Long Range Strike and the T-Xtrainer.”

All three firms continued to spend

heavily on share buybacks and divi-dends, Lockheed and Boeing especial-ly. Lockheed’s board recently

authorized the company to spend up to$4.3 billion on future share buybacks,

and the company spent almost $1.3 bil-lion on share buybacks and dividendsin the third quarter of 2015. Boeing

spent $1.5 billion on share buybacksand $600 million on dividends over thesame period.

Raytheon is on track to spend $1 bil-lion on share buybacks in 2015, Kenne-dy said during the earnings call.

Byron Callan, an analyst with AlphaCapital, noted that Raytheon now en-joys the top consensus sell-side rating

for US large-cap defense stocks. If thissignals that Wall Street is beginning tofind organic growth stories more com-

pelling than share buybacks and divi-dends, this could signal a strategic shift

toward more merger and acquisition

activity.“If the sell-side is becoming more fa-

vorably disposed to defense growth

stories among primes/large caps, itmay reshape strategies of some com-panies that seem to heavily rest on stat-

ic capital deployment, particularly asthe returns on buybacks are inverselyproportional to valuations,” he wrote

in a note to investors, noting that com-panies with fiscal years ending in De-cember are firming up their future

strategies. “If growth will command a

premium in defense and outshine stat-ic capital deployment, at least it should

be debated and reviewed in the 2016

and outyear plans.” N

Email: aclevenger@defensenews.com.

Defense Firms’ Q3 ResultsHighlight M&A Activity

By ANDREW CLEVENGER

LAURA BUCKMAN/AFP/GETTY IMAGES

Lockheed’s Hewson

Engine UpgradesThe US Air Force has

awarded UK-based Rolls-Royce a $36 million contract

to begin upgrading its fleetof C-130 transport planes,the company announced.

The contract will kick offwhat is expected to be a

long-running agreementwith the Air Force to up-grade the entire fleet of 400

C-130E and C-130H engineswith Rolls-Royce’s T56 Se-ries 3.5 kits.

Deliveries of the upgradepackages will begin in De-cember, and will introduce

the engine improvementsinto Air Force and US AirNational Guard C-130s, ac-

cording to an Oct. 20 compa-ny news release.

The Series 3.5 upgrade,

which was designed andfunded by Rolls-Royce, en-ables the engines to operate

at low temperatures, ex-tends parts life and im-

proves reliability by 22percent, according to the

statement.

Tank Development HelpA Turkish company com-

missioned to develop an en-gine for the country’s future

tank has signed a deal withan Austrian company fortechnical support.

The privately owned Turk-ish engine maker TUMO-

SAN said it signed anagreement with Austria’sAVL List to get technical

support for the power unitof the Turkish tank, the Al-tay, and its integration into

the tank. Procurement officials said

they did not object to any

deal involving foreign tech-nical support for what Tur-key aims to make an

indigenous tank as long asforeign support did notcause licensing problems.

In March, TUMOSANsigned a €190 million (US$206.35 million) contract

with the Turkish govern-ment to design an engine for

US AIR FORCE

A $36 million contract to Rolls-Royce is expected to kick off a

long-term upgrade of the US Air Force’s entire fleet of C-130E and

C-130H engines with T56 Series 3.5 kits.

RANDOM NOTES

OTOKAR

Austrian company AVL List will aid in development of the engine for

Turkey's indigenous Altay tank.

Mitch Snyder has beennamed president and CEO

of Fort Worth, Texas-basedBell Helicopter, succeedingJohn Garrison, parent compa-

ny Textron said.

Lisa Atherton will succeedSnyder as executive vicepresident of Bell Helicop-

ter’s military business. Shewas vice president of globalmilitary business develop-

ment.

Falls Church, Virginia-

based Northrop Grumman an-

nounced that Gloria Flachwill become chief operatingofficer on Jan. 1 as the com-

pany streamlines its struc-ture from four businesssectors to three, with the

merging of elements of itsElectronic Systems, Infor-mation Systems and Techni-

cal Services sectors. Flach is

corporate vice presidentand president of Northrop’sElectronic Systems sector.

Additionally, Kathy War-den, currently corporatevice president and president

of Information Systems, willbecome corporate vicepresident and president of a

new Maryland-based Mis-

sion Systems, composed ofthe existing Electronic Sys-tems sector and elements

from the current Informa-tion Systems sector.

