What really lies behind the sudden and unexpected decision by the right wing Law and Justice (PiS) government in Poland to walk away from negotiations with Airbus over the planned purchase of 50 Carucal multi-role helicopters announced by the previous Civic Platform Polish Peoples Party in April 2015? For now question remains unanswered but whatever lies behind it I am bound to fear that not only will Poland be the loser but also that the reputation of the Polish Government will suffer and that the trust of those with whom the nation trades will have been seriously damaged.
Originally won through a tender based process, the proposal made by Airbus to the former Polish Government of Ewa Kopacz was the only offer that fully complied with stated Polish Ministry of defence and Ministry of Development requirements. The tendering process itself had followed a normal pattern of initial request for information (RFI) followed by sessions on technical dialogue and then a formal request for proposal (RFP). Not surprisingly given the capability required and other important requirements, the tendering process was of necessity demanding and was to last just short of three years.
The official line from the Polish Government is that they pulled away from completing a deal with Airbus on the grounds that after over a year of negotiations with the company they considered that there was no longer room left for compromise. I note too that there was a suggestion from one senior Polish government minister of security concerns and to which I would counter by saying that given how Airbus has bent over backwards to satisfy all expressed security concerns raised so far that such accusations simply do not stack up.
My initial view is that the Polish Government was that not only was the Polish government being extremely ‘economical with the truth’ but also that it will come to rue the day that it decided to kick Airbus in the teeth. Clearly the new Polish Government had other ideas on how it wanted to best achieve its aim of procuring helicopters and, as Tom Enders said after the decision was announced, it seems that the new Polish Government had little intention of completing negotiations with Airbus. Not only has Poland seemingly gone elsewhere it has seriously damaged how it will be seen by other EU partner nations who it may wish to trade with. The decision made by Poland is at odds with reality and the needs of the nation to think long term in building sovereign manufacturing capability that Airbus was ready and able to help provide and to build and develop new skills that the nation needs.
Another related concern that I would express here is that just as Hungary is also appearing to do, Poland appears now to be fast moving fast to the right of politics. This was initially evidenced through the election of the new Law and Justice (PiS) Government last year but it seems that the process is now speeding up. If this is a correct assessment then the rest of the European Union could, in respect of relations with Poland, be in for a very tough time.
The negotiations with the Polish Government had seen Airbus offering a very significant offset based deal that included large scale investment in-country. Airbus had also agreed to establish the first state-owned helicopter plant in Poland with WZL1 Company in which Poland was to have a 90% stake. This would create real sovereign based helicopter manufacturing capability for Poland with potential benefits stretching through many decades ahead.
An offset based inward investment and technology transfer deal on a scale such as that being proposed by Airbus for Poland would not only have been unprecedented it would also have created specialist skills and very many long term jobs. We are left with little choice now but to conclude that either the new Polish Government is no longer interesting in creating sovereign based helicopter manufacturing capability or there are other more significant competition based reasons for why the Polish Government has cancelled the negotiations with Airbus. Either way, Prime Minister, Beata Maria Szydlo and/or her Defence Minister, Antoni Macierewicz needs to be open and honest in why they have walked away from what most would regard as being an excellent long term deal that would not only provide excellent capability but also benefit the nation for decades ahead.
Airbus Helicopter was also offering to provide a full H225M Caracal helicopter production and assembly line mirroring exactly the capabilities of the existing main Airbus Helicopter French manufacturing facility. This would have allowed for future production of helicopters for both the domestic and export markets, as well as a growth potential to produce other commercial helicopter types in the longer term. The Airbus offer included a firm commitment to deliver Caracal helicopters from a full assembly line that would be established in Lodz. Airbus had also promised to create helicopter export market potential for Poland through an intention to produce a minimum of 50 H225 type helicopters in Poland.
Taking account of the time needed for necessary transfer of technology into Poland and in order to comply with the urgent operational requirements of the Polish armed forces, an initial batch of helicopters would have been assembled in France, by Polish workers from WZL1. This would have ensured the proper transfer of skills, know-how and technology to Poland.
To my mind, offset arrangements rarely get better than those that Airbus had been offering the Polish Government and I can be hardly surprised that Airbus CEO Tom Enders should be vexed enough to say that “Never [before] have we been treated by any government customer the way this [the Polish] government has treated us. The controversial and contradictory declarations of the Polish government over the course of these procurement proceedings created the impression of unprecedented confusion. Airbus wanted to invest in Poland big time and we wanted to contribute to building a competitive aerospace industry in this country. But the Polish government slammed the door on us and we take note of this.”
Anger on this scale being shown by any CEO engaged in international negotiations is extremely rare but in this case it is surely more than justified. Mr. Enders went on to note that “the confusion in respect of the negotiations that it was having with the Polish Government had been further increased by declarations from the Polish government concerning the purchase of helicopters from contractors who decided to submit non-compliant offers in the tender and were disqualified” adding that “we have an impression that we have been misled for months by the current Polish government”.
The Airbus CEO added “we have spent a huge amount of effort and money in recent years trusting that they were in a fair and professionally-conducted competition and that we will of course be seeking remedies”. But perhaps the most telling remark came when he said that “we obviously feel [that we have been] misled for months by the Polish government. They never had the intention to contract with us. This was demonstrated when they announced the acquisition of American helicopters only the day after they broke off the negotiations with us!”
In a separate personal letter to the Polish Prime Minister, Guillaume Faury, CEO of Airbus Helicopter said that “our offset offer would have generated more value in Poland than the revenues that would have been generated for Airbus Helicopters through the helicopter supply contract and that out of a global Airbus Group ambition to create 6,000 jobs in Poland, the Airbus Helicopters project would have led to the creation of 3,800 jobs, including 1,250 direct employments mainly in Lodz, Radom and Deblin”. Importantly he said, “Airbus believed that the offset offer would have provided Poland with at least 30 years of activity for state owned Polish companies through multiple industrial projects”.
My understanding is that the Airbus offer included no fewer than 45 technology transfers to Poland including 28 from major international aerospace companies and that these had been based on Polish Ministry of Defence and Ministry of Development specifications in order to serve and protect the essential strategic interests of the Polish state. These included transfer of source codes, licenses together with granted rights to modernise helicopters and their operating systems.
Independent of the above arrangements Airbus has also intended to establish in Lodz, Airbus Helicopters offered Poland the creation of an additional and new production plant dedicated to the manufacturing of rotor and transmission complex parts for the full range of existing and future Airbus Helicopters products. The initial investment represented 370 Million PLN and over 10 years the project was estimated as being likely to generate turnover of 1.7 billion PLN and more than 200 Million PLN per annum beyond that. Unfortunately, this outstanding project was rejected from the offset proposal by the Polish Ministry of Development. In August this year, new requirements were introduced by the Ministry of Development but Airbus Helicopters concluded that it was impossible to include some of these new projects as these were not compliant with EU regulations governing the tender.
Clearly, there is far more to the sudden and unexpected cancellation of a large contract based helicopter offset based negotiation than the Polish Government appears to be letting on. Currently Poland has no state owned helicopter manufacturing facilities. What facilities that there are in country are fully-owned by foreign parent companies. For instance, PZL Swidnik is I believe owned by Leonardo-Finmeccanica while PZL Mielec is a Sikorsky/Lockheed Martin owned company. Thus in the proposals that it had put forward, Airbus would potentially have been the only helicopter company to meet the Polish governments ambitions to develop a state-owned rotorcraft manufacturing and export capability.
CHW (London – 11th October 2016)
Howard Wheeldon FRAeS