Industry Pushes Back on Calls for More Corporate R&D Spending

1/13/2012
By Dan Parsons
NATIONAL HARBOR, Md. — Defense officials should temper expectations that contractors will bear the brunt of the R&D costs associated with new weapon systems, industry executives said.
For everything from helicopters to more-efficient batteries, the Pentagon has begun to ask industry to pick up the research-and-development tab as the defense budget falls off in the coming years.
That theme reverberated through the Association of the United States Army’s symposium on aviation Oct 12-13, where military officials expressed frustration about the slow progress in achieving revolutionary rotary-wing technology.
At least four companies are independently developing replacement options for the Army’s armed scout helicopter. Those prototypes will be demonstrated at an Army-hosted demonstration this spring.
But James R. Moran, vice president of Boeing’s Army Systems National Security and Space Group, said industry might not be able to front development dollars for military programs forever. It’s bad business, he said.
“There are a lot of programs in the [Defense Department] now where they expect industry to do all the [research and development] … and deliver the initial product for testing all on industry’s dollar with no expectation that we will get a production contract,” Moran said Jan. 11. “I think some of those expectations are unrealistic.”
Moran added: “I think there are some, not all, people who believe industry, regardless of the cost, will stay in the business without any near-term incentives. ... No company — and I don’t care if you’re making cars or airplanes or cell phones — is in business unless it can produce returns for its shareholders.
“If we can’t make, from a financial perspective, a profit on our investment … then that industry will not be pursued,” Moran said. “That’s the world of business. The [Defense Department] is not exempt from the business model.”
Unlike smaller firms, Boeing has the “size, breadth and capability” to invest heavily in complex high-risk technologies, said David Koopersmith, the company’s vice president for attack helicopter programs.
The company has developed the AH-6 Little Bird, which it plans to offer the Army. It has also developed the A-160 rotary-wing unmanned aerial vehicle.
Sikorsky, which builds the UH-60 Blackhawk utility helicopter, has joined the fray with its S-97 Raider aircraft. The coaxial, dual-rotor helicopter has already flown at 250 knots, nearly twice the speed of the fastest conventional helicopter.
Sikorsky announced Jan. 12 it has 35 subcontractors lined up to build components for the experimental Raider, even if there is no guarantee the Army wil buy it. 
“I’m very concerned about this business model,” Moran said at the AUSA conference. “I personally don’t think it’s a sustainable business model.”
Richard Linhart, vice president of military business for Bell Helicopter, said that  “recapitalization has got to be number one. Right behind it, we have to invest in new technologies if things like [joint multi-role] are going to be a reality.”
Defense budget cuts will have an unavoidable impact on the nation’s industrial base, unless investment is prudent and changes are made to the acquisition process, said Philip Dunford, vice president and general manager of Boeing military aircraft.
“We’re at a tipping point,” he said.

Topics: Aviation, Rotary Wing

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