Textron Systems an-nounced the promotion ofBrian Sinkiewicz to senior

vice president and general

manager of its Weapon &Sensor Systems businessunit. He led the Textron

unit’s Precision Weaponsbusiness line.N

ON THE MOVE

Send personnel news to

onthemove@defensenews.com.

www.defensenews.com October 26, 2015 DefenseNews 19

CalendarTO PLACE AN EVENT LISTING,CALL (703) 658-8365 OR EMAIL CALENDARAD@DEFENSENEWS.COM

OCTOBER

DECEMBER

JANUARY

December 8-10, 2015

GULF DEFENSE & AEROSPACEKuwait City, Kuwaitwww.GulfDefense.com

November 8-12, 2015

DUBAI AIR SHOWDubai World Central, Jebel Ali, UAE

NOVEMBER

NOVEMBER

October 26-29, 2015

NDIA ANNUAL SYSTEMSENGINEERING CONFERENCESpringfield, VAwww.ndia.org/meetings/6870

October 27-29, 2015

NDIA ANNUAL EXPEDITIONARYWARFARE CONFERENCE Portsmouth, VAwww.ndia.org/meetings/6700

November 30 - December 4, 2015

I/TSEC 2015Orange County Convention CenterOrlando, FLwww.iitsec.org

I/ITSEC is the world's largest conferenceand display of training systems capabilitiesin the world. Over 500 exhibitors join topresent leading edge technology andinnovative concepts related to the Training,Modeling and Simulation industries for over14,000 visitors. Key government organiza-tions and key industry partners from acrossall training domains are present to include,transportation, health care, gaming, andeducation. The venue is host to numerouscollateral meetings and discussion oppor-tunities take advantage of the large numberof government and industry leadersbrought together in one venue. This repre-sents a huge offset to separate meetingsrequiring separate travel and logisticalsupport. In many cases, cross functionalmeetings between government, industryand academia would be impossible outsidethis venue.

November 2-5, 2015

DEFENSE AND SECURITYBangkok, Thailand

November 3, 2015

NDIA EMBASSY/DEFENSE ATTACHELUNCHEON SERIES - UNITED KINGDOMWashington, DCwww.ndia.org/meetings/647B

¥

November 3-5, 2015

NDIA AIRCRAFT SURVIVABILITYSYMPOSIUM 2015Monterey, CAwww.ndia.org/meetings/6940

November 7, 2015

2015 REAGAN NATIONAL DEFENSEFORUMSimi Valley, CAwww.reaganfoundation.org

December 7-9, 2015

NDIA GLOBAL DEMILITARIZATIONSYMPOSIUMParsippany, NJwww.ndia.org/meetings/6580

December 9-10, 2015

NDIA MASTERING BUSINESSDEVELOPMENTSan Diego, CAwww.ndia.org/meetings/607A

January 19-21, 2016

27TH ANNUUAL SO/LICSYMPOSIUM & EXHIBITION Washington, DCwww.ndia.org/meetings/6880

November 4-5, 2015

NDIA HOW WASHINGTON WORKSReston, VAwww.ndia.org/meetings/643A

November 16-18, 2015

NDIA 27TH ANNUAL INTERNATIONALINTEGRATED PROGRAMMANAGEMENT (IPM) WORKSHOPBethesda, MDwww.ndia.org/meetings/6IPM

December 1-2, 2015

NDIA INSIDER THREAT PROGRAMWashington, DCwww.ndia.org/meetings

the Altay, now under devel-opment. The program in-

volves the indigenousdesign, development, proto-type production, testing and

qualification of an engine forthe Altay.

Aegis Ashore ComponentsThe US Missile Defense

Agency (MDA) has awarded

Merrill Aviation & Defense acontract to manufacturestructural components and

sub-assemblies for its AegisAshore Ballistic Missile De-fense System (BMDS).

Saginaw, Michigan-basedMerrill began making the ar-ray frames and foundations,

turnbuckles, waveguidefoundations and waveguidehangers in May. Array

frames, large steel compo-nents milled to tight toler-ances, are integrated with

arrays for installation in theAegis Ashore deckhouse.Using array frames cuts in-

stallation time from aboutfour weeks to four days.

These components and sub-systems will be delivered tothe Aegis Ashore Poland in-

stallation as part of theEPAA Phase III.

Latvia Orders MissilesSaab has received an or-

der for RBS 70 missiles from

the Latvian Defense Minis-try, the Swedish companysaid. Deliveries will take

place this year and next. Thevalue of the contract wasnot released.

The order is part of Lat-via’s long-term plan to in-crease its air defense

capabilities. The contract in-cludes the delivery of mis-siles, training and associ-

ated equipment plus anoption for additional orders.

