i 

 

JSF INTERNATIONAL 

INDUSTRIAL 

PARTICIPATION:

A STUDY OF COUNTRY 

APPROACHES AND FINANCIAL 

IMPACTS ON FOREIGN 

SUPPLIERS

JUNE 2003 
ii

This report and all appendices can be viewed online and downloaded at: 

http://www.acq.osd.mil/ip

This report was produced by the Office of the Deputy Under Secretary of Defense 

(Industrial Policy) from March - June 2003. Michael Caccuitto and Dawn Vehmeier, 

Industrial Base Transformation Directorate in the Office of the Deputy Under Secretary, 

led this effort. Rosemary Carpenter, Victor Ciardello, and Cara Negrette of the 

Industrial Policy staff also had major roles in the production of this report. Support was 

provided under contract by First Equity Development, Inc. Among others, special 

thanks are due to Joshua Krotec, Matthew Mejía, and David Cohen of First Equity for 

their important contributions. 

The team would especially like to acknowledge the contributions of the government 

representatives, companies, and Offices of Defense Cooperation in the United 

Kingdom, Italy, Netherlands, Canada, and Norway who hosted our site visits, provided 

us with data on a compressed timeframe, and gave us logistical support. We would 

also like thank our colleagues in the Office of the Director for International Cooperation, 

the JSF Joint Program Office, Lockheed Martin, and Pratt & Whitney for their advice 

and counsel. The draft of this report was formally reviewed by Lockheed Martin, Pratt & 

Whitney, the JSF Joint Program Office, and the Office of the Director of Defense 

Systems. Most comments were incorporated. 

Companies listed or mentioned in this report are representative; the list is not 

exhaustive. Inclusion or exclusion in the report does not imply future business 

opportunities with or endorsement by DoD. Inquiries regarding the report should be 

directed to Michael Caccuitto at (703) 607-4065 or Dawn Vehmeier at (703) 602-4322. 
iii

INTERNATIONAL INDUSTRIAL PARTICIPATION: 

A STUDY OF COUNTRY APPROACHES AND 

FINANCIAL IMPACTS ON FOREIGN SUPPLIERS 

OFFICE OF THE DEPUTY UNDER SECRETARY OF DEFENSE

(INDUSTRIAL POLICY) 

JUNE 2003 
iv

 

STUDY OBJECTIVES/METHODOLOGY

Provide a preliminary assessment of partner country 

strategies and the financial impact on their defense 

industrial base of the Joint Strike Fighter (JSF) 

program. 

Use comprehensive case studies of partner country 

governments and major industrial suppliers to 

characterize financial effects of JSF for 

representative companies in order to assess the 

likely return on investment. 

• UK, Canada, Italy, and Netherlands were 

selected for in-depth assessment based on 

their level of partnership and/or the maturity of 

their industrial linkages. 

• Norway, Denmark, Australia, and Turkey were 

examined on a more prospective basis to 

illuminate their approaches and earnings 

potential from participation in the program. 

Document “lessons learned” for JSF and other 

programs to capitalize and improve upon the 

success of JSF’s revolutionary acquisition strategy. 
v

T ABLE OF C ONTENTS

E XECUTIVE S UMMARY ............................................................... 1

JSF P ROGRAM O VERVIEW .......................................................... 9

A NEW PARADIGM.....................................................................................................................................10

IMPORTANCE TO DOMESTIC AND GLOBAL INDUSTRIAL BASE........................................................................13

U NITED K INGDOM .................................................................. 15

KEY FEATURES OF GOVERNMENT APPROACH.............................................................................................16

CONCERNS ...............................................................................................................................................20

FINANCIAL IMPACT.....................................................................................................................................22

I TALY ................................................................................. 25

KEY FEATURES OF GOVERNMENT APPROACH.............................................................................................26

CONCERNS ...............................................................................................................................................30

FINANCIAL IMPACT.....................................................................................................................................32

T HE N ETHERLANDS ................................................................ 35

KEY FEATURES OF GOVERNMENT APPROACH.............................................................................................36

CONCERNS ...............................................................................................................................................39

FINANCIAL IMPACT.....................................................................................................................................40

C ANADA .............................................................................. 43

KEY FEATURES OF GOVERNMENT APPROACH.............................................................................................44

CONCERNS ...............................................................................................................................................48

FINANCIAL IMPACT.....................................................................................................................................50

T HE W AY A HEAD ................................................................... 53

NORWAY...................................................................................................................................................55

DENMARK .................................................................................................................................................61

AUSTRALIA ...............................................................................................................................................65

TURKEY....................................................................................................................................................69

C ONCLUSIONS ...................................................................... 73

S OURCES ............................................................................ 77
vi

A PPENDICES

APPENDIX A – FINANCIAL ANALYSIS METHODOLOGY & ASSUMPTIONS

APPENDIX B – UNITED KINGDOM: COMPANY CASE STUDIES & COMPENDIUM

 BAE 

 GOODRICH

 ROLLS ROYCE

 SMITHS

 ULTRA

 GPA COMPANY COMPENDIUM

APPENDIX C – ITALY: COMPANY CASE STUDIES & COMPENDIUM

 ASE 

 FIATAVIO

 FINMECCANICA (INCLUDES ALENIA AERONAUTICA, GALILEO AVIONICA, AND MARCONI 

SELENIA) 

 GPA COMPANY COMPENDIUM 

APPENDIX D – THE NETHERLANDS: COMPANY CASE STUDIES & COMPENDIUM

 PHILIPS

 SP AEROSPACE

 STORK AEROSPACE (INCLUDES STORK FOKKER AND FOKKER ELMO) 

