2018 – A Year of Turmoil In Markets, Countries and Governments With More to Come in 2019!
By Julian Nettlefold
21 Dec 18. As the issue the first BATTLESPACE Update of 2019, it is worth reflecting on 2018 a year of turmoil In markets, countries and governments with more to come in 2019!
World Scene
Certainly the world security situation has drawn back from the turmoils of IS attacks in Europe, the Uk and other parts of the world and the tragedy of the Syrian situation which at last seems to be in its death rattle. However, this has now been overtaken by the tragedy in Yemen where millions of men. Women and children are starving to death or dying in bombing raids.
North Korea and the US have come to delicate truce at the same time as North Korea seemingly quietly continuing the development of its own nuclear capability, saying only today that they would only stop developing nukes if the US depleted their stockpiles.
Reuters reported today that President Vladimir Putin on accused the United States of raising the risk of nuclear war by threatening to spurn a key arms control treaty and refusing to hold talks about another pact that expires soon. In a news conference that lasted more than three hours, Putin also backed U.S. President Donald Trump’s decision to pull troops out of Syria, said British Prime Minister Theresa May had no choice but to implement Brexit and that Western democracy was under serious strain. The annual event, the 14th of its kind, is used by Putin to burnish his leadership credentials and send messages to foreign allies and foes.
This year, he made clear his biggest worry was what he called a dangerous new arms race, something he accused the United States of stoking by turning its back on arms control. Washington has threatened to pull out of the 1987 Intermediate-range Nuclear Forces Treaty (INF) which bans Moscow and Washington from stationing short- and intermediate-range, land-based missiles in Europe. Putin said the move, if it happened, would have unpredictable consequences.
The ongoing Trade Wars between the US and China appears to have destabilised stock markets around the world causing sharp drops in Stock Markets across the world.
Last but not least Brexit! I am ashamed to be a British citizen and to associate with people and a party I voted for who claim to be acting in the best interests of the people and the country! It was an act of gross incompetence and arrogance for David Cameron to embark on the Referendum process which was a purely party political act to save his struggling party and government, ignoring the rights of citizens and the country as a whole
The government had it in its power to solve the immigration problems caused by Tony Blair’s government, again an act of self-indulgence (whose wife made a fortune defending asylum seekers!).
Letting in unvetted immigrants, unlike other European countries swelled the crime figures and the number of prisoners. But, what do all those people need? Lawyers!
No, Cameron made a lame appeal to Angela Merkel and returned form Europe empty handed to face the wrath of his party, the Government and Nigel Farage’s UKIP party. Cameron made little or no effort to parry the UKIP campaign preferring to retreat to his Oxfordshire cocoon of cohorts and advisors more interested in champagne and country pursuits with little or no knowledge of what was going on in the wider community!
At the start of the Referendum Campaign I attended a dinner in a London Club where the guests were bankers, layers, land owners, insurance salesman and other top City grandees. I was the only ‘Remainer’ of 30 people and pointed out to one banker the pitfalls of leaving the Eurozone which had common standards and supply chains. He seemed unphased by such problems but later denied to me that he was a Brexiteer!
At a later dinner addressed by a Conservative MP he outlined the Brexit process and said, “When we start negotiating after March 29.” I said that in my view we should have got to a negotiating position before March 29th!” He failed to reply with any coherent explanation. However, an old school friend sitting across the table who has had a long career in Brussels said, “Three things will happen on March 29th, the Union Jack will come down from the EU parliament building, we will lose our seat on the EU council and the European Court, nothing else!”
On discussing this later with a wise old politician he cynically pointed out that the reason the landowners had voted ‘Leave’ was due to the fact that the CAP would go on leaving the EU and thus the large landowners would pick up land from struggling Hill farmers in particular at rock bottom prices!
The UK Defence Budget
2018 has been a year of the Defence Budget lurching from crisis to crisis with huge overspend predictions at a time of growing US equipment spend when the Exchange Rate is plunging adding millions to the over inflated demands of the armed forces. Brexit has exacerbated this problem with money and resources being diverted to avoid a Hard Brexit. This problem was exacerbated when the EU made the announcement that the UK would be barred from the Gallileo Programme requiring the UK to look for £3.5 billion for a replacement.
Defence Secretary Gavin Williamson made a brave attempt to ask for more money but this resulted in the damp squib announcement this week of only £1.5 billon extra with nothing to show for the major equipment programme costs overruns which some says is a whopping £20 billion! The can has now been kicked down the road to the Comprehensive Spending Review due in May. How many SMEs will go to the wall waiting for the promise of contracts under the new DE&S promise to spend 25% of the budget on SMEs who then fail at the first fence due to the fact that their balance sheets are not seen as robust enough to support the length and costs of the programme they have bid for!
Morpheus and FBLOS
Given the Galileo replacement budget this has put a huge strain on two key C4ISTAR programmes, Morpheus and the Skynet 5 replacement, FBLOS with Skynet 6 and accompanying systems. FBLOS is an interesting scenario as the Chancellor deemed that PFI was not the way forward for future Programmes so DE&S is looking at innovative funding to bridge the budget gap. Only one ‘bird’ has been ordered from Airbus in a move seen as a way of spreading the R&D over a number of birds to retain the best technology available unlike Skynet 5 where all the birds had the same technology.
The danger in both Requirements is that the MoD may fall back onto the existing contractors GDUK and Airbus to save time and money when innovators such as Fujitsu and Viasat in particular have been discussing funding solutions which would save the MoD considerable money. The DFTS win by Fujitsu over incumbent BT is a good case in point where Fujitsu’s bid is saving the MoD millions. Viasat is believed to offer an innovative solution to the MoD where ground equipment is offered at very competitive rates with the MoD just paying access charge to the Viasat constellation.
Once again, the Army is the loser in the queue for money with the RAF getting their new F-35s and continuing the Centurion Programme to upgrade Typhoon to take over roles from Tornado, new P-8 Maritime Patrol Aircraft and the promise of E-7 Wedgetail to replace the ageing E-3 AWACS.
The Royal Navy have their spanking new carriers albeit stretched for crews, the River Class Patrol boats, Dreadnought and Astute submarines, the Type 26 and now Type 31e.
The Army is desperate for new vehicles for its new Strike Brigades but still struggling for funds for MIV, MRV(P), Challenger 2 LEP and Warrior WCSP, the latter of which has already had its Trial extended. As the war against IS in particular diminishes and no chance of a return to Afghanistan, the major threat on the horizon is Russia and the Baltics. The MoD may well take a chance and stretch all the Army programmes until a real thereat emerges which, one again can be solved with UORs.