Counterfire TrackerThe US Army will buy an

additional seven AN/TPQ-53

(Q-53) counterfire target ac-quisition radar systems val-

ued at $85 million, the

radar’s US-based maker,Lockheed Martin, said.

The Q-53 can be automat-ically leveled and remotely

operated at 90- or 360-de-grees and operated from alaptop computer or from the

fully equipped climate-con-trolled command vehicle.

Smart Vests for SoldiersElbit Systems’ Land and

C4I Ltd. has been awarded a

US $150 million contract tosupply advanced infantryvests to the Benelux coun-

tries, C4ISR & Networks re-ported.

Under the five-year con-

tract awarded by the DutchMinistry of Defense on be-half of the Netherlands, Bel-

gium and Luxembourg, Elbitwill provide its Smart Vest,which includes wearable

and protective systems forthe soldier, command andcontrol systems, including

advanced audio and data ra-dio systems, specialized dis-plays and C4I capabilities as

well as vehicle systems, ac-cording to a company news

release. Thales NetherlandsB.V. will be the main subcon-tractor.

Aluminum for F-35sBrentwood, Tennessee-

based AMI Metals has beenawarded a multi-year con-tract from Lockheed Martin

to provide aluminum flatrolled material for the F-35joint strike fighter, AMI par-

ent company Reliance Steel& Aluminum said. The con-tract, with an estimated val-

ue of $300 million, runs Jan.1, 2017-Dec. 31, 2021.

Contract requirements in-

clude cut-to-size and cut-to-shape processing of alumi-num plate for use by

multiple Lockheed Martin,Lockheed Martin Aeronau-tics teammates and subcon-

tractor facilities for all F-35aluminum flat rolled re-quirements. N

Send product information and financial news to

randomnotes@defensenews.com.

LOCKHEED MARTIN

The US Army is buying more Q-53 truck-mounted, 360-degree radar

systems from Lockheed Martin. .

20 DefenseNews October 26, 2015 www.defensenews.com

Commentary

DefenseNewswww.defensenews.com

EditorVago Muradianvmuradian@defensenews.com

Managing EditorDave Gustafsondgustafson@defensenews.com

Deputy Managing EditorGreg Couteaugcouteau@defensenews.com

European EditorAndrew Chuterachuter@defensenews.com

WASHINGTON STAFF WRITERS

Naval WarfareChristopher P. Cavasccavas@defensenews.com

IndustryAndrew Clevengeraclevenger@defensenews.com

CongressJoe Gouldjgould@defensenews.com

Land WarfareJen Judsonjjudson@defensenews.com

PentagonAaron Mehtaamehta@defensenews.com

Air WarfareLara Seligmanlseligman@defensenews.com

BUREAUS

Asia Wendell MinnickTel: 886-922-428-572wminnick@defensenews.com

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IndiaVivek RaghuvanshiTel: 91-11-225-8507Fax: 91-11-225-0527vraghuvanshi@defense-news.com

IsraelBarbara Opall-RomeTel: 972-9-951-8258Fax: 972-9-951-8257bopallrome@defensenews.com

United Arab EmiratesAwad Mustafaamustafa@defensenews.com

United KingdomAndrew ChuterTel: 44-207-618-3470achuter@defensenews.com

CORRESPONDENTS

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ICBM Still Within Iran’s ReachGreg Thielmann expresses a

highly optimistic view of Iranianbehavior in his commentary piece

“Iran Nuclear ICBM Threat not onHorizon” (Commentary, Oct. 12).

Many commentators have noted

that the Joint ComprehensivePlan of Action (JCOPA), as theagreement of the P5+1 with Iran

has been named, is not the gooddeal claimed by President Obama.The agreement falls well short of

the objectives outlined by thepresident prior to the completionof the agreement. Even the name

JCOPA adds to the confusionsince no reference was made inthe agreement to restricting Irani-

an development of intercontinen-tal ballistic missiles (ICBMs). No,Mr. Thielman, the threat of Irani-

an nuclear-tipped ICBMs remainsvery much on the horizon.

Turning to the Iranian existen-

tial threat to Israel, even yourown commentary piece notes thatthe Rouhani regime has focused

on the shorter- to medium-rangemissiles. These are well advancedand can threaten our only demo-

cratic ally in the region.Even if Iran abides by the agree-

ment, and judging from past

behavior that is a very large “if,”the agreement certainly leavesIran free to become a member of

the nuclear warhead club within15 years. In national security, 15

years is not a long period.I have been involved in missile

defense activities since President

Reagan made his famous speechin March 1983. That was 32 yearsago, and despite the expenditure

of more than $160 billion, thenational missile defense is still anunproven entity and at best is

only capable of intercepting alimited raid of 10 to 20 relativelyunsophisticated missiles.

