Exchange Rate Behind UAE Rafale Balk: Dassault

PARIS - The price resistance from the United Arab Emirates on the Rafale fighter jet stems from an unfavorable euro-dollar exchange rate, but talks on the French aircraft continue, Dassault Aviation executive chairman Charles Edelstenne said July 28.

The UAE's discussion with Lockheed Martin about a potential purchase of additional F-16 fighters was "not a negative sign," Edelstenne told a press conference on the company's results for the first half of the year.

"Talks are going on," he said.

But with the euro at $1.40, the Rafale's sale price was boosted by the currency exchange rate, Edelstenne said. Dassault could not cut prices by 40 percent to offset the weaker dollar.

"I make Mirages, not miracles," he said.

The euro was trading at $1.43 in early afternoon, with the dollar under severe pressure from the U.S. government impasse on raising the debt-ceiling limit ahead of the Aug. 2 deadline.

Edelstenne refused to disclose the unit price of a Rafale, but he said an export purchase generally involves a political decision to pay a "price premium" that granted "independence of action." As the Rafale is built in France, reflecting a strategic decision on sovereignty, its costs are in euros, making it more expensive than an American fighter aircraft sold in dollars.

On the French government's July 20 decision to start negotiations with Dassault on a supply of the Heron TP medium-altitude long-endurance (MALE) UAV, Edelstenne said this meant sustaining a French design capability in military aircraft instead of paying for the "Messerschmitt design office" in EADS.

Edelstenne said in picking OHB over EADS, Germany made similar national selections in its space procurement.

Asked what the significance was in selecting Dassault as supplier of an interim MALE UAV, Edelstenne said the choice showed a determination to maintain a French national capability in building combat aircraft, as the next manned fighter jet would not enter service for another 30 to 40 years.

The negotiations would determine what sensors and communications payloads would go on the Israeli Aerospace Industries' UAV air vehicle, which is intended to provide an interim solution until the planned Anglo-French new generation MALE UAV enters service, expected in 2020.

IAI has agreed to disclose technical information on the Heron TP, which will be adapted to French requirements, including the ability to carry weapons, Edelstenne said.

The interim MALE UAV could have a service life of around 10 years and could overlap with the new Anglo-French air system, a company executive said.

On an asset swap under negotiation between Safran and Thales, Edelstenne said the airplane engine and equipment maker was holding up a deal by saying "no" to each new proposal from the electronics company. That forced Thales into a corner, he said.

"The valuation levels are a bit extraordinary," Edelstenne said.

Dassault signed an agreement with the government on an asset swap when it took its 26 percent stake in Thales, covering inertial navigation, onboard electricity generation and optronics, Edelstenne said.

Safran's sales in optronics are worth around 600 million euros, and if the business were put into Thales, that would make the electronics company second or third in the world market for electro-optics.

At the Paris Air Show in June, French President Nicolas Sarkozy said the government would impose a settlement if industry failed to reach a voluntary agreement.

Edelstenne said he was "very satisfied" with the Thales first-half results, which were released on July 27. The results displayed early effects of the Probasis restructuring plan and improved management of large programs and contract negotiations, he said.

Dassault reported a 35 percent fall in net profit to 129 million euros from 197 million euros a year ago, as sales dropped 34 percent to 1.32 billion euros from 1.99 billion euros.

The sales and profit slide came from lower deliveries of the Falcon business jet, with a delay in shipment of the Falcon 7X into the second half.

Orders declined to 95 million euros from 99 million euros.

On a production rate of one unit per month, Dassault has delivered six Rafale jets so far this year out of 180 total orders to date.

Privately, company executives expect the French government to stretch out future Rafale orders because of expected defense budget cuts, especially if export contracts are won.

Besides the UAE, Dassault hopes to sell the Rafale to India, Brazil and Switzerland. India is holding to its timetable to buy 126 medium-range combat aircraft, and the Swiss government has shown renewed interest in replacing its F-5 fighters.

Pentagon Seeks To Reduce Subcontractor Costs for F-35

The Pentagon is looking to lower subcontractor costs as it attempts to bring down the price tag of the Lockheed Martin F-35 Lightning II, the Pentagon's director of defense pricing said.