The Year in Focus
As well as being a turbulent year on world markets, there was also considerable M&A activity of defence and aerospace stocks. One particular feature was the hiatus in PFI companies with Carillion going under to be followed by profit warnings at Interserve and a bearish analysts report on Babcock plc.
The year opened on January 12th on a very personal note with the Editor’s family firm, 250 year old GKN, falling with Melrose’s audacious bid for GKN which was instantly rejected by GKN’s Board. As they year progressed we have watched Melrose wrestling with an acquisition which they lack the management expertise to handle or execute sales of businesses.
In site of promises by Melrose to retain UK jobs, the Government seems oblivious to the fact that the Aerospace segment in particular is quietly moving its base and HQ to Holland where the old Fokker busiess was based.
GKN Chief Executive appointment, transformation programme, future Group structure and rejection of unsolicited Melrose proposal.
The Board of GKN plc (“GKN” or “the Company”), the global engineering business serving the aerospace and automotive markets, announces the appointment of Anne Stevens as Chief Executive; confirms the Group’s current trading; outlines a transformation programme and future Group structure; and rejects a proposal from Melrose Industries PLC (“Melrose”).
On Feb 10th Defense News reported tonight that the U.S. Air Force intends to cancel the JSTARS recap program in its fiscal year 2019 budget submission, tanking one of the service’s few remaining aircraft production opportunities still in contention.
The Air Force had planned to buy 17 new JSTARS recap planes to replace its legacy inventory of E-8C Joint Surveillance Target Attack Radar System battlefield management and control aircraft, with Boeing, Lockheed Martin and Northrop Grumman — the three major U.S. military aircraft manufacturers — all vying for the prime contractor slot.
Instead, it will push forward with a system-of-systems approach that will link together existing platforms to track ground targets and do command and control, sources with knowledge of the budget told Defense News.
The U.S. Air Force’s decision to terminate the recap program will come as little surprise to those closely watching the competition. News of the potential cancelation broke in September, when a handful of lawmakers released a letter to Defense Secretary Jim Mattis that condemned the Air Force’s plans to explore alternate options for the airborne command and control mission.
In recent months, the service seemingly doubled down on the system-of-systems approach, with top officials from the Air Force’s top civilian to the head of Air Combat Command all questioning — in public — whether a JSTARS recap made sense given future threats.
This comes at a time when other air forces, the RAF in particular is examining their ISTAR assets. (See: UK E-3D Sentry AWACS for scrapheap? BATTLESPACE UPDATE Vol.20 ISSUE 05 29 January 2018). The U.K. is looking closely at whether it should retain the Sentinel and E-3D AWACS capability or scrap the AWACS in favour of Wedgetail. The AWACS, Rivet Joint and J-STARS systems are all based on the venerable but aging Boeing 707, spares for which are becoming harder to source. So, do air forces migrate to the 737 airframe, itself no youngster, or soup up existing assets use advanced networking, AI, satcom and other air assets including UAVs to provide the battlefield picture and airspace management? One other problem encountered with composite airframes such as the Boeing 787 is the earthing problems for sensors. This was one reason why the 767 airframe was kept in production for the Boeing KC-46A Pegasus refuelling aircraft. Another factor which may be influencing decisions is that radars are becoming smaller, less power hungry and more powerful allowing them to be mounted on smaller airframes or UAVs. (See: Radars – Getting Smaller, Lighter and Cheaper By Julian Nettlefold on BATTLESPACE Features www.battle-technology.com)
12 Feb 18. Defense News reported today that in an unexpected move, General Dynamics announced plans to acquire government information technology solutions giant CSRA in a deal worth $9.6bn — bolstering its IT business even as other defense companies have opted to offload such segments from their portfolios. Under the agreement, General Dynamics will acquire all outstanding shares of CSRA for $6.8bn. The nearly $10bn value includes the assumption of $2.8bn in CSRA debt.
Revenue growth for General Dynamics Information Systems and Technology arm, which includes GDIT and Mission Systems, was slow in 2017, Novakovic noted during the company’s 2017 earnings call, despite a healthy backlog. Novakovic pointed to the impact of the continuing resolutions on short cycle business and the new administration’s slower pace of awards, particularly in the federal civilian business, as explanation for the lackluster sales. She also pointed to the Army’s decision to stop funding WIN-T and some other related communications programs until they completed their network and battlefield review.
On Feb 12th Defense News reported tonight that President Trump’s fiscal 2019 budget requested $686.1 billion in military funding, with a focus on great power competition with Russia and China, the Pentagon announced Monday morning.
The request includes $597.1 billion in base budget funding and $89 billion in cap-exempt wartime funds, part of the administration’s expected $716 billion national security request (which includes Department of Energy nuclear programs).
Defense Secretary Jim Mattis told reporters Sunday the new two-year budget agreement would allow the military to be reshaped, “back to a position of primacy.”
The administration’s new national security strategy is prioritizing strategic competition with near-peers over counter-terrorism. With the respite budget instability, the Pentagon is rebuilding “to address the changing forms of warfare, and to bring the current capabilities up,” Mattis said.
Congress raised budget caps for defense by $165 billion through fiscal 2019 under a bipartisan budget agreement Congress approved last week. That sets a clear path, versus the spending fights and budget instability that have dominated Congress for the past few years.
Trump’s second budget plan also calls for the purchase of 10 new naval ships in fiscal 2019, and would enable the Air Force to grow from 55 combat squadrons to 58 over the next five years.
The budget plan also calls for more than $1 trillion in defense spending over the Obama administration’s 10-year plan, arguing that “failure to provide adequate funding to meet these defense objectives would embolden America’s enemies.”
Seeking savings, the budget continues a Congressionally-mandated 25 percent headquarters reduction, despite the the split of the office of the chief weapons buyer into two new offices.
Acquisitions
DoD request funds to modernize equipment for a second Army armored combat team, buy 10 combat ships and increase production of the F-35 and F/A-18 aircraft.
The budget earmarks $236.7 billion for acquisitions. Of that, $144.3 billion is for procurement and $92.4 billion is for research, development, test and evaluation (RDT&E). Major defense acquisition programs take up $92.3 billion.
One of the largest increases is for the vaguely worded “mission support activities,” which jumps $16.9 billion, from $49.9 billion in fiscal 2018 to $66.8 billion in fiscal 2019. A full 28 percent of the entire investment budget request, it includes various departmental capabilities, like live-fire test and evaluation, classified special programs, and the Joint Improvised-Threat Organization — which is researching counter-drone technologies.
