26 Jan 17. The collapse of the deal between Raytheon and Italy’s Leonardo to offer the T-100 jet trainer in the US T-X competition followed Leonardo’s inability to cut the price of the aircraft by nearly a third, Italian sources have told Defense News.
“Raytheon wanted to drop the price of the plane by 30 percent below Leonardo’s idea,” said the source, who was knowledgeable of the talks between the two firms. “Leonardo worked towards that but could not achieve it.”
The partnership was nearly called off in October in a dispute allegedly over control of the program. All appeared to be back on track later the same month when Raytheon announced it would build a final assembly and check out line in Mississippi. All appeared back on track later the same month when Raytheon announced it would build a final assembly and check out line in Mississippi. While structural assembly would take place in Italy, at least 70 percent of the T-100 training system — including ground-based systems —would be built in the United States, a Raytheon spokesman said at the time.
“The October row was over control, and that never really went away, but the debate over price also became more important, particularly as the [competitiveness] of Boeing’s offer in the T-X program became more evident,” said a second Italian source. Boeing has teamed with Saab to offer a clean sheet design.
The second source added that Raytheon wanted to reduce the price by 25-30 percent. The first source sympathized with Leonardo over the price wrangle, stating, “Raytheon saw price as key to competing, but perhaps didn’t fully understand the cost of the plane, not being an aircraft manufacturer.”
“Leonardo really worked on pricing,” he added.
A US source with knowledge of the discussions confirmed that the final price per plane was the sticking point, saying Raytheon’s target figure was “several million” less than Leonardo was willing to accept. The issue remained one of contention for several months, the source added. Raytheon declined to comment on its split from Leonardo beyond a company statement released yesterday, which attributed the breakup to the fact that the “companies were unable to reach a business agreement that is in the best interest of the U.S. Air Force.”
Richard Aboulafia, an analyst at the Teal Group, said it was no secret that cost was crucial in the T-X bid.
“And it’s no secret the M-346, with a fly away cost of about $25m, is an expensive plane — about the same price as the T-50,” he said. “For the M-346, which lags on some specifications including Gs, price was doubly important and they needed to hit the $15-18m zone.” (Source: Defense News)
26 Jan 17. Finland’s impending big-ticket defense programs are attracting significant levels of foreign interest from industry companies, as the country readies to launch force-modernization programs, including the next-generation fighter project, costing over $20bn by 2022. Officials with the Finnish Armed Forces (FAF) are at the advanced planning stage for a number of large-scale procurement projects that also include counter-artillery radar systems, precision missiles, torpedoes and the Navy’s Squadron 2020 battle system. Saab, Israel’s Elta and Raytheon are among the foreign companies that have established strategic dialogue positions on future contracts with the FAF. Due to the open competition nature of the program bidding processes, a number of Russian companies are also expected to tender bids on some of the larger procurement projects. The underlying significance around core programs has been heightened by non-aligned Finland’s unease over Russia’s growing unpredictability and long-term political and military ambitions in the wider High North and Baltic Sea regions. Finnish Defense Minister Jussi Niinistö said the government is determined to ensure that funding for the country’s military needs matches the FAF’s equipment procurement needs and capacity-building objectives.