New Patterns of Collaboration and Rivalry in the US and European Defense and Aerospace Industries

Abstract

This report continues our efforts to provide useful insights and a partial framework for understanding ongoing developments in the international defense marketplace. Among other things, defense industrial affairs are becoming increasingly global and increasingly complex. In this discussion, we focus more on defense firms considering the organization of Boeing 787 development and production, the KC-45 aerial tanker competition, and European defense firms direct investment in the US defense market. In the 787 case, we observe that even experienced companies such as Boeing can run afoul of the complexities of coordinating a multiform venture. The KC-45, at least so far, seems to illustrate a new weakness of defense establishments relative to their suppliers. It is reasonable to suppose the two rival bidders (NG-EADS and Boeing) will continue to have veto powers over source selection absent some fresh thinking. European defense firms (BAE, EADS and Finmeccanica) entry into the US defense market through various direct investment strategies results from an increasingly globalized defense market. More importantly, perhaps, it demonstrates their ability to work around obstacles posed by US legislative and regulatory barriers. One major theme is that increased complexity of agile suppliers methods and relationships poses significant problems for their bureaucratic customers.