Major Warfighting Investments:
– Mission support activities: $66.8 billion
– Aircraft and related systems: $55.2 billion
– Shipbuilding and maritime systems: $33.1 billion
– Missiles and munitions: $20.7 billion
– Ground systems: $15.9 billion
– Science and Technology $13.7 billion
– Missile defense programs: $12 billion
– C4I systems: $10 billion
– Space-based systems: $9.3 billion
Space:
– 5 Evolved Expendable Launch Vehicles: $2 billion
– Global Positioning System $1.5 billion
Missile Defense:
– 43 AEGIS Ballistic Missile Defense (SM-3): $1.7 billion
– Ground Midcourse Defense: $2.1 billion
– 82 THAAD Ballistic Missile Defense: $1.1 billion
– 240 Patriot Advanced Capability (PAC-3): $1.1 billion
Aircraft:
– 77 F-15 Joint Strike Fighters: $10.7 billion
– 15 KC-46 Tanker Replacements: $30 billion
– 24 F/A-18s: $2 billion
– 60 AH-64E Attack Helicopters: $1.3 billion
– 6 VH-92 Presidential Helicopters: $0.9 billion
– 8 CH-53K King Stallion: $1.6 billion
Shipbuilding:
– 2 Virginia Class submarines: $7.4 billion
– 3 DDG-51 Arleigh Burke Destroyers: $6 billion
– 1 Littoral Combat Ship: $1.3 billion
– CVN-78 Class Aircraft Carrier: $1.8 billion
– 2 Fleet Replenishment Oilers: $1.1 billion
– 1 Expeditionary Sea Base: $0.7 billion
Ground Systems:
– 5,113 Joint Light Tactical Vehicles: $2 billion
– 135 M-1 Abrams Tank Modifications: $2.7 billion
– 30 Amphibious Combat Vehicles: $0.3 billion
– 197 Armored Multi-Purpose Vehicles: $0.8 billion
(Source: Defense News)
On Mar 12th After months of anticipation, Defence Connect can reveal that Rheinmetall Australia has been selected as the successful tenderer for the hotly-contested LAND 400 Phase 2 program. Rheinmetall’s bid, comprising of the Boxer CRV, has beaten out BAE Systems Australia AMV-35 offering. The project, worth up to $5 billion, will see Rheinmetall deliver 225 combat reconnaissance vehicles to the Australian Army.
Under the company’s offering to the Commonwealth, Rheinmetall will build a majority of the vehicles in Queensland. The first 25 vehicles will be built in Germany in a move Rheinmetall says will support the transfer of technology. Australians will be embedded into teams in Germany to learn the necessary skills before transferring back to Australia for the build of the remaining 200 CRVs.
While the first 25 vehicles are being built overseas, Rheinmetall will establish its manufacturing hub, the Military Vehicle Centre of Excellence (MILVEHCOE) in Brisbane.
The MILVEHCOE was announced by Rheinmetall last July and will act as a sovereign industrial capability for the continuous design, manufacture, export and support for military vehicles, turrets and tactical systems.
As a centre of excellence, the MILVEHCOE will be the focal point for the LAND 400 combat vehicles, LAND 121 logistics vehicles and other complex defence projects. Under the LAND 121 Phase 3B program, Rheinmetall is delivering more than 2,500 logistics trucks to the Australian Army.
Rheinmetall has partnered with several Australian SMEs for the project, including Melbourne’s Heuch, Cablex and Tectonica Australia, Burnie-based Direct Edge, Brisbane-based G&O Kert, Melbourne/Brisbane-based Hilton Manufacturing, Perth-based Hoffman Engineering, Melbourne-based Nezkot Precision Tooling and Engineering, Adelaide-based Plasteel and Adelaide-based Redarc.
Rheinmetall has also partnered with BlueScope, which will see the Port Kembla steelworks company deliver thousands of tonnes of feedstock for the LAND 400 Phase 2 project.
BATTLESPACE Comment: This announcement cements Boxer into the top league of APCs, ratcheting up another win for Rheinmetall. This win also means that the UK will gain access to the Australian data, which gives another strong pointer to a sole-source UK MIV buy through OCCAR.
On Mar 29th The FT reported today that GKN narrowly lost its fight for independence on Thursday after a bitter 10-week bid battle that saw politicians, unions and industry rally to the side of the 259-year-old engineering company. Melrose Industries, the buyout group founded in 2003, declared victory after investors holding 52.43 per cent of GKN’s equity backed its £8bn cash and share bid. The battle went right to the wire with both sides saying the outcome was too close to call just hours before the result. GKN’s fate appears to have been sealed by the more than 20 per cent of shares controlled by hedge fund and other short-term investors.
Christopher Miller, Melrose chairman, said on Thursday the group intended to create ”a UK industrial powerhouse with a market capitalisation of over £10 billion and a tremendous future” ”Let me assure you that GKN is entering into very good hands,” Mr Miller said. “Melrose has made commitments as to investment in R&D, skills and people and we are very excited about putting these into action. GKN is expected conceded defeat in a statement later today. However the narrowness of Melrose’s victory will be seen as a consolation for the unexpectedly assertive defence by one of the UK’s oldest engineering companies.
The fight over the future of GKN sparked a political outcry, transforming the aerospace and automotive parts supplier into a symbol for the vulnerability of Britain’s industrial base as the UK prepares to quit the EU. The controversy prompted the UK government to intervene, with revelations this week that it had demanded the right to veto the sale of GKN’s defence business should Melrose win despite the fact it has no golden share. Melrose’s business model of “buy, improve, and sell” underperforming industrial companies within three to five years has come under fire from MPs and GKN’s own customers, who have questioned whether the new owner will invest for the long-term. Melrose has repeatedly insisted it intends to maintain investment at least at GKN levels and rejected accusations that it is an asset stripper.
Melrose will now have just over three weeks to win approval for its takeover from US regulators. Although this condition has been waived by the buyout group, US authorities could still demand undertakings from the buyer.
BATTLESPACE Comment: Both sides put up a good fight but the writing was on the wall when Elliot backed the Melrose bid, who seemed to be in front form the start with GKN playing catch up. From a stock market point of view there is little doubt that investors will gain more in the short term from the Melrose offer but in the long term we await whether the Melrose strategy of extracting value will give GKN shareholders the added value Melrose has promised. From a family point of view it is a sad day as it end the independence of GKN founded in 1902 and one of the few remaining members of the FT 390 Share Index to remain independent.
On Mar 31st, in one of the worst kept secrets in the world, the MoD announced today that British Army has taken a step towards exploring a deal for a fleet of new armoured vehicles, potentially supporting at least 1,000 British jobs, by announcing it is re-joining the Boxer programme today. The UK will re-join the Boxer programme and explore options to equip the Army with the 8×8 troop carriers to modernise its vehicle fleet and meet the Army’s Mechanised Infantry Vehicle requirement.
