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September 10, 2016

US Air Force: Tech Transfer Issues Key to F-16 Production Line Move to India


The issue of technology transfer is likely to be the sticking point on whether the US government sanctions the potential move of Lockheed Martin’s F-16 production line to India, the US Air Force’s top civilian said Wednesday.   Fresh off an August trip to the Asia-Pacific region with stops at India, Singapore, Indonesia and the Philippines, US Air Force Secretary Deborah Lee James told reporters she discussed the possible sales of F-16s and Navy F/A-18s with Indian defense officials to help promote the US defense industry and further military cooperation between the two nations.
 Both Lockheed and Boeing, which produces the F/A-18, have proposed moving production to India in the hopes of attracting new sales of two fighter jets whose days are numbered.
  James said her discussions with Indian Secretary of Defense Production Ashok Kumar Gupta, Air Chief Marshal Arup Raha and Vice Chief of Air Staff Air Marshal Birender Singh Dhanoa did not go into the details of the industry proposals. However, the talks did touch on technology transfer issues, something that she said was seen as crucial for finalizing a possible deal.   “Obviously technology transfer is something that India is really, really hoping for [and] looking for,” she said. “So how much we're able to work through will probably be a key determinant.
  “And also I think a key determinant in what India ultimately ends up doing will relate to the Make in India part — how many jobs, what sorts of technologies might transfer,” she said, referring to Indian Prime Minister Narendra Modi’s effort to expand the country’s manufacturing sector.
Boeing and Lockheed have made buying fighter jets a condition of any possible deal to move production to India.
The country is also considering other fighter jets, such as Saab’s Gripen and the Eurofighter Typhoon. Notably, James said Indian officials did not express interest in the US Air Force’s newest fighter, the F-35, which has amassed 10 international customers so far.   She added that she did not expect India to come to a decision for at least a year.   Given the age of the aircraft and the focus on selling the F-35, it makes sense that Lockheed would be willing to move its production line in exchange for one last big sale, said Richard Aboulafia, an aerospace analyst with the Teal Group. However, the Indian government has been continuously indecisive, making a deal unlikely, he said.
  “On the US side, it could be a tech transfer issue” that keeps a deal from happening, “but I doubt it,” he said. “I think in the US, they’ve realized that this stuff is not exactly F-22 territory. The bigger issue is just Indian contracting uncertainty.”   Outsourcing elements of production, or even creating a separate line, is not a novel move, he said. In the past Lockheed has established such agreements with F-16 customers such as Turkey, South Korea and, most ambitiously, with Japan’s F-2 —  an F-16 derivative that split manufacturing between Lockheed and Mitsubishi.
Although current F-16 deliveries end in 2017, the company believes it will be able to net further foreign sales to sustain the production line until 2021, Randy Howard, Lockheed’s director of F-16 business development, said in an emailed response.   Asked whether moving the production line would become prohibitively expensive after that point, Howard said Lockheed was confident it would be able to set up a line in India when given the go-ahead, although the timeline would depend “on a number of factors.”   Negotiations with the US and Indian governments are ongoing, but if a deal is reached, Lockheed may also be willing to expand Indian companies’ participation in the program at a supplier level, he said.
  “Under our current proposal, Lockheed Martin is offering India the exclusive opportunity to produce, operate and export F-16 Block 70 aircraft,” he said. “We also foresee significant Indian participation in the F-16 supply chain based on Indian industry’s capacity to offer best-value F-16 supply chain options.”

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