A claim that an ICBM threat is

not on the horizon takes too littleaccount of the well-established

behavior of the radical Iranianregime. Fifteen years is certainlywithin their horizon, and judging

by our current rate of progressleaves us too little time to en-hance our defenses.

STANLEY ORMAN

Rockville, Md.

Making the Case for F-35CIn your Oct. 19 issue, Jerry

Hendrix published a detailedhistory on carrier-based aviation

and the US Navy’s current rangeand anti-access challenges. Hedid not mention the F-35C, but his

article makes the best possiblecase for the navalized joint strike

fighter, on both range and surviv-ability grounds.

The F-35C offers a big improve-

ment over current carrier-basedstrike aircraft in range, payload,situational awareness and surviv-

ability. It is the Navy’s first stealthaircraft. But it is range that Capt.Hendrix mainly hangs his hat on.

Fully loaded and on internal fuelonly, the F-35C’s 700-mile combatradius is a significant improve-

ment over current carrier-basedstrike assets.

MERRICK “MAC” CAREY

CEO, Lexington InstituteArlington, Va.

LETTERS

US NAVY

An F-35C approaches the carrier Nimitz

n Email letters to defenseletters@defensenews.com. Please includephone number. Letters may be edited. Submissions to Defense Newsmay be published or distributed inprint, electronic or other forms.

P resident Barack Obama’s veto of the 2016defense authorization bill is no surprise, butsome say it’s hypocritical.

For months, he has made clear that he wouldreject any measure that breaks budget caps fordefense spending alone – as does the current bill –

yet his original defense budget request was alsohigher than spending caps would allow.

Political gamesmanship continues as Congress

and the administration gear up for a battle overraising a debt limit that will be reached in a fewweeks. Leading the charge will be a band of zealous

anti-debt lawmakers who forced sequestration toavoid a first-ever US debt default. There are fewer ofthem in Congress now but they wield enormous

influence, as they recently demonstrated by gettingthe House speaker fired.

With a presidential election underway and the

administration in its last year, politicians won’t riskthe tough calls and messy deal-making needed toaddress the nation’s fiscal challenges. Quite simply,

they’re shirking the duties they were elected toperform. That the world’s most important nationcan’t get its budget act together even as its economy

improves is an obscenity.For seven years, the Pentagon has been forced to

live with fiscal uncertainty and budgetary half mea-

sures. That sends the wrong signal to friends andenemies while actually forcing the Pentagon tospend more to get less.

EDITORIALS

Lawmakers’ Dereliction of Duty

J ustin Trudeau promised that if elected Canada’sprime minister, he would withdraw Ottawafrom the US-led Joint Strike Fighter project.

And that’s exactly what he’s expected to do nowthat he’s set to assume office and on the recordsaying that Canada could get new fighters for less, a

bigger industrial role in the new program and applythe savings to shipbuilding programs.

Canada has long been partnered on the Lockheed

Martin program with plans to buy 65 of the stealthyjets, initially projected to cost $9 billion, to replace80 CF-18 fighters now in service. Trudeau has said

that replacing Canada’s version of America’s F/A-18swould be done through competition, but it’s nosecret that some in Ottawa favor the new version of

the Boeing jet that is in US Navy service, affordingautomatic interoperability with its closest ally.

The F/A-18E/F is a formidable aircraft. Though

cheaper than the F-35, it is not as advanced. Trudeauclaims that Canada doesn’t need such a sophisti-cated jet, but potent Russian air defenses being

deployed suggest demand for stealthy planes like

the F-35 will only grow, a key consideration forCanada that prides itself on engaging globally.

Canada’s departure would raise the unit price for

other partner nations by about $1 million per plane.Cost control on JSF depends on volume, so cuttingnumbers is problematic.

In dropping JSF, Canada would trade a productionand sustainment role on each of several thousandaircraft in the hopes of a bigger role on a far smaller

number. It’s like saying that a bird in the bush isbetter than one in the hand. Canadian industry has$750 million in JSF production contracts. Support

could total billions more over the coming decades.And changing course now would delay replace-

ment of aging fighters, increasing support costs.