The UK played a major role in the original design, development and testing of the Boxer, and would reassume the rights it had as a project partner if a deal was to go through – allowing the option for the vehicle to be built and exported from the UK. The deal could see the Boxer fully assembled in the UK with at least 60% of the manufacturing with British industry, sustaining and developing UK industrial capabilities, facilities and skills.
Artec, the consortium who manufacture the Boxer vehicle, have already made commitments to British industry by signing partnership agreements with BAE Systems, Pearson Engineering and Thales UK, in anticipation of a deal being struck.
It is expected that British companies would compete for the manufacture and supply of many of the vehicle sub-systems, as well as for a full production and assembly line in the UK. Estimates suggest Artec’s planned investment in the UK could secure or create at least 1,000 jobs, based across the country including locations such as Glasgow, Newcastle, Sheffield, Stockport, Telford and Wales.
With the likes of Rolls Royce already powering Boxers with engines and Parker-Hannifin, William Cook Engineering and other British companies also supplying sub-systems for the vehicle, this deal could secure a broader industrial UK partnership.
The MOD is now taking forward negotiations with the Organisation for Joint Armament Cooperation (OCCAR) and Artec. Looking forward to the Assessment Phase, concluding in 2019, this will consider the comparable benefits of manufacturing locations and different supply chains for Boxer, as well as value-for-money. Any deal will be subject to commercial negotiation and assessment in 2019 and the aim is to have the first vehicles in service with the Army in 2023.
OCCAR is a European intergovernmental organisation which facilitates and manages collaborative armament programmes through their lifecycle between the UK and European allies. The organisation manages the Boxer programme and, as an OCCAR member state, the UK has the necessary Intellectual Property Rights to the Boxer and greater control over ensuring Britain benefits from supply chain work.
The MOD conducted a comprehensive market analysis of Mechanised Infantry Vehicles in-service, entering service and in development. The analysis was guided by the British Army’s requirements and how best to deliver them. The Boxer delivered on protected mobility, capacity, flexibility, utility and agility.
As part of the proposed deal, the UK is also expected to see substantial inward investment from Rheinmetall, one of Artec’s parent companies, who signalled their intention to launch a production and integration centre for armoured vehicles in the UK as part of the programme. This would represent a significant commitment which would lead to long-lasting armoured vehicle capability in the UK.
The other of Artec’s parent companies, Krauss-MaffeiWegmann (KMW), already has a substantial UK manufacturing facility in Stockport, from where it designs, manufactures and supports complex military equipment as far afield as the US and Australia, as well as parts of Europe.
BATTLESPACE Comment: The appointment of General Sir Nick Carter as the new Chief of the Defence Staff was a huge boost to the Boxer selection as he had expressed preference for a sole source selection of Boxer rather than an expensive drawn out competition. The selection by Australia of Boxer was also a big boost to the vehicle’s prospects for the UK. With access to the full datapack and IP from OCCAR, no VAT and crucial UK DNA in the original design, the other competitors, Nexter, GDUK and Patria, had to run hard to beat this selection. Key UK Partners are Raytheon for GVA, Power Modes and Training, Thales for comms, Bowman integration and Command Post version, William Cook for castings, Marshalls for the ambulance version, BAE Systems, DB Santasalo for the angular gearbox, Parker Hannifin for rear ramp hydraulics, Rolls-Royce MTU for engines and WFEL for welding. The next stage will see a selection of a Prime Systems Integrator which will be bid by the likes of Thales, BAE Systems, Lockheed Martin and Raytheon. Was sneaked out over the Easter break to minimise reaction of the losers?!
On Apr 6th, following the 2015 contract to supply the Belgium Ministry of Defence (BeMOD) with over 100 FOX Rapid Reaction Vehicles (RRV), Jankel has secured a second prestigious contract with the country’s military to supply a new fleet of specialist tactical vehicles.
Jankel specialises in fully engineered solutions that utilise commercial-off-the-shelf base platforms and meet exact military customer requirements, standards and operational needs. The contract will see Jankel execute on this specialty by using the Mercedes UNIMOG platform to deliver 199 Light Troop Transport Vehicles (LTTV) to the Belgium army.
The LTTV will be designed by Jankel’s team of engineers to provide a modular vehicle solution that will benefit from unique removable mission modules that enable the vehicle to be re-rolled for operational platform versatility. Alongside a fully integrated suite of military sub-systems that includes a removable ballistic protection kit, a Roll-Over-Protection-System (ROPS), weapon mounts and communications fit, the platform will provide full interoperability with the FOX RRV fleet.
Commenting on the contract, Mike Mullen, Jankel’s Managing Director said: “This is great news for British industry. Jankel excels at selecting and converting the right commercially available base chassis into exceptional military grade vehicles, and this programme reflects our position as a leading provider of such military platforms, not just in the UK, but across Europe“. Daniel Crosby, Commercial Director at Jankel stated: “It’s an exciting programme that is very much in line with Jankel’s business growth strategies. Our team worked extremely hard on this opportunity, and I’m sure our flexibility and ability to listen and respond quickly to Customer needs helped to offer a high value-for-money proposition which ultimately secured this contract against highly regarded competition. We are thrilled and very proud to be continuing to deliver leading tactical vehicles to BeMOD.” Jankel is committed to providing the very best equipment and capability to Military Forces around the world, with a strong company heritage of innovation, delivery and through life support.
On June 18th, the U.S. Marine Corps has awarded BAE Systems a $198m contract to deliver an initial 30 Amphibious Combat Vehicles (ACV), with options for a total of 204 vehicles which could be worth up to $1.2bn.
BAE Systems, along with teammate Iveco Defence Vehicles, prevailed in the Marine Corps’ robust competition for the next generation of vehicles to get the Marines from ship to shore to engage in land combat operations.
The ACV provides exceptional mobility in all terrains, and blast mitigation protection for all three crew and 13 embarked Marines, along with other improvements over currently fielded systems. The new vehicle is an advanced 8×8 open ocean-capable vehicle that is equipped with a new 6-cylinder, 700HP engine, which provides a significant power increase over the Assault Amphibious Vehicle, which is currently in service and has been in operation for decades. The ACV is also adaptable to accommodate growth for future technologies or requirements.
The BAE Systems team conducted its own extensive risk mitigation testing and evaluation for land mobility, survivability, and swim capabilities that proved its vehicle’s performance prior to delivering the first 16 prototypes to the Marine Corps in 2017.
Over the past 15 months, the company supported the Marine Corps’ rigorous Developmental Testing and Operational Assessment of the vehicles, which performed superbly in water and land operations, payload, and survivability.
