Defense Industrialist

The USAF's plans for new close support aircraft show an unusual willingness to move out quickly.

Earlier this week, the Atlantic Council and other institutions around Washington were briefed on how the Air Force plans a two-phased approach to the recapitalization of its close air support (CAS) fleet. In the next two years, the USAF intends to procure an off-the-shelf observation-and-attack aircraft, deemed the "OA-X," for flying against lesser threats. Very likely, Air Force officials noted to us, this means either A-29 Super Tucanos from Embraer, or AT-6 Texan IIs from Beechcraft. In the next five years or so, for flying against somewhat stronger threats, the USAF intends to buy another aircraft, the "A-X2", possibly developed fresh, and possibly derived from an existing subsonic military jet. Plenty of options come to mind for the latter fleet; the Italian firm Leonardo was clearly thinking this way when it began designing its latest Aeromacchi trainer jet—pitched for the USAF's upcoming T-X competition—with modest ground attack capabilities available from flipping a switch.

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Congressman Smith’s call for new thinking on nuclear weapons may actually require some fresh ideas.

This week’s Republican National Convention has reminded me again that knowing your nuclear triad is important. Some of the malcontentedness after last month’s Brexit referendum is a reminder that the Scottish Nationalists don’t like nuclear weapons, triad or not. Earlier this month, Congressman Adam Smith, raking member of the House Armed Service Committee, wants new thinking on nuclear weapons, including “downsizing” its ambitions for recapitalization. One almost wholly new thought would be getting the land-based missiles on the road, to increase their deterrent effect and defensibility, while decreasing the cost of replacing the whole force.

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The RCAF’s divergent commitments to NORAD and NATO suggest that none of the fighters on offer are quite right for its needs.

Canada’s Department of National Defence has had quite a time over the past two weeks at both the NATO Summit and the Farnborough Air Show. The DND is now preparing to deploy 450 troops, the nucleus of a battalion group, to Latvia next year, as part of the four-battalion NATO brigade approved at the meeting in Warsaw. As Murray Brewster of CBC News wrote, the federal government has also “renewed a commitment to provide six CF-18 fighter jets for air policing duties over the Baltic states, a mission the air force last conducted in 2014.” With all this activity, Defence Minister Harjit Sajjan admits concern about Canada keeping its commitments to both NORAD and NATO on a dwindling fleet of usable jets. Some furthering thinking about both the various jets and those twin commitments shows how it’s possible that none of the available aircraft are quite right for Canada’s needs.

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How should the military relate to billionaires who don’t follow its playbook?

At the NewSpace 2016 conference in Seattle last month, a questioner in the audience wanted an opinion about “Jeff Bezos, Yuri Milner, Paul Allen, Richard Branson and Elon Musk: all of these billionaires, instead of buying yachts, are investing in space.” As panel moderator Alan Boyle responded, "they’re building yachts too.” Space yachts maybe too, opined Space News in its coverage. Some of them are interested in the urgent and emergent problems of defense as well. There’s an analogy here to Henry J. Kaiser—taking time off from running a business empire, and creating the concept of the HMO, to figure out how to build Liberty Ships faster than Karl Dönitz could sink them. Some of today's magnates, however, seem troubled by how the government doesn’t seem so appreciative.

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The Chilcot Inquiry usefully recalls the bureaucratic failures of the fight against IEDs.

The Chilcot Inquiry, the official British government investigation of the Iraq War, convened in November 2009. Just yesterday, more than six years on, Sir John and his fellow commissioners—Sir Lawrence Freedman, Sir Roderic Lyne, Baroness Usha Prashar, and the late Sir Martin Gilbert—published their massive final report. Sir John's summary public statement is blunt: “Mr. Blair told the Inquiry that the difficulties encountered in Iraq after the invasion could not have been known in advance. We do not agree that hindsight is required.” Section 14 and its conclusions, on equipment deficiencies, provide considerably more detail. Early in those 241 pages, the members write

     We have found that the Ministry of Defence was slow in responding to the threat from Improvised Explosive Devices and that delays in providing adequate medium weight protected patrol vehicles should not have been tolerated. It was not clear which person or department within the Ministry of Defence was responsible for identifying and articulating such capability gaps. But it should have been.

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Concerns about the implications of Brexit to European security may be overblown.

At the beginning of last week, as everyone else in the commentariat was commenting, I resolved myself not to comment on Brexit. But after a flurry of articles about Britain turning inward, I want everyone to calm down. Just yesterday, US Secretary of State John Kerry said he thought that Brexit would actually strengthen NATO. As Jakub Grygiel of the Center for European Policy Analysis put it today, “Europeans now have clear incentives to put more efforts into NATO.” For both industrial and operational reasons, it’s the Alliance, not the Union, that guarantees security, at least west of Crimea.

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The next attack aircraft may take a total rethinking of ground support.