Every nation determines its defense needs, even ifdecisions are based on political posturing ratherthan fact. But its former partners are also within

their rights to prune the program of Canadian con-tent, especially lucrative decades-long sustainmentwork. Ottawa can’t dynamite its JSF buy and still

expect to double dip on the new fighter.

Canada’s Risky JSF Gambit

www.defensenews.com October 26, 2015 DefenseNews 21

I t has become fashionable to

critique the US Army as nothaving a clear sense of pur-

pose as the Iraq and Afghanistan

operations wind down. I disagree.The Army, or at least the leaders I

know best

within it,know full wellthat they must

be ready for awide range ofpossible mis-

sions — somepossibly re-sembling the

conflicts andmajor opera-tions of the

last 25 years,others per-haps quite

different. Rather, it is

political lead-

ership that is confused and whichhas been trying mistakenly topredict and circumscribe the

range of plausible future Armymissions with overconfidence inthe accuracy of its crystal ball.

In my view, the Obama admini-

stration has kept the US Army infairly good shape over the lastseven years, in terms of budget

and readiness and force struc-ture. But in its 2012 Defense Stra-tegic Guidance as well as its 2014

Quadrennial Defense Review, ithas introduced incorrect ideasabout how the Army should size,

shape and train its future forces. If allowed to persist, these ideas

could cause real damage down

the road, leaving the nation seri-ously unprepared for missionsthat could be needed to address

very serious threats to the nation.We have made similar mistakes inour history, especially after major

wars, and we are at risk of doingit again.

Specifically, the 2012 Defense

Strategic Guidance dismissed theplausibility of large-scale counter-insurgency campaigns or other

stability operations. It stated, “USforces will retain and continue torefine the lessons learned, ex-

pertise, and specialized capa-bilities that have been developedover the past ten years of coun-

terinsurgency and stability opera-

tions in Iraq and Afghanistan.However, US forces will no long-er be sized to conduct large-scale,

prolonged stability operations.”This strategic guidance, rooted

in understandable frustrations

with the Iraq and Afghanistancampaigns, is unwise. Howeveradamantly leaders in Washington

declare their lack of interest inlarge-scale land operations, andmost specifically in stabilization

missions, the enemy gets a voteas well.

Put differently, to paraphrase

the Bolshevik adage, the UnitedStates may not have an interest instabilization missions, but they

may have an interest in us.In my new book, “The Future of

Land Warfare,” I develop several

scenarios: trusteeship for Kash-mir after another Indo-Pakistaniwar; a major humanitarian relief

operation perhaps 10 times asdemanding as in past catastro-phes; a large-scale peace enforce-

ment mission in Syria after afuture peace deal (presumablysome years down the road); re-

sponding to another massive

Ebola outbreak (perhaps thistime within an active conflictzone) — all could require Amer-

ican forces to help backstop amultilateral mission that wouldhave important elements of stabi-

lization among its main tasks.All of these scenarios could

pose very serious threats to US

security that would make it im-prudent in the extreme to thinkwe could safely stay out of them.

All could arise fairly quickly,meaning that we must do morethan simply retain the institution-

al knowledge about how to regen-erate capacity for them shouldfuture circumstances warrant.

One of the great ironies of thisrecent Obama guidance is that aDemocratic administration has

decided to get out of nation-building and related tasks — justa few years after a Republican

administration decided to treatthem as crucially important toAmerican security. One could

even say that Bush, Cheney andRumsfeld turned out to be morewilling nation-builders than Oba-

ma and his teams.

The Bush administration,though initially averse to mis-sions that smacked of nation-

building, issued DoD Directive3000.05 in 2005, which stated that“stability operations are a core

US military mission. ... They shallbe given priority comparable tocombat operations.”

No one wants to be part of

messy stabilization, counterinsur-gency, peace enforcement or

other “nation-building” missions,least of all the soldiers who willoften have to do the dirty and

dangerous work associated withthem. But the enemy, and thefuture, get a vote as well.

In terms of at least preparingfor the possibility of such opera-tions, the Bush administration

was ultimately closer to the rightanswer than is the Obama ad-ministration today. The next

president and his or her defenseteam should revise Americanpolicy and defense guidance

accordingly. The debate abouthow to do that should beginnow.N

Stabilization Missions Are Here To Stay

By MichaelO’Hanlon, senior

fellow at the

Brookings Institution

and author of “The

Future of Land

Warfare.”

O ver the past several years,Pentagon leaders havewarned the big defense

industry companies not to mergewith each other. In early 2011, AshCarter, then-undersecretary of

defense foracquisition,technology

and logistics,acknowledgedthat firms

would likelyrestructure inresponse to

expected cutsto the defense

acquisition

budget, butsaid, “The

department is

not likely tosupport fur-ther consoli-

dation of ourprincipal

weaponssystems primecontractors.”