Work on the program will be performed at the company’s facilities in Aiken, South Carolina; Sterling Heights, Michigan; Minneapolis; Stafford; San Jose, California; and York, Pennsylvania.
On June 26, Defence Connect announced Australia’s $1.4bn commitment to MQ-4C Triton purchase. Prime Minister Malcolm Turnbull has committed Australia to the $1.4bn procurement of the first six Northrop Grumman MQ-4C Triton long-range surveillance drones, which will be used to support maritime border security and freedom of navigation operations (FONOP) throughout the region.
The Prime Minister, along with Defence Industry Minister Christopher Pyne, announced the long-awaited procurement of the giant Northrop Grumman unmanned aerial systems (UAS) today as part of a joint program with the United States Navy.
The initial $1.4bn investment in the Triton system will also include $364m on new facilities at RAAF Bases Edinburgh and Tindal, as well as the necessary ground control systems, support and training required to implement a project of this scope.
PM Turnbull said, “The first of the Triton aircraft is expected to be introduced into service in mid-2023 with all six aircraft to be delivered and in operation by late 2025, based at RAAF Edinburgh, South Australia.”
The multi-mission warship, which is due to come into service after 2020, will be used by the Royal Navy in combat and counter piracy operations and to support humanitarian and disaster relief work around the world.
On June 28th, Defence Connect announced today that Australian Prime Minister Malcolm Turnbull has tonight unveiled BAE Systems’ Type 26 Global Combat Ship as the design for Australia’s $35bn Future Frigate program.
The new frigates will be officially known as the Hunter class, with the Royal Australian Navy to receive nine advanced guided missile frigates beginning in the late 2020s.
In one of defence’s most hotly-contested competitions in years, BAE Systems with its Type 26, Navantia with an evolved Hobart-class/F-100, and Fincantieri with its FREMM frigate were all considered for the next-generation of Australia’s surface fleet.
The new Hunter class will mark a major increase in the future capability of the Royal Australian Navy and will combine the powerful Aegis combat system, the Australian designed CEAFAR 2 phased array radar and a suite of advanced anti-submarine sensors allowing the ships to conduct a variety of missions, with sufficient range, endurance and world-leading combat capability throughout the projected life of the vessels.
It can also be revealed the next generation of frigates will be built by ASC Shipbuilding at the Osborne Naval Shipyard. ASC Shipbuilding, currently wholly owned by the Commonwealth, will become a subsidiary of BAE Systems during the build.
According to the Prime Minister, this will ensure BAE Systems is fully responsible and accountable for the delivery of the frigates and ensures the work will be carried out by Australian workers and create Australian jobs.
As part of the Government’s $89 billion Naval Shipbuilding Plan, BAE and its winning design will be responsible for directly creating 4,000 jobs around the nation while kickstarting the nation’s sustained sovereign shipbuilding capability once construction commences in 2020.
This concerted industrial effort will also provide further workforce and industry development opportunities in the lead-up to the rolling SEA 1000 Future Submarine procurement program, set to commence in Adelaide from 2022-23.
On September 24th, Boeing [NYSE: BA] will provide its MH-139 helicopter and related support to the U.S. Air Force to replace the more than 40-year-old UH-1N “Huey” helicopters used to protect America’s intercontinental ballistic missile bases. The program awarded today is valued at $2.4bn for up to 84 helicopters, training devices and associated support equipment.
The MH-139 derives from the Leonardo AW139, which is used by more than 270 governments, militaries and companies worldwide. Leonardo will assemble the helicopters at its northeast Philadelphia plant, with Boeing integrating military-specific components at its facility south of that city. The contract also includes operations, maintenance, training systems and support equipment for the MH-139 aircraft.
On September 24th, it was announced that U.S. Air Force pilots will soon train for combat with T-X jets and simulators from Boeing [NYSE: BA].
“Today’s announcement is the culmination of years of unwavering focus by the Boeing and Saab team,” said Leanne Caret, president and CEO, Boeing Defense, Space & Security. “It is a direct result of our joint investment in developing a system centered on the unique requirements of the U.S. Air Force. We expect T-X to be a franchise program for much of this century.”
Boeing and its risk-sharing partner Saab designed, developed, and flight tested two all-new, purpose-built jets ― proving out the system’s design, repeatability in manufacturing and training capability.
“This selection allows our two companies to deliver on a commitment we jointly made nearly five years ago,” said Håkan Buskhe, president and CEO of Saab. “It is a major accomplishment for our partnership with Boeing and our joint team, and I look forward to delivering the first trainer aircraft to the Air Force.”
Boeing is now clear to begin placing orders with its suppliers, including Saab. More than 90 percent of Boeing’s offering will be made in America, supporting more than 17,000 jobs in 34 states.
On Oct 1st, Reuters reported yesterday that Humvee maker AM General is up for sale, sources say. AM General has put itself up for sale and has hired investment bank Macquarie Group Ltd to seek potential bidders in a deal that could value the builder of Humvee military vehicles at more than $2bn, people familiar with the matter said on Monday.
Potential bidders include competitors in the military ground vehicle market, such as General Dynamics (GD.N), Oshkosh Corp (OSK.N) and BAE Systems PLC (BAES.L) according to two people familiar with the matter. Auto makers like FIAT Chrysler (FCHA.MI) and General Motors Co (GM.N) may also be potential buyers, one of the sources added.
AM General and Macquarie did not immediately return a request for comment. General Dynamics and BAE declined to comment. Representatives for Oshkosh did not immediately respond to a request for comment.
The South Bend, Indiana-based company is currently owned by private equity firms, including MacAndrews & Forbes Inc and The Renco Group Inc.
A possible sale of AM General follows a rash of deals over the past 18 months among defense contractors. But relatively fewer makers of defense equipment have gone on the auction block.
Last year, United Technologies Corp (UTX.N) acquired Rockwell Collins for $30bn, and in March, TransDigm Group (TDG.N) continued its acquisition spree with a $525mi deal for Extant Components Group. AM General could fetch about 10 times its annual earnings of $160m, one of the people said.
The company’s favorable tax treatment because of its current status as an limited liability corporation, would allow a buyer to reduce the company’s taxable earnings for 15 years. That coupled with recent contract awards could push the ultimate value of the company to over $2bn in a sale.
The sale, should it happen, comes as the U.S. Army is gearing up for a broad effort to modernize its forces, including seeking prototypes of its Next-Generation Combat Vehicle in fiscal year 2022.
