U.S. Loses Out

So if you haven’t heard, the U.S. economy won’t be getting a $4.5 Billion boost from our friends in Brazil.  President Dilma Rousseff of Brazil announced recently that her country would be purchasing 36 Dassault Gripen fighters from Sweden instead of Boeing’s F/A-18 Hornet from the U.S.  But can you blame her?  I mean after all, we did admit to spying on her government.  Whether or not the Brazilians were making a political statement with this decision, the fact of the matter remains they didn’t choose “Made in the U.S.A.”

The announcement came after 10 years of evaluation as part of a program labeled “FX-2” wherein the Gripen competed against the Hornet and the French-made Dassault Rafale (pronounced “Rah-Fáll”).  Of the three aircraft, the Saab Gripen is not only the least expensive, but it is also the only one unproven in combat.  So why now, why the Gripen, and why does this transaction matter?  I’ll give you three reasons for each of these questions.

Gripen Comp

Financially – Brazil is right where the rest of the world is: navigating a minefield of domestic financial issues.  Brazilian citizens were outraged that their country was dropping this kind of cash at this time on fighter jets (sound familiar U.S.?)  From a financial perspective, the Rafale never stood a chance, as it was clearly the most expensive – although some would argue the most technically modern and capable of the three options.  Oh, and did I mention the Gripen is single-engine?  That fact alone reduces man-hours for labor and cuts maintenance procurement and footprint costs in half.

This acquisition decision should send a huge signal to aircraft manufacturers around the globe: Unless you’re marketing to a country flush with cash, now is not the time to focus on the “bells and whistles”. Countries around the world are reassessing their defense requirements based on fiscal restrictions.  Most of these countries don’t need the super high tech sensors and processors stuffed into the Rafale and the Hornet, let alone those we find on aircraft like the F-35. Realistic assessments of defense needs will likely drive more countries with small air forces to follow in Brazil’s footsteps.

Politically – It is very suspect that this decision comes at this time; just after a government spying scandal involving the U.S. was brought to light.  Of course, the Brazilians are helping the U.S. Government save face by insisting the decision in favor of the Gripen was based on capabilities and cost efficiencies instead of political backlash.  This should also be a clear sign that other countries don’t need U.S. products.  The market is full of competition, and if a government doesn’t think it’s getting fair, respectful treatment, it will take its money elsewhere.

Technologically – The Gripen was a strong contender with its PS-05/A AESA radar (the basis for the Eurofighter’s CAPTOR radar), full Electronic Warefare suite, and sensor fusion (in layman’s terms: the jet “fuses” data from the various onboard sensors to provide the pilot with one consolidated display.)  The Gripen also supports the Striker Helmet Mounted Display System (see video below).

While some consider the Gripen’s sensor suite inferior to those of the Hornet and the Rafale, it is undeniable that Sabb is offering a lot of bang for the buck.  This should also be a sign to aircraft manufacturers that defense requirements vary greatly by country.  Products should be scaled down (or up) to meet each country’s needs.  There is no “one size fits all” solution when it comes to fighter aviation.

So where am I going with all of this?  U.S. defense contractors must make an honest assessment of worldwide demand in relation to their current offerings.  Just like manufacturers in other sectors, defense manufacturers must have a solid understanding of their potential clients’ requirements before throwing money at a problem.  Now that a reduced domestic military operating budget is the norm, U.S. companies will need to focus on foreign military sales to bolster their bottom line – and they must know what those foreign militaries need.

The Brazilian decision is a red flag to the U.S., but they aren’t the first to balk at a contract with U.S. aircraft manufacturers.  The Indian government recently chose Russian-made over American when it turned its back on the F/A-18 and F-16.  The JSF has seen order cancellations from Canada to Denmark.  This is the global free market at its finest – those who adapt survive.  This type of competition should drive American manufacturers to be the best they’ve ever been in order to maintain their position in the market.

Maybe it’s time to scrap the Hornet and design a new, more efficient (both technologically and financially) aircraft without the bells and whistles of the F-35.  Maybe it will be a little less about price gouging, and more about delivering for manufacturers around the globe.

Anyway you look at it, when your prospective customer writes your competition a check for $4.5 billion, you should ask yourself: “why didn’t that money come to me.”

Tells us what you think.  Which of the three aircraft would you have picked if you were Brazil?  Where do you see U.S. military aircraft sales going from here?