THE PENTAGON'S DIRECTOR of defense pricing, Shay Assad, said the agency is trying to lower subcontractor costs for the F-35 Lightning II program. (LOCKHEED MARTIN)

"What we've learned is that a lot of the money that we're spending is at the subcontract level," Shay Assad told reporters July breakfast with reporters in Washington.

"We're following money," Assad said. "We want to make sure we have a complete understanding of what we think a fair and reasonable subcontract price should be, and we do expect Lockheed Martin to develop their own position."

The U.S. Defense Department expects to have a better picture of the Joint Strike Fighter (JSF) program costs in the fall. Prior estimates have pegged the cost of the overall JSF program - which includes more than 2,400 U.S. jets and an expected 700-plus international order - at more than $380 billion.

This comes as the Pentagon prepares to enter negotiations for the fifth batch of low-rate, initial production (LRIP) jets.

Assad said DoD officials are currently evaluating Lockheed Martin and subcontractor proposals for that batch of aircraft.

"We expect that sometime in the fall we'll commence negotiations, and if it goes according to plan, we should have a deal sometime by the end of the year," he said.

Asked if Lockheed's LRIP-5 price shows a downward trend, Assad said: "We're expecting a downward trend."

DoD is "getting a much clearer view each day" of F-35 cost projections, he said.

The Pentagon is also evaluating earned value management, which had been previously "disapproved" by the Defense Contract Management Agency, according to Assad.

"They have a path, and we're satisfied that if they stay on that path, they'll be OK," he said. "One of the problems is just the ability to accurately forecast their work."

"I think that by the end of this year, they'll be in pretty good shape in terms of having reliable projects and forecasts," Assad added.

Lockheed is getting better at determining common features across the three multiservice jets, which will be operated by the Air Force, Navy and Marine Corps, as well as allies.

The Air Force version is a conventional jet that takes off and lands on a runway, but the Navy version is build to operate off aircraft carriers and the Marine Corps version can launch off smaller ships or runways and land vertically.

"What we're finding is that we're getting much more precise about what is the commonality amongst these things and how should we build those common items, because that's where we'll save some money," Assad said.

The current LRIP-4 batch is the first in which all three versions of the JSF are being built at the same time.

"I would say by the end of this year, early next year, we'll have some very good insight into what the production differences are in the aircraft in terms of what they should cost," Assad said.

The Pentagon is also exploring the possibility of having Lockheed build all Air Force jets for a period, then switching to a different variant, and so on.

That review is expected to wrap up in 60 to 90 days, Assad said.

Iraq FM Hopeful Some U.S. Troops Stay Past 2011

BAGHDAD - Iraq's president has called a meeting to decide whether U.S. troops should stay beyond a year-end deadline, Foreign Minister Hoshyar Zebari said July 27, adding there could be consensus to keep a small number of trainers.

President Jalal Talabani had set last weekend as the deadline for the Iraqi government to give a unified yes or no answer to Washington about some troops remaining, but it expired without an answer from Baghdad.

Zebari told reporters that Talabani had now called another meeting for July 30 to discuss the issue.

Meanwhile, Prime Minister Nuri al-Maliki said in a telephone conversation with U.S. Vice President Joe Biden that the issue would be decided in parliament, his office said.

"The prime minister assured Mr. Biden that in the end it is up to the parliament to decide whether the country needs American forces to stay or not after the end of this year," a statement from Maliki's office said, adding it was Biden who had called Maliki.

Zebari said he believed that some U.S. troops were needed beyond 2011 to train Iraqi forces.

"Is there a need for trainers and experts? The answer is 'yes,'" Zebari said. "I think it is possible to reach a consensus on this," he added.

"The Iraqi government alone cannot reach a decision on this issue. It needs political and national consensus; it's an issue all political leaders should back."

"President Talabani has announced a decision to gather all political leaders this Saturday" to discuss the issue.

"In my assessment, it is possible to reach an acceptable agreement."