On Oct 2nd, Defense News reported today that Britain’s defense secretary has revealed the government held discussions with Boeing over the purchase of a fleet of Wedgetail E-7 airborne warning and control aircraft. Discussions are also taking place with Australia about cooperating in the use of the aircraft, Gavin Williamson said.
Williamson said the Ministry of Defence had undertaken market analysis and discussions with other potential providers, concluding “that the potential procurement of the E-7 represents the best value for money option for the U.K. against need, whilst representing a significant opportunity for increased defense cooperation and collaboration with our key ally Australia.”
“The Wedgetail is the stand-out performer in our pursuit of a new battlespace surveillance aircraft, and has already proved itself in Iraq and Syria,” Williamson said.
The MoD said in a statement that further discussions are set to take place prior to an investment decision.
“If selected, U.K. industry could be involved significantly with the program, from modification work to through life support,” the MoD said.
Said Williamson: “The MoD will work closely with Boeing to ensure [exploration of] how Britain’s leading defense industry could also benefit from any deal.”
One company expected to benefit from any E-7 deal is the Marshall Aerospace and Defence Group.
Marshall already builds auxiliary fuel tanks for the Poseidon P-8 maritime patrol aircraft program, and industry sources say the Cambridge, England-based company is set to convert 737 aircraft to the Wedgetail configuration as part of the deal.
The talks with Boeing about raising U.K. content on the aircraft are an effort to head off likely criticism over handing yet another major contract to the U.S. defense giant without holding a competition and with little in the way of work coming to local industry.
Boeing Apache attack helicopters and Poseidon P-8 maritime patrol aircraft have both recently been purchased without a competition.
The U.S. contractor is, however, trying to nullify criticism over growing its workforce here to 2,300 and spending a sizable sum of cash building Poseidon support facilities at the aircraft’s main Royal Air Force operating base at Lossiemouth, Scotland.
On October 14th, Harris Corporation (NYSE:HRS) and L3 Technologies, Inc. (NYSE:LLL) agreed to combine in an all stock merger of equals to create a global defense technology leader, focused on developing differentiated and mission critical solutions for customers around the world. Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both companies, L3 shareholders will receive a fixed exchange ratio of 1.30 shares of Harris common stock for each share of L3 common stock, consistent with the 60-trading day average exchange ratio of the two companies. Upon completion of the merger, Harris shareholders will own approximately 54 percent and L3 shareholders will own approximately 46 percent of the combined company on a fully diluted basis.
The combined company, L3 Harris Technologies, Inc., will be the 6th largest defense company in the U.S. and a top 10 defense company globally, with approximately 48,000 employees and customers in over 100 countries. For calendar year 2018, the combined company is expected to generate net revenue of approximately $16bn, EBIT of $2.4bn and free cash flow of $1.9bn.
Harris Chairman, President and Chief Executive Officer, William M. Brown said, “This transaction extends our position as a premier global defense technology company that unlocks additional growth opportunities and generates value for our customers, employees and shareholders. Combining our complementary franchises and extensive technology portfolios will enable us to accelerate innovation to better serve our customers, deliver significant operating synergies and produce strong free cash flow, which we will deploy to drive shareholder value. Integration planning is already underway, and from our extensive experience with integration, we are confident in our ability to realize $500m of annual gross cost synergies and $3 billion of free cash flow by year 3.”
L3 Chairman, President and Chief Executive Officer, Christopher E. Kubasik said, “This merger creates greater benefits and growth opportunities than either company could have achieved alone. The companies were on similar growth trajectories and this combination accelerates the journey to becoming a more agile, integrated and innovative non-traditional 6th Prime focused on investing in important, next-generation technologies. L3 Harris Technologies will possess a wealth of technologies and a talented and engaged workforce. By unleashing this potential, we will strengthen our core franchises, expand into new and adjacent markets and enhance our global presence.”
Strategic Benefits of the Merger
Increased scale with a well-balanced portfolio of complementary franchises: The combined portfolio brings depth and balance of relationships across a wide range of customers, in both the U.S. and international markets. Increased scale will enable the combined company to be more cost competitive, expand capabilities to provide end-to-end solutions across multiple domains of air, sea, land, space and cyber, enhance leadership in RF and spectrum technologies and establish a leading platform-agnostic supplier and integrator.
Shared culture of innovation and operating philosophy creates stronger platform to drive growth: Both L3 and Harris are technology driven organizations with significant R&D investment and a combined workforce of approximately 22,500 engineers and scientists. The combined company plans to accelerate investment in select technologies to expand leadership in key strategic domains including national security. By leveraging a common operating philosophy of continuous improvement and operational excellence, L3 Harris Technologies will continue to drive operating margin improvement.
Meaningful value creation opportunity: The combination is expected to generate approximately $500 million of annual gross pre-tax cost synergies, or $300 million net of savings returned to customers, in year 3. The savings will come from reducing direct and indirect spend, rationalizing footprint, consolidating corporate and segment headquarters, establishing a common shared services platform for IT and finance and reducing other overhead costs. The company is expected to invest approximately $450 million cash to achieve the synergies over the next 3 years.
Strong balance sheet with significant cash flow generation: On a calendar year 2018 basis, L3 Harris Technologies is expected to have approximately $16bn of revenue, $2.4bn of EBIT, and $1.9 bn of free cash flow. The combined company will target $3bn in free cash flow by year 3, driven by organic growth, cost synergies, working capital improvements and capital expenditure efficiencies. L3 Harris Technologies will be well capitalized with a strong balance sheet and a leverage ratio of 2.2x net debt to trailing twelve months EBITDA. The combined company will remain committed to maintaining an investment grade credit rating and a dividend payout consistent with each company’s current practice and deploying excess cash toward share repurchases, including up to $2bn in share repurchases in the 12 months post-closing.
On October 18th, the FT reported yesterday that Canada has chosen BAE Systems’ Type 26 design for next generation of warships. Canada’s next generation of warships will be built on a design by Britain’s BAE Systems after Ottawa selected an international consortium led by Lockheed Martin as its preferred bidder. The Canadian government said late on Friday that BAE’s Type 26 design had beaten two rival submissions in a competitive tender to provide replacements for the Royal Canadian navy’s frigate fleet. While a final contract award still has to be made the news marks a significant step forward in what is the largest and most expensive military purchase in Canadian history. The selection of the Lockheed Martin-led team marks the second overseas order for BAE’s Type 26 design. BAE in June won a multibillion-dollar contract to supply the Australian navy with nine of the 6,900 tonne multi-mission warships in a competitive tender. The victory was significant in part because work on the first Type 26 for the Royal Navy only started last year and the ship is not due to enter service until 2027. The potential Canadian contract is much smaller and would be a licensing agreement only for BAE. The ships will be built at Irving Shipbuilding of Halifax, Nova Scotia.
