By Cassell Bryan-Low
LONDON, July 24 (Reuters) - As U.S. defence companies descended on Britain's Farnborough Airshow this week hoping to tap Europe's military spending boom, they encountered increased concern among customers about reliance on American suppliers.
European governments are demanding greater control over defence equipment, more local production and a bigger share of industrial benefits. In response, U.S. arms makers are expanding manufacturing in Europe, forming joint ventures and offering
more tailored products.
“We hear loud and clear: Europeans want more sovereignty, and they want more localised capability,” said Daniel Tenney, Lockheed Martin's senior vice president of global business development and strategy.
LOCALIZATION PLEDGES
With NATO's European members and Canada sharply increasing defence spending, U.S. companies argue it is faster and cheaper to buy proven American systems than develop new ones, while pledging to localise production and technology.
At Farnborough, Lockheed announced a lower-cost Patriot interceptor to be developed with European and U.S. partners. It comes shortly after an announcement about plans to produce an Army Tactical Missile System (ATACMS) with Germany's Rheinmetall. RTX's Raytheon also recently announced it had partnered with European firms to increase Stinger missile production, including assembly in the Netherlands.
Europeans benefit from systems that are widely used, such as the Patriot, where the many countries using it pool funding to support features such as a threat database, said Thomas Laliberty, president of Raytheon's land and air defence systems. “They get a lot of benefit from that collective,” he said.
Newer defence-tech firms are also making a push. Anduril, which had a major presence at Farnborough for the first time, has expanded its UK workforce and agreed to establish local production of its Barracuda-500M cruise missile in Poland.
“Each government has a different localisation need,” said Anduril UK General Manager Richard Drake.
EUROPE STRIVES FOR INDEPENDENCE
But some Europeans worry that the U.S. could be less willing or able to provide weapons, parts or other support in the future, including if American defence companies need to prioritise U.S. military needs in other regions.
Europeans no longer want finished products, they want access to enough of the underlying technology to build, modify and maintain equipment themselves, industry insiders and specialists say. They want “a significant IP transfer,” said Fabio Dal Pan, a Milan-based senior partner at Boston Consulting Group, a management consulting firm.
While Europe remains heavily reliant on the U.S. defence industry, the worry for U.S. companies is if the shift towards greater autonomy becomes a long-term trend. That’s “of huge concern,” said Tom Waldwyn, at the International Institute for Strategic Studies, a UK-based think tank.
There is some equipment that Europe can’t quickly substitute, such as F-35 fighter jets and Patriot air-defence missile systems.
But in other areas “there are European capabilities that may well be good enough,” and where there is a massive advantage in terms of sovereignty — they may in some cases even be cheaper, said Sash Tusa, an aerospace and defence analyst at UK-based research firm Agency Partners. That includes medium-range air defence missile systems, he added.
Europe is making progress in weaning itself off U.S. equipment in some areas, such as early warning aircraft, analysts say. NATO recently announced a roughly $4.5 billion plan to buy up to 10 Saab GlobalEye surveillance planes to replace aging AWACS early warning aircraft, backing a Swedish system over a rival solution from U.S. planemaker Boeing.
Meanwhile, Europeans are looking to develop some newer technologies themselves. At the airshow, UK-based BAE Systems revealed a new unmanned fighter jet that the British government said it is adopting as its “operational concept demonstrator.” That comes despite a number of U.S. companies already developing similar aircraft, several of which were on display at Farnborough.
Britain’s program will have multiple vendors associated with it but it will be “sovereign,” Air Vice-Marshal Jim Beck, the UK Royal Air Force’s director of capability and programmes, told Reuters last week. “We need the right to do what we want with our kit at the point of our choosing.”
(Reporting by Cassell Bryan-Low; Editing by Joe Brock and Sharon Singleton)