In the last month, the currentundersecretary, Frank Kendall,escalated the rhetoric, revealing

plans to ask Congress to expandexisting anti-trust laws to giveDoD more power over defense

industry mergers.Their heart is in the right place.

Americans celebrate competition

as the best route to efficiency and

innovation, and mega-mergerscan threaten the possibility ofcompetition. But the defense

industry presents a special chal-lenge not typically addressed byanti-trust: Defense contractors

influence their buyer’s decisionsnot just by offering a variety ofproducts in the marketplace, but

also through lobbying. But the authority to regulate

mergers will not get the depart-

ment what it wants. No mergerpolicy can eliminate the sub-stantial political influence that

contractors enjoy. Congress often

gives in to industry pressures —buying more of the weapons that

industry wants to sell — but itdoes not always do so. Neithermergers nor merger policy can

determine what weapons will armthe US military. Ultimately, Con-

gress makes the key decisions.

In a “normal” business, whenthe market shrinks, competitors

often merge to close down excess

capacity and return to profit-ability. Americans are used to

seeing this pattern during cyclical

downturns, for example amongairlines and banks during the

recent Great Recession. The defense sector has loudly

proclaimed its reduced market

prospects as the defense budget

has started to drop from its 2010peak, and investment bankers

and private equity moguls have

been salivating over the prospectof a bonanza.

The tale of a few recent deals,

though, shows that defense merg-ers are not like mergers in therest of the economy. Prime con-

tractors bought some of the fac-tories that produced the signatureweapons of the Iraq and Afghani-

stan wars: e.g., MRAP vehiclesthat protected against improvisedexplosive devices and UAVs that

surveilled the complex battles-pace.

From an industrial perspective,

those acquisitions did not mattervery much, because the primecontractors integrated the new

facilities into their political port-

folio more than their productionportfolio. Their main goal was to

keep selling the new products to

the DoD. They thought they werebuying growth — the parts of the

defense budget that would beprotected from the budget cycle.

Perhaps the political goodwillfrom selling the “new stuff”would rub off on the primes’

other products, too.This was a rational, profit-

maximizing strategy, but it did not

work well for them this time.With the wars ending, DoD actu-ally had a surplus of the new

stuff. The department sought tostreamline its complex mix ofUAVs, so even though unmanned

vehicles are still extremely pop-

ular, the buyer does not haveroom for every type on offer. Andno matter what the lobbying

strategy, Congress has little tastefor expensive vehicles designedto put boots on the ground.

Note that the purchasers in thisnascent mergers and acquisitionswave did not focus on industrial

consolidation and increasedproduction efficiency. Facilitiesclosed and restructured not at the

time of the mergers but whenCongress and the DoD closed offthe money spigot.

That experience followed thepattern of the 1990s merger wave.For example, Boeing merged with

McDonnell Douglas in 1997. Boe-ing integrated what had been the

MD-95 into its commercial prod-

uct line as the 717, but Boeing leftMcDonnell Douglas’ C-17 factory

alone. Instead of consolidating

the defense aircraft business,Boeing continued McDonnell

Douglas’ political effort to prop

up C-17 sales. The plant is finallyclosing this year, because Con-

gress stopped supporting it.

Political control over what DoDbuys naturally frustrates the

policy experts in the Pentagon.They want to decide what to buybased on their analysis of techno-

logical trends and military

threats. They want the defenseindustry to offer choice, and they

resist mergers, as if the mergers

would decide what products areon offer. But Congress has thelast word on when a factory

develops a new product or closesits doors.

The real background for Ken-

dall’s new statement may be hisconcern about the aftermath ofthe coming award of a devel-

opment contract for the newbomber. The losing bidder(s) arewidely expected to exit the air-

craft business, perhaps through amerger. But the key to maintain-ing the losers’ design capacity is a

contract, even just to experimentor build a prototype.

As much as competition is the

American way, so is politics. In

fact, defense policy should bepolitical, because our elected

representatives should be the

ones who decide what fights weprepare for and what wars we

actually fight.With that political process

comes inefficiency and frustra-tion. Neither mergers nor mergerpolicy reform can address the US

needs. What we need is for Con-gress to make responsible de-fense policy decisions. N

Political Choices Shape Industry, Not Mergers

By Eugene Gholz,an associate

professor at the

University of Texas at

Austin and the

Stanley Kaplan

Visiting Professor of

American Foreign

Policy at Williams

College.

n Send your opinion pieces to

opinion@defensenews.com.