“These ships will form the backbone of our Royal Canadian Navy and will be Canada’s major surface component of maritime combat power for decades to come,” Public Services and Procurement Canada said in a statement on Friday. A contract award is expected this winter, the statement went on, “with construction beginning in early 2020”. Apart from BAE, the Lockheed consortium also includes CAE, L3 Technologies, MDA and Ultra Electronics. None of the companies was immediately available for comment. The team beat a rival submission from Alion Science and Technology which, along with its subsidiary Alion Canada, had submitted a proposal based on the Dutch De Zeven Provinciën Air Defence and Command (LCF) frigate. Navantia, a Spanish-based company, headed a team that included Saab and CEA Technologies. Its proposal was based on the F-105 frigate design, a ship in service with the Spanish navy. (Source: FT.com)
BATTLESPACE Comment: This is excellent news and builds on the success for the BAE Systems’ Type 26 design chosen by Australia. It has transformed the UK’s naval shipbuilding industry and will lead to other deals across the globe. Given this choice the requirement for a separate Type 31e design may diminish given the likely drop in list price for the UK’s Type 26 fleet given the increased volume in numbers. This may be a blow to Babcock which is hoping for the Type 31e bid to bolster its ailing naval division where the storm clouds are growing. There are rumours of a large increase to £1.3bn for the Astute Drydock which has to be built in 4 years and continuing stories of the need to increase the weight of the Faslane shiplift to accommodate the Dreadnaught boats. A number of City research papers suggest that Babcock’s profit forecast is under pressure resulting in a drop in the share price this week with more expected to come.
On Oct 22nd, Reuters reported today Belgium has chosen Lockheed-Martin’s (LMT.N) F-35 jets rather than the Eurofighter Typhoon as a replacement for its ageing F-16s, Belgian national news agency Belga said, citing government sources. Belgium has been deliberating for months over a multi-billion-dollar purchase of 34 new fighter jets, with the latest deadline for a decision being Oct. 29. A defence ministry spokeswoman declined to comment on the government’s decision and did not confirm the end-October deadline.
On November 14th, it was announced that after 20 years, the majority of the G-Model off-road vehicles used by the Dutch military are to be replaced. In their place will come proven Mercedes-Benz G-Class 300 CDI vehicles which are, however, much more technologically advanced. Following a successful tendering process, Mercedes-Benz Cars Netherlands B.V. (MBCNL) will supply around 515 vehicles to the Dutch military between 2021 and 2023. Known as the “12kN AASLT”, the vehicles (1200kg payload air assault vehicles) can be transported with precision to their place of deployment by Chinook helicopters as either internal or external cargo. In a second tranche, a further 550 vehicles could be purchased through to the year 2030. Other vehicle variants are a logistics body and an ambulance body.
“We are proud that an intelligent combination of modular solutions from Graz in Austria and local flexibility was demanded by the Dutch army,” explains Niels Kowollik, CEO of MBCNL. “For the Dutch dealer network this also means that servicing, maintenance and repair of these vehicles will be required over an extended period.”
Dr. Gunnar Güthenke, CEO of the Mercedes-Benz G-Class, had this to say about the pleasing result of the Dutch army’s tendering process: “The G-Class speaks for itself. In all deployment scenarios, the off-road vehicle is compelling for its performance, outstanding handling characteristics and safety, whatever the terrain. Time after time, we see that nations who have bought the G-Class once opt again and again for the G-Class’s proven quality.”
On November 19th, Babcock, the engineering services company, would like to provide clarification following a report by Sky News regarding exceptional items likely to be included in the Group’s half year results announcement on 21 November 2018.
As indicated to the market in its most recent Trading Update of 19 September 2018, Babcock is currently undertaking a programme to strengthen the Group by exiting a number of small, low-margin businesses, including the Appledore shipyard, and is reshaping its oil and gas business. We announced at that time that we would provide an update on these activities at our half year results. Whilst the exact impact of these actions has yet to be determined by the Board, we do not expect the net cash costs to be material.
On November 16th, Sky News reported that ‘Babcock braces for £100m hit on North Sea helicopter arm.’ Babcock International Group, the engineering giant which maintains Britain’s nuclear submarine fleet, will next week try to draw a line under its recent difficulties by taking a £100m hit on the value of its helicopter business.
Sky News has learnt that Babcock is likely to announce as part of its half-year results next Wednesday an impairment charge relating to the Avincis operations it bought in 2014 for £1.6bn.
The precise size of the writedown, which will affect the company’s profitability but will be predominantly a non-cash item, is expected to be decided at a board meeting early next week.
One investor said the charge relating to Avincis was likely to be in the region of £100m, with analysts forecasting a number of relatively minor costs deriving from issues including the closure of the company’s Appledore shipyard in Devon, which was confirmed earlier this month.
City sources said that Babcock had decided to take the financial hit as it seeks to repair relations with the City following the publication of a bearish research note by a firm calling itself Boatman Capital.
The Boatman note contained a series of allegations about Babcock’s management and finances, provoking a stinging response from the company, which said much of the content was “false and malicious”.
A number of mainstream City analysts, including at Royal Bank of Canada, have also cast doubt on Babcock’s prospects in recent weeks, with its shares under pressure after sliding by nearly 25% over the last year.
Babcock, which is structured under four main operating divisions, is the Ministry of Defence’s (MoD) second-largest supplier, and runs a string of major contracts for all of the UK’s armed forces.
The company employs tens of thousands of people in Britain and has a market value of roughly £3bn. Its engineering expertise is seen as a vital asset in Whitehall, particularly because of the company’s role in maintaining the Vanguard class of nuclear submarines. The Financial Times reported this week that the MoD was seeking assurances that Babcock can complete a £200m overhaul of HMS Vanguard on time. The purchase of Avincis was funded partly through a rights issue, but its performance was subsequently affected by an oil price slump which left much of its fleet under-utilised by a North Sea oil industry grappling with a steep decline in revenues.
However, the majority of the Avincis operations, which are generated from high-margin emergency medical and firefighting activities, have turned out to be a compelling growth business for Babcock.
The FTSE-250 company retains the confidence of its key public sector customers, and included a statement from a Government spokesman in a stock exchange announcement this week which said it remained “committed to working with [Babcock] on a wide range of programmes”.
The MoD spent more than £1.7bn with the company last year – a sizeable chunk of Babcock’s overall revenues. Recent pressure on its shares have led some analysts to question whether Mike Turner, the chairman since 2008, may step down in the near term, but he said this week that he had no intention of doing so. One shareholder said on Friday that Mr Turner, the former boss of BAE Systems, enjoyed widespread investor support despite their shared frustration at its stock price performance. Babcock has sought to differentiate itself from peers in the support services sector by highlighting the skilled nature of its workforce and the loftier profit margins that it enjoys.
