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IS ALENIA L-3 DEAL START OF RELATIONSHIP?

IS ALENIA L-3 DEAL START OF A NEW LONG-TERM RELATIONSHIP?

21 Feb 05. Reports in Defense News Reporters TOM KINGTON, ROME And GOPAL RATNAM, WASHINGTON with regard to news that L-3 Communications and Alenia Aeronautica have signed a trans-Atlantic joint venture agreement Feb. 15 to pursue what could be a $9bn global business for turbo-prop medium cargo planes, could be the start of a long-term relationship for the two companies. Since Mark Newman CEO of DRS Technologies rebuffed Frank Lanza’s hostile approach for his company, L-3 has been looking for partners to grow the company and indeed for Frank Lanza to exit in style. The purchase of Raytheon’s Greenville plant signaled that L-3 had a wish to enter the aerostructures business and the high price paid, $1.3bn signaled a need for L-3 to make the best use of the plant. Raytheon retained the ASTOR business in a JV with L-3 but this has now tailed off with the integration moving to Broughton in North Wales, UK.

The first order of business for the new joint venture — dubbed Global Military Aircraft Systems (GMAS) — will be to pitch the C-27J Spartan for the U.S. Army’s Future Cargo Aircraft program. GMAS will be jointly managed by L-3 Integrated Systems and Alenia North America. The deal severs an arrangement between Alenia and Lockheed Martin for marketing the C-27J in the United States. This poses a question, what can L-3 do that LockMart cannot or has L-3 seen a new opening for the aircraft. Italy has been positioning its defence interests for siome time towards the USA as Airbus strengthens its hold in Europe. Gien that Italy ionly recives Airbus business on a tendering basis, reports suggest that toher Airbus partners such as BAE SYSTEMS are looking to take over the Italian share given their strategic stakes in the business. Beyond the U.S. Army competition, L-3 and Alenia are eyeing a global market. The Army is expected to request bids in the next two months.

“There is demand for an aircraft like the C-27J, which is wide-bodied, has a lot of legs on it and has a lot of loitering capability,” said Frank Lanza, chief executive of New York-based L-3 Communications. “We see a market overseas that is multimission, cargo-plus-sensor platform, and we certainly see applications for from 100 to 300 airplanes in the next five to seven years,” worth about $9bn. Lanza said the U.S. demand alone could be 140 planes if the Air Force also chooses the C-27J for its intra-theater lift requirements.

The plane is likely to compete with EADS’ C-295 for the U.S. Army’s business. Joining hands with L-3 suits Rome-based Alenia, which is looking at the New York company as a partner for other airborne surveillance programs.

“While Lockheed Martin [led] the program in the U.S. during the pure marketing stage, GMAS will now be responsible as we move to the offer stage” to the U.S. Army, Giuseppe Giordo, president and chief executive of Alenia North America, a subsidiary of Alenia Aeronautica and a unit of the Finmeccanica group, said. “GMAS will handle sales in the U.S., but Alenia will continue to be responsible
for sales outside America for the time being.” Lockheed’s Role

An earlier joint venture between Alenia and Lockheed Martin was formed in the late 1990s to market the aircraft, which has been ordered by Italy and Greece. In 2003, Lockheed Martin sought to give Alenia a larger role, including more marketing and construction responsibility for the aircraft. Under that deal, Lockheed Martin ceded to Alenia the marketing responsibility for the C-27J for most sales, excluding those in the United States, to Taiwan and to two other undisclosed countries, as well as sales covered by the U.S. Foreign Military Sales program.

Peter Simmons, a Lockheed spokesman, said the company continued to have responsibility for marketing the plane in a few countries, but would not name them. A source close to the deal said responsibility for those areas

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