Submissions must be roughly 800

words long and are subject to editing

for space and clarity.

22 DefenseNews October 26, 2015 www.defensenews.com

Interview

Q. What major factors have you taken

into account in your proposed blue-

print for the IDF’s future ground force?

A. We needed to look at the ene-my and the changes he’s un-dergone, anticipate changes we’re

likely to face in the future anddetermine the best way to applyall the lessons we’re learning.

Based on all this, we have anunderstanding of what materiel,technologies and operational

concepts are needed for a verystrong and effective maneuveringforce across a spectrum of sce-

narios.

Q. Plan Gideon is for five years, but

your blueprint, what you call Ground

Horizon, extends further into the

future, correct?

A. Gideon will start from 2016 andrun through 2020, but we’re alllooking at least 10 years, some-

times 20 years ahead. My portion,which we call Ground Horizon, is

a process that took about a year.

With major modernization plans,like tanks, big guns and troopcarriers, we need to think how

they’ll develop over 20 yearssince such a huge investment isrequired.

Q. Considering all the above, what is

the goal for fortifying and crafting the

future ground force?

A. To be decisive over what wecall disappearing enemies; forces

that are often invisible and havelargely learned to counter ourmethods of operations.

The fact is that today, there isno enemy around us that canachieve his objectives against us.

At the end of the day, when theIDF is required to achieve victoryover the enemy, we will know

how to do it through maneuvers

and every situation.

Q. Critics would say 75 Israelis killed

in 50 days of fighting in the summer

2014 Gaza war was unreasonable.

What’s your view?

A. You always need to ask whatyou want to achieve and how. InProtective Edge, we wanted to

achieve a certain end-state with-out vanquishing Hamas. … Every-one knew the game plan, and it

required us to achieve this in a

different way (by directly con-fronting the tunnels). In the end,

Hamas is extremely weakenedand won’t be ready for anotherround for a long time, and that

was the objective we set forourselves. But this question is amajor lesson of Protective Edge,

and a major driver of our GroundHorizon plan.

Q. Would 50 days be considered rea-

sonable for the next ground war in

Lebanon?

A. That’s too open a question. Itmust be considered in political,diplomatic and international

context. It depends on whatwould motivate our government

to go for this action in the first

place. Imagine if the alternativewas huge sustained casualties to

the homefront. Under those cir-

cumstances, our government maybe willing to pay costs associatedwith fully maximized, high-in-

tensity ground maneuvering, andnot just pinpoint, tactical ob-jectives.

Q. So what have you learned?

A. We have to develop proper

commanders at all echelons, fromthe smallest squad to corps com-manders, and we cannot compro-

mise on our training regime. It

must be consistent and not besubjected to budgetary-drivenhalts and restarts as we’ve done

in the past. And we must tailorforce training to specific chal-lenges.

Q. Are you referring to the tunnel

threat, which I assume was a major

lesson of the last Gaza campaign?

A. The gaps we discovered withregard to the subterranean threat

were pretty much across theboard in terms of technology,operational concept and training.

We underestimated the magni-tude of the threat. Our trainingwas a matter of too little, too late.

When we asked ourselves whatwas our certified capability forthis mission, we realized we were

deficient, but we didn’t realize towhat extent. We didn’t see that it

was at the heart of the enemy’sCONOP. Gaza is an entire city ontop of a city.

Q. But capabilities exist in other indus-

tries, for example, the energy explora-

tion industry, no? Couldn’t they be

adapted for the sands of Gaza, or the

mountains along the Lebanese and

Syrian borders?

A. In the Gaza context, we suf-fered from the fact that the tech-

nology is not yet developed forthreats 20-30 meters deep. Itdoesn’t really interest the indus-

try. We looked at what we couldtake from other industrial sec-tors, but the truth is, they are not

readily adaptable for our partic-ular threat. And anyone whoclaims otherwise is being mis-

leading.During Protective Edge, we

were able to improvise; to take

things that weren’t developed forthis purpose and adapt them forthe mission.

Q. So where are you today? We’ve seen

an MoD program called Snake Pit,

growing proficiency of your Combat

Engineering Corps, use of robotics,

canines, etc.

A. We’ve advanced a lot, but still,

the subterranean threat demandssolutions. We have answers for

part of the problems, but I can’t

elaborate. Suffice it to say there isno magic solution. But the most

important progress is that we’veadopted a certain technique thatwe can use to fight this threat. We

now have a validated, formalCONOP that was codified intomanuals immediately after Pro-

tective Edge.