BATTLESPACE Comment: This announcement to in effect ‘steady the ship’ and the share price may be a temporary measure given the headwinds building about Babcock’s naval business, the Astute drydock in particular, and looming delays at its DSG land systems division where both the Warrior WCSP and Challenger 2 LEP programmes are facing delays, the latter for about 4 years. At the moment DSG does not seem to be well placed to benefit from other UK Land Programmes such as Ajax and MIV where both Rheinmetall and GDELS are creating their own support solutions. As our readers know we have been suggesting a write off on the £140m paid for DSG which was way in excess of bids from Dyncorp in particular.
Babcock shares reacted well to this Statement with the stock up 9.49p (1.62%) at noon to 593.69p. However, sources in the City suggest that with he burgeoning off balance sheet debt the shares may well be 300p in two years. Will Mike Turner survive this hiatus or is it time for him to retire gracefully after a sterling career at BAE Systems, GKN and Babcock? One possibility is a bid from BAE Systems for the submarine business which would put submarine manufacturing and support under one roof for the first time as happens in other countries. A merger was mooted some years ago but it is believed that the MoD did not like having so much power in the hands of one company. Which of the low-margin businesses are up for sale has not been revealed, but it is likely that McNeilie will be on the block given that it has been moved to the Networks and equipment Support segment. Other larger businesses may well be placed on the block to slim don the company and pay off debt to avoid a ‘Carillion like’ catastrophe.
On November 26th, Rheinmetall AG Confirms Talks Regarding A Potential Acquisition of a Stake In KNDS. Rheinmetall AG confirms talks with Wegmann Unternehmens-Holding GmbH & Co. KG regarding the possible acquisition of Wegmann Unternehmens-Holding GmbH & Co. KG’s stake in KMW + Nexter Defense Systems N.V. (“KNDS”), and therefore an indirect acquisition of Krauss-Maffei Wegmann GmbH & Co. KG (“KMW”), or other forms of cooperation with KNDS and/or KMW.
The Executive Board of Rheinmetall AG will analyze and review the possibility to successfully complete such transaction both from a legal and economic point of view; the possibility of such transaction depends on a variety of, inter alia, political, economic and regulatory factors. Depending on the outcome of such analysis, the Executive Board of Rheinmetall AG will decide about further actions.
Rheinmetall Aktiengesellschaft
The Management Board
(Source: defense-aerospace.com/Rheinmetall AG)
BATTLESPACE Comment: This is an interesting move and would certainly streamline Germany’s armoured vehicle business and Europe’s in particular at a time of perceived policy differences between Rheinmetall and KMW over the UK’s MIV Programme in particular. This will also streamline the proposed new European MBT being agreed between France and Germany as Leopard will now come solely under Rheinmetall. The takeover will make Rheinmetall one of the most powerful armoured vehicle manufacturers in the world with a product range stretching from armoured 4×4 to MBTs. However, this move puts Rheinmetall as the most powerful partner in the KMW + Nexter Defense Systems N.V. alliance and could cause further moves in this area. Will the alliance now re-look at acquiring Arquus, which would balance the company and boost the French element?
SSAFA Raceday
The year ended with our annual Chepstow Raceday on November 21st in aid of SSAFA. The day was a great success and we raised a record £29,000 for SSAFA.
The day culminated int he much deserved award of BATTLESPACE Businessman Of the Year Ken Peterman, President of Government Systems for Viasat. He received his award from Simon Davies, CEO of Spectra, last years’ winner. Two weeks prior to the event Ken had the great news of the birth of his new daughter Katie. I have had the pleasure of knowing ken for over 20 years.
Viasat is a rapidly growing global broadband services and technology Company approaching nearly $2 billion in annual revenue that has helped shape how consumers, businesses, governments and militaries around the world communicate and share information for over 30 years.
Ken, congratulations on being selected as BATTLESPACE Businessman of the Year.
Thanks, Julian. It’s truly an honor to be selected as the BATTLESPACE Businessman of the Year. As you know, it takes a team and Viasat has an amazing team. It’s a privilege to be able to work with some of the most innovative and passionate people in the industry. I have a deep respect for them and feel they are equally deserving of the recognition associated with this award.
Can you tell me about the culture at Viasat and how it contributes to your continued success in the industry?
Year-over-year, our government business continues to rapidly grow, innovate, and empower warfighters around the globe with game-changing communications and secure networking capabilities. We’ve helped our defence customers improve their situational awareness, enhance battlefield safety, and extend their mission effectiveness—all because of the dedication and passion our team brings to Viasat on a daily basis. It is a genuinely exciting, even inspiring environment.
At Viasat, we encourage our employees to think creatively, empower them to pursue their passions, and leverage this unique culture of innovation, coupled with our entrepreneurial business strategies, agile technology development processes, and non-traditional business models to accelerate delivery of turnkey warfighter capabilities.
That is the reason Viasat’s defence business is experiencing such significant growth and delivering such differentiated financial performance. Our growth has been attained in large part by recognizing nexus points in technology innovation, with key discoveries and technological breakthroughs moving from the defence industry to the private sector. This has specifically impacted the mobile networking, satellite communications, and cybersecurity market segments; enabling defence market disruption, creating new defence business models, and resetting traditional defence customer valuation paradigms.
You and I have discussed the value of customer intimacy and the pivotal role it plays when it comes to delivering the turnkey capabilities you mentioned. Can you share a little bit more on this topic?
Customer intimacy is an essential ingredient when it comes to our differentiated business model. At the end of the day, we are driven by the needs of today’s warfighter on the front lines. When young men and women put on a uniform and enter military service, it is Viasat’s strong belief that we don’t just have a responsibility, we have an obligation, to give them the most cutting-edge technology solutions available in order to empower them with the capabilities needed to be as safe and successful as possible when they’re deployed into some of the most dangerous and stressful situations they will ever face. To that end, we are committed to working closely with warfighters deployed around the globe to clearly understand the “problem to be solved” in their terms.
We then develop new operational capabilities through our Non-Development Item (NDI) model, which leverages cutting-edge technologies in global satellite communications (SATCOM), cybersecurity, information assurance, tactical mobile networking and enhanced situational awareness solutions that are seamlessly integrated in order to deliver cutting-edge capabilities to warfighters with unparalleled speed and affordability.
Next years’ SSAFA Raceday is on November 20th.
Quite a year in focus! We would like to wish you all a Happy Christmas and a Prosperous New Year!