The discussions about some troops staying on comes as the nearly 47,000 U.S. troops now in Iraq are packing to pull out at the end of this year under the terms of 2008 pact.

Rebuffed by U.S. Navy, Lawmakers Order New LCS Study

Rep. Duncan Hunter, R-Calif., recently rebuffed by the U.S. Navy in asking the service to review its Littoral Combat Ship (LCS) program, has turned to the Government Accountability Office (GAO) to further examine the shipbuilding effort.

In a July 27 letter to the GAO, Hunter, joined by Rep. Rob Wittman, R-Va., cited his concerns about the program's historic cost overruns and schedule delays, and more recent corrosion and structural issues with the ships.

Hunter and Wittman asked the GAO to "review and as necessary update the August 2010 [GAO] report on the LCS program." Specifically, the lawmakers want GAO to examine:

■ what the Navy is doing to overcome technical design flaws in the first two ships;

■ what the Navy is doing to make sure follow-on ships are delivered with cost and time estimates;

■ what actions the Navy has taken to make certain that mission packages have the capabilities they were intended to have; and

■ provide performance and operational maintenance date on the propulsion systems for both LCS variants.

Hunter, in a July 1 letter to Navy Secretary Ray Mabus, had asked the service "to immediately conduct a formal review of the entire LCS program, provide an assessment of the technical design flaws of the current fleet and determine the best way forward to include the possibility of rebidding this contract so that the program can be put back on a fiscally responsible path to procurement."

Mabus, in a July 7 reply, said the Navy had "faced and overcome the program's past cost and schedule challenges," and addressed many of the issues presented in the GAO's 2010 report.

Noting that both ships have yet to complete all test and trial programs, Mabus wrote that the service now "is confident that we are on a path of success" with LCS.

In addition to Hunter, a group of seven senators, led by Sen. John McCain, R-Ariz., have questioned the Pentagon's handling of the LCS program. In a July 12 letter to Pentagon acquisition chief Ash Carter, the group questioned the Pentagon's certification procedures allowing the program to go forward, and asked for more information on corrosion problems affecting the ships.

Joe Kasper, a spokesman for Hunter, explained that the San Diego-area congressman's intent "is not to terminate the program."

Rather, Kasper said, "it's about efficiency of production, it's about efficiency of dollars. And if there's an opportunity to improve production and reduce costs in the process, then that's important and something worth considering."

1st Catapult Launch for F-35C Joint Strike Fighter

For the first time, an F-35C Joint Strike Fighter (JSF) was propelled into the air July 27 by a steam catapult, marking a significant milestone in the test program to qualify the aircraft for carrier operations.

AN F-35C SHOOTS down the track Wednesday during the first steam catapult launch of a Joint Strike Fighter. (Lockheed Martin)

The aircraft, dubbed CF-3, was launched at the U.S. Navy's aviation test facilities at Naval Air Station Lakehurst, N.J., Naval Air Systems Command (NAVAIR) said in a press release. It was flown by Navy test pilot Lt. Chris Tabert, the most junior test pilot yet to fly any variant of the F-35.

Using more junior aviators to test the aircraft is "a deliberate shaping of the test force," NAVAIR said, with the aim of balancing "experienced military and contractor test pilots with newly qualified test pilots with recent fleet experience."

The F-35C - the carrier variant of the JSF program - was launched by a TC-13 Mod 2 test steam catapult, similar to the catapults used by all the Navy's aircraft carriers.

Further tests lie ahead at Lakehurst, including launching the aircraft at varying catapult power levels, testing degraded catapult configurations, and jet blast deflector testing.

N.Korea Warns of New Nuclear Arms Race Ahead Of Talks

UNITED NATIONS - North Korea said July 27, ahead of landmark talks with the United States, that a U.S. missile defense shield will set off a new nuclear arms race.

The new diplomatic attack on the United States came as the U.S. government said it wanted to see signs in talks due to start on July 28 in New York that North Korea is "serious about moving forward."

RELATED TOPICS

• Americas
• Asia & Pacific Rim

But the North's U.N. envoy said the United States was aiming through its proposed missile defense shield to gain "absolute nuclear superiority and global hegemony over the other nuclear power rivals."