Q. What’s next with regard to the

tunnel threat?

A. We understand that it’s not

enough to have a unique capa-bility entrusted with a small num-ber of forces. We need to give

these means and methods to allof our forces, and to train accord-ingly. Now we’re building the

infrastructure to train in, and aswe train, we’re discovering we

have very creative and resource-ful commanders who have beenable to improve on operational

methods. The best thing to hap-pen to us will be to turn thesetunnels into death traps. Once we

know how to do this, we’ll be in avery different place.

Q. What other lessons inspired your

future force blueprint?

A. With regard to combined arms

battle, we are emphasizing theneed for every battalion to trans-form itself into a hybrid unit

when necessary. We decided notto do this organically, since ourforces are busy with routine

operations and we need to pre-serve the traditional, professionalchain of command. But our train-

ing is such that our combat mis-sions are no longer single service.There’s no longer armor without

infantry, combat engineering,intel and artillery capabilities,which is something we couldn’t

say about the second Lebanonwar or even Cast Lead [the De-cember 2008-January 2009 opera-

tion in Gaza]. And it’s all

connected through the net.

Q. Your people often speak of cross-

service interoperability and joint force

combat. This has been a priority for

several years now, no?

A. Absolutely. When I look a dec-ade or two ahead, I don’t know if

the term interoperability with airand sea forces will still be rele-vant. That’s because it’s clear

there needs to be a single forcefighting in the same domain, all ofwhich must be supported by a

robust integrated C4I network.We understand that even if

we’re not organized like this in

routine operations, the need to

operate in wartime against dis-

appearing enemies is a basicneed.

Q. Lt. Gen. Gadi Eisenkot, IDF chief of

staff, recently announced his decision

to stand up a commando brigade.

What was the rationale?

A. Because we’re not a rich Army,

we needed to prioritize in a waythat the improved capabilities,and lethality of a few can influ-

ence larger combat goals. Weneed to entrust a good part of ourqualitative edge to those units

that can rapidly deliver addedvalue in complex operations,whether they are in the urban

theater, against subterraneanthreats or in other conditions. Weunderstood that once we opti-

mize special forces for thesemissions and give them every-thing they need in terms of weap-

onry, resources and training, wecan strengthen ourselves with acertain center of gravity that was

previously diffused.So we’re merging elite units

from infantry, combat engineer-

ing, artillery and technologicalspecialists and grooming them forhigh-end, elite missions.

Q. What about active protection sys-

tems (APS)? Are these prerequisites

not only for tanks, but for troop carri-

ers and other ground vehicles as well?

A. Even before Protective Edge,

the [Rafael-developed Trophy]APS deployed on Merkava Mk4shas proven to be an enormous

success. Now we’re equippingNamer heavy APCs with thiscapability, the first of which will

probably go to our Golani in-

fantry brigade. Our APS is per-forming beyond expectations. It

will be the Iron Dome for our

infantry.But it’s expensive. Every plat-

form must be equipped. So we’llhave to prioritize and outfit onlythose units facing more complex

threats such as the disappearing

enemy I’ve spoken about. N

By Barbara Opall-Rome in Tel Aviv.

MAJ. GEN. GUY ZURCommander, Israel Ground Forces Command

Next month, the Israel Defense Forces General Staff will hold aseries of closed-door deliberations to finalize its proposed Plan

Gideon, an estimated 82 billion shekel (US $21 billion) modern-ization plan through 2020. Compared to previous plans, a larger shareof funding — nearly 40 percent — is slated for upgrading combined

arms maneuvering capabilities and combat readiness of ground forces.As the man responsible for organizing, training and equipping the

Israeli Army, Zur is designing the future force for at least a decade to

come. He shared highlights from his strategic blueprint, dubbedGround Horizon, which aims to render ground forces much more deci-sive than they were in the 2006 Lebanon war or in the most recent

Protective Edge campaign in Gaza.

ISRAEL DEFENSE FORCES

End strength (including reserves):513,000

Formations (including reserves)n Three territorial commands

n 16 divisions

n 21 independent brigades/groups

2014 data from Tel Aviv University’s Institute forNational Security Studies

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BUYING MATERIAL FOR TWO AIRCRAFT CARRIERS WILL SAVE TAXPAYERS $500 MILLION AND KEEP THE INDUSTRIAL SUPPLIER BASE STRONG.

CVN 80 AND CVN 81.

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