Saturday, October 22, 2011

DTN News - GERMANY DEFENSE NEWS: Germany Said To Cancel Billions In Military Plane Orders

Defense News: DTN News - GERMANY DEFENSE NEWS: Germany Said To Cancel Billions In Military Plane Orders
NSI News Source Info) KOTTAKKAL, Kerala, India - October 22, 2011: EADS, the parent company of Airbus, is bracing for months of thorny negotiations with Germany as the country seeks to cancel billions of dollars’ worth of orders for military aircraft in an effort to cut its defense budget.

Thomas de Maizière, the German defense minister, is expected to present the program of radical cuts to the government’s budget committee on Oct. 26. But according to a confidential document that has been leaked to news organizations in recent days, the ministry hopes to sharply reduce its commitments to purchase a range of flying hardware, including A400M transporters, Eurofighter Typhoon fighter jets, as well as NH-90 transport and Tiger attack helicopters.

“This is another sad chapter in the saga of shrinking European budgets — with major industrial and political implications,” said Alexandra Ashbourne, an aerospace and defense industry consultant in London. “This is going to be very difficult for the industry to absorb, on the one hand, while on the other you will see the British, the Spanish and everyone else once again questioning Germany’s commitment to European defense.”

Less than two years after European governments agreed to a complex rescue program for the long-delayed four-engine turboprop A400M, Germany, the largest customer for the plane, now wants to buy 40 instead of 53 of the airlifters, said a government official, who confirmed the figures cited in the document but declined to be identified because the information was classified.

That would bring Germany’s commitment to the A400M below that of France, which has ordered 50. Germany had originally agreed to buy 60 A400Ms in 2003, but that order was reduced in 2009 as part of an arduously negotiated bailout in which seven NATO governments agreed to a hefty price increase to provide an additional €1.5 billion, or $2.1 billion, in financing to EADS, whose full name is European Aeronautic Defense & Space.

The cuts are part of an effort by Germany to reduce its defense budget by 20 percent. Berlin also wants to reduce its order for Typhoon fighters to 140 instead of 177, while it would like to take delivery of 80 instead of 122 NH-90 helicopters, and only 40 Tigers, half of an original order for 80.

Spokesmen for EADS and the German Defense Ministry declined to discuss the proposed cuts before Mr. de Maizière presented his proposals next week.

But Lt. Col. Holger Neumann, a Defense Ministry spokesman, conceded that there would be deep cuts and said that negotiations with EADS and its partners would be difficult.

“We have to find solutions on a consensus basis, especially concerning those projects under contract,” Colonel Neumann said. “It is not something that we can change unilaterally.”

The A400M is built by the military division of Airbus, while the Typhoon is made by a multinational consortium that includes EADS, BAE Systems of Britain and Finmeccanica of Italy. The NH-90 and the Tiger are products of EADS’s Eurocopter division.

The procurement cuts are part of a broader German effort to streamline its defense bureaucracy, dramatically reducing the size of its active-duty forces to around 185,000 from 220,000 and abolishing compulsory military service, which ended this year.

But analysts noted that canceling the orders could involve costly penalty payments for Berlin unless it managed to find alternative buyers for the equipment it no longer wants. If those buyers end up outside Europe, they added, that would eat into the company’s future export sales — considered vital to recouping research and development costs.

The A400M, for example, has yet to catch on outside Europe, with just one foreign customer, Malaysia, holding a contract for four planes.

South Africa canceled an order for eight planes in 2009, though both sides are still in discussions about possibly reviving that deal at a later date.

EADS has already written down more than €2.4 billion in cost overruns for the A400M. The first of the planes are expected to be delivered in 2014.

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*This article is being posted from Toronto, Canada By DTN News ~ Defense-Technology News



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