When a senior Air Force official offered me a correction some months ago, a Marine colonel friend of mine suggested that I “tell him to stop bothering you and to get back to trying to kill the A-10.” We may actually now be getting past the jokes. The air and ground crews of A-10Cs are doing such yeoman service against Da’esh that the retirement is clearly on hold. Now the USAF is talking about actually replacing that Cold Warrior the Thunderbolt II, and drafting the requirements for what might come next. That might not be an updated clone of the venerable jet. Last week, at his confirmation hearing before the Senate Armed Services Committee, General David Goldfein (the hopefully incoming chief of staff) offered some thoughts on how he’d like to improve on what he’s got:

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At the end of 2014, the CEO of naval shipbuilder Huntington Ingalls Industries, Mike Petters, delivered an address at the Atlantic Council entitled, “Playing the Long Game”. In it, Petters made the case for the chief executive’s leadership antidote to what he called “the institutionalization of the short-term”:

No. 1: You have to think that you're the longest person—you have the longest horizon—in the room; and that you're gonna have a view that is about creating value in your organization that is longer and farther out than anyone else. No. 2: You have to decide what are the things that you really believe in.”

These remarks came back to mind recently while reading Crash Course: The American Automobile Industry’s Road from Glory to Disaster, by Paul Ingrassia. Crash Course chronicles the now familiar story of how General Motors, Chrysler, and Ford, which in 1970 stood at the very pinnacle of that global industry, dissolved over the course of about one career’s duration into bankruptcy and restructuring at the outset of the Great Recession. Summarizing this story, Ingrassia writes,

The 1970s were the decade that undid Detroit. During the 1980s and 1990s, the Big Three would mount periodic, and sometimes spectacular, comebacks and undergo equally dramatic crises. But never again would Detroit rule the automobile industry unchallenged and unbowed.

What’s most striking about Crash Course is not the depth or special character of external shocks the Big Three suffered. No “black swans” figure in this tale. Indeed, all of what came to undermine the health of the U.S. auto industry—unsustainable labor agreements, convoluted regulation of fuel economy, and foreign competition—were known challenges with predictable effects.

Instead, what’s striking about Ingrassia’s account is the frequency with which the executive leadership of these companies responded to known existential challenges with short-term, expedient solutions that sowed catastrophic long-term effects. Summarizing the lessons learned by the U.S. auto industry’s 40-year decline, Ingrassia writes, “[T]he most fundamental is that problems denied and solutions delayed will result in a painful reckoning. And the longer the denial and delay, the more costly the reckoning.” Or, in Mike Petters’s words, never institutionalize the short-term at the expense of the long game.

It might be said that 2014 marked the year in which the aerospace and defense industry was at the top of its game. According to a recent report by PwC, “The aerospace and defense
industry reported lower revenues and sharply lower profit in 2015 compared with 2014, ending a run of five consecutive years of record revenue and operating profit.” Assuming we have crossed a cyclical peak, what are the existential challenges for which our industry’s executive leaders will be called upon to find a long-game approach?

Analogues to the sources of Detroit’s demise may be instructive:

·       The existential challenge of labor to auto companies was its aggregate of cost, which expanded in scope and escalated at rates that ruined the industry’s productivity and profitability. For today’s A&D industry, the labor challenge concerns the specter of a brain drain, which threatens to foreclose from our companies the scientific and engineering talent needed to advance 21st-century innovations. What is the long-game approach to attracting and retaining talent at great aerospace and defense companies?

·       In auto, the existential challenge of regulation concerned fuel efficiency. The imposition of Corporate Average Fuel Economy standards set perverse incentives for innovation and product development. In A&D, like so many other industries, the central regulatory challenge of the next 40 years is most likely to concern emissions of carbon dioxide. What is A&D’s response to global warming that will not be self-defeating over the long term?

·       Finally, new competitors entering the market with products at prices that appealed to the changing tastes and preferences of U.S. car-buyers proved an existential threat to the Big Three. Beginning now and extending over the next generation, entrants also will confront incumbent A&D companies, but the challenges they pose will tend to concern business model innovations rather than simply product performance and price. What are A&D executives’ long-game plans to change the sclerotic style of incumbents’ business practices?

The career trajectory of a young engineer arriving in Detroit in 1970 would have been marked by a series of dramatic crises and spectacular combacks, culminating, upon his retirement, in the complete undoing of the industry to which he’d committed his professional life. Now is the time for the leaders of our industry to think long, and hard, about the next forty years and consider the kind of reckoning their choices will sow for today’s young engineer upon his or her retirement at mid-century.

Steve Grundman is the M.A. and George Lund Fellow at the Brent Scowcroft Center on International Security. This essay first appeared in Aviation Week and Space Technology.

The future of Big Space depends on the defensibility of big satellites.

Last week, Rick Ambrose of Lockheed Martin Space Systems gave the 15th address in the Atlantic Council's Captains of Industry series, our forum for aerospace and defense executives to address the public interests their companies serve and the public policies that affect their markets. Ambrose's talk on “Thriving in the Evolving Space Sector” covered several big ideas, including prospects for colonizing Mars. The impulse to explore and settle is fetching, but in the short term, it’s information from Earth orbit that makes space matter. And how those flows of information are best defended will strongly affect the future structure of the space industry.

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If they could just control enough drones, perhaps F-35s could make war affordable again.

The Danish fighter competition is over, it would seem, as the parliament has officially approved a program for 27 F-35 Lightning IIs. As I noted last week, the purchase price remains indeterminate, so the Danish Defense Ministry may be seriously unprepared for the final bill, if it’s really taking seriously the source-selection team’s calculations. As I wrote earlier this week, it's hard to see how F-35As will cost to procure and fly than F-18Es. In Canada, the Trudeau Government seems sharply opposed to the F-35, strongly preferring the F-18E, and largely on cost. In the long run, though, it’s just possible that pursuit of the Joint Strike Fighter could be a low-cost option for air forces. Seriously—read on.

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