The ambassador, Sin Son Ho, said the shield showed the United States has no "moral justifications" to lecture other countries about proliferation.

"In this current changing world, one can easily understand that this dangerous move will eventually spark a new nuclear arms race," Sin said of the shield which the United States wants to build over Eastern Europe. Washington says the shield is aimed at preventing attacks by rogue states such as Iran.

"This shows that the world's largest nuclear weapon state has lost its legal or moral justifications to talk of proliferation issues before international society, on whatever ground," the envoy added.

North Korea and the United States are to hold two days of talks in New York from Thursday on issues including the North's nuclear arsenal.

Vice foreign minister Kim Kye-Gwan is leading the North's delegation at the New York talks. Kim arrived in the United States late Tuesday.

Kim and U.S. envoy for North Korea, Stephen Bosworth, are expected to discuss improving U.S.-North Korean ties and ways to relaunch six-nation talks on the North giving up its nuclear weapons.

Talks between North Korea and the United States, China, South Korea, Japan and Russia have been frozen since December 2008.

The North staged nuclear tests in 2006 and 2009 which sparked international concern and outrage.

U.S. Secretary of State Hillary Clinton announced the New York talks on July 24, two days after the nuclear envoys of South and North Korea held a surprise meeting on the sidelines of an Asian security conference in Bali, Indonesia.

In Washington, State Department spokesman Mark Toner said the Bali meeting had been "constructive" but that the communist state needs to do more.

"What we're looking for is in our mind a clear indication that North Korea is serious about moving forward," Toner told reporters.

The United States will be watching to see if North Korea will recommit to a 2005 agreement made at the six party talks "as well as take concrete and irreversible steps towards denuclearization," the spokesman said.

South Korea, a key observer in the new contacts between the North and the world superpower, has also demanded signs that its arch-rival is sincere about wanting good relations before it agrees to concrete action to help its beleaguered neighbor.

South Korea remains furious over a deadly attack last year on an island on the tense frontier between the two.

The North's disclosure in November that it had a uranium enrichment plant, which could give it another way to make atomic weapons, has become a new complicating factor.

The North's official news agency, in a commentary July 27, said a peace agreement with the United States formally ending the 1950-53 war could become a "first step" to peace on the Korean peninsula and "denuclearization".

The North and South fought a bitter war in 1950-53, with the United States fighting with the South. The conflict ended 58 years ago on July 27 with an armistice but no full peace treaty.

"It is impossible to wipe out the mutual distrust, nor is it possible to achieve a smooth solution of the issue of denuclearization, as long as there persists the hostile relationship" between North Korea and the United States, the news agency said.

DoD Strives To Curb Rework From F-35 Production

The F-35 Lightning II is proving to be as stealthy as promised; now the challenge is turning production from a somewhat handcrafted affair to a dependable industrial process, the deputy director of the Joint Strike Fighter (JSF) program said July 27.

"The challenge that we see ahead is not necessarily achieving [very low observable] capabilities," said Air Force Maj. Gen. C.D. Moore. "The challenge is produce-ability. To be able to produce beyond four a month, six a month, eight a month, you need to be able to get your processes down to where you're not doing artisan type of work."

Right now, jets need to be reworked depending upon whatever corrections need to be made due to design changes or errors. Instead, what needs to happen is that aircraft have to be built so that such reworks are not needed, Moore said.

"That's still ahead of us to make [sure] we can do that and produce a plane the first time, every time," he said.

In the meantime, test pilots at Edwards Air Force Base, Calif., continue to put the jet through maturity tests using the same syllabus as the first student pilots at the 33rd Fighter Wing, the first F-35 training unit. About 80 percent of those tests have been completed, Moore said. Remaining tests include two-ship sorties.

The data gathered will be used by the Air Force and Navy air systems commands to determine whether to certify the jets as airworthy and ready to start training.

Training will start at Eglin Air Force Base, Fla., after an operational utility evaluation in the fall, Moore said.

Planning has already started for a second training site for the F-35 which should be up and running by 2014. The Air Force has not yet set a location, Moore said.