12 Mar 04. Arthur Veitch, Executive Vice-President Combat Systems for General Dynamics told BATTLESPACE yesterday, that the offer to buy Alvis will open the door for technology transfer from the U.S. technology across to the U.K. for the FRES requirement. As General Schenk told BATTLESPACE at AUSA that both the U.K. and U.S. governments were working together to create a commonality of technology between FRES and FCS, the GD/Alvis combination will, “Enable industry to improve the flow of technology across borers allowing both Government’s to take advantage of new technologies as it would be too expensive for the U.K. to reinvent the wheel by itself. The FRES study paper is expected to be placed with a services company, with SAIC being the favourite, working with QinetiQ. The Editor asked Nick Prest whether the new GD/Alvis would consider putting forward a proposal to write the FRES proposal. He told us that, ”The MoD has already ruled out any platform company being involved in the FRES study paper, it is being undertaken by a systems house which can oversee the implementation of the project such as is being done in the U.S. by the Boeing/SAIC team.

The deal with General Dynamics enables a technology flow into the United Kingdom to enable the sound execution of the FRES requirement for the new armoured vehicle fleets. Like the BOWMAN radio fiasco, the cause of which was a lack of investment in the tactical radio infrastructure by the MoD for 25 years, the armoured vehicle industry has been starved of MoD investment since the mid-seventies when the current CVR(T) fleet was built when Alvis was company in its own right.

The Levine years of reform and the end to cost-plus contracting meant that the City turned its back on the defence companies and therefore rationalisation was inevitable. This short-termism coupled with the long-term decline in the armed forces and lack of government investment meant that it became impossible for a company to invest in a new armoured vehicles as the investment could not be justified for the returns could not be made on the numbers involved.

The huge U.S. DoD R&D budget and the numbers involved has enabled U.S. Defense contractors to work with and benefit from these large programmes, one of which Future Combat System (the U.S. equivalent to FRES) is worth $11bn over 20 years. The U.S. technology is reputed to be 30 years ahead of the U.K. and Europe and growing.

BAE Systems Plc confirmed this need for technology transfer at its recent results meeting. The company said that a top priority this year was to ensure Britain secures a deal to allow it access to sensitive U.S defence technology, though it expected
some U.S. industrial opposition.

Europe’s largest defence firm needs this technology transfer to be able to compete for lucrative upgrade work on the JSF. BAE works with U.S. firms on many projects and is Europe’s biggest defence exporter to the United States, but the proposed technology transfer deal would enable it to compete for far more work now going exclusively to U.S. rivals.

“Agreeing appropriate transfer of technology between the UK and the U.S. on this programme will be a key objective during 2004,” BAE said in its annual results statement. Chief Executive Mike Turner said he expected top U.S. defence firms to try to block such a deal. “It’s not surprising if they take a position. We have to fight alongside the UK government,” he told reporters.

Having said that technology flows both ways and there is a great deal of U.K. armoured vehicle technology, Chobham Armour being one example, which can flow over to the U.S. Alvis has a huge depth of technology in its Alvis, Vickers and Haaglunds companies, a lot of which will be used in FRES and may flow over to the U.S.

There is always the possibility that 30% shareholder BAE SYSTEMS could offer a counter bid but this would almost certainly shut out this technology transfer deal. Heaven forbid that this deal fail