 THALES

 URENCO

 GPA COMPANY COMPENDIUM

APPENDIX E – CANADA: COMPANY CASE STUDIES & COMPENDIUM

 CASEBANK

 GASTOPS

 HEROUX-DEVTEK

 MAGELLAN

 PRATT & WHITNEY

 GPA COMPANY COMPENDIUM

APPENDIX F – NORWAY: COMPANY CASE STUDIES & COMPENDIUM

 KONGSBERG DEFENCE & AEROSPACE

 VOLVO AERO NORGE

 GPA COMPANY COMPENDIUM

APPENDIX G – DENMARK: GPA COMPANY COMPENDIUM

APPENDIX H – AUSTRALIA: GPA COMPANY COMPENDIUM

APPENDIX I – TURKEY: GPA COMPANY COMPENDIUM
1 

EXECUTIVE S UMMARY
EXECUTIVE S UMMARY

2

The Joint Strike Fighter (JSF) program was conceived as an international acquisition 

program in order to attract financial investment and technological innovation from 

partner countries, as well as to partner early with governments whose military Services 

were likely users of this state-of-the-art coalition forces platform. 

This study was produced to provide an initial assessment of the international acquisition 

strategy of the program. While it has only been about a year and a half since the 

October 2001 award of the System Design and Development (SDD) contract to the 

Lockheed Martin/Northrop Grumman/BAE Systems contracting team, for number of 

reasons we chose to do an initial assessment now. 

First, we believe that enough time has elapsed to do a “first look” at the strategies 

partner countries have adopted in the face of the industrial and economic opportunities 

which this program’s acquisition strategy presents. Second, we feel that our findings 

could lead to refinements in the program acquisition strategy, approaches taken by 

individual partner countries, or companies – or all three. Third, we hope that this study 

may help prospective JSF partner countries and companies forge more robust 

accession strategies for this program and its opportunities for coalition warfare and 

financial return. Finally, many of the largest programs moving toward production in this 

Administration provide for international industrial participation to help our war fighters 

get the best of what the global defense industrial base has to offer. As such, some of 

the early lessons learned in JSF may help programs such as Missile Defense, Future 

Combat System, Littoral Combat Ship, the Multi-Mission Maritime Aircraft, and 

Deepwater optimize their own international acquisition strategies. 

This report is based on comprehensive case studies of partner country governments 

and major industrial suppliers. We used standardized engagement questionnaires to 

conduct inquiries and guide the collection of data to support uniform development of 

findings and conclusions. We selected the UK, Italy, Netherlands, and Canada for indepth assessment based on their level of partnership or the maturity of their industrial 

linkages. We examined Australia, Denmark, Norway, and Turkey in a more abbreviated 

fashion to characterize their approaches and plans for the road ahead. 

 

The primary objectives of this study are to: 1) assess the various approaches of partner 

countries to the JSF program, 2) characterize the financial impact of the JSF 

development and baseline procurement programs on selected international suppliers, 

and 3) estimate a country-level financial impact and return on investment for the four 

most mature partner countries. 

FINANCIAL SUMMARY

Conceived in the late 1990s, the international aspect of the JSF’s acquisition strategy 

has had important successes. Eight partner countries collectively have invested about 

$4.5 billion in the program to date, 18% of total SDD funding. The United Kingdom has 

made a commitment to purchase the aircraft while many partner countries are well 

advanced in their deliberative process. The program’s engine has been much 
EXECUTIVE S UMMARY

3

enhanced by the joint research and development work done on the Short Take-Off and 

Vertical Landing (STOVL) variant by Rolls Royce. JSF has also benefited from 

transformational new suppliers with innovative technologies such as Ultra Electronics 

and their High Pressure Pure Air Generator (HiPPAG) pneumatic weapon ejection 

technology that eliminates the need to replace and recharge gas bottles, provides direct 

support to air-to-air missiles, and decreases aircraft turnaround time. Contract award 

examples testify to the breadth of industrial base participation: Rolls Royce, a 

venerable blue chip of the global defense industrial base; and a Canadian company 

which grew from 12 to 15 employees to produce innovative semiconductor chips for 

JSF.

With the approval of the SDD contract in October 2001, the opportunities for the 

companies of the partner countries to participate in this program should only increase 

with many SDD contracts yet to be awarded – JSF timeline below. 

It is important to remember that we are only 18 months into a program that will span 

well into the third decade of this century. For many of the companies in partner 

countries, the most lucrative bidding opportunities may be closer to the aircraft’s inservice date, when flight training, maintenance, and logistics systems requirements will 

better leverage, for example, software development expertise. Even farther in the 

future, as partner countries and other nations acquire JSF, follow-on support activities 

and the prospect of revenues from future export sales should exert a compounding 

effect on current earnings estimates. 

JSF TIMELINE

Source: ODUSD (Industrial Policy) and First Equity 

UK: Level I,

$2.056B, 17 Jan 01

Italy: Level II,

$1.028B, 24 Jun 02

Netherlands: Level II, 

$800M, 10 Jun 02

Turkey: Level II, 

$175M, 11 Jul 02

Canada: Level III, 

$100M, 7 Feb 02

Australia: Level III,

$150M, 31 Oct 02

Denmark: Level III (with Norway),

$125M, 28 May 02

Norway: Level III (with Denmark),

$125M, 20 Jun 02

2001 2002 2003

International 

Partnerships

Program Schedule 

& Major Milestones

1995 2000 2005 2010 2015

1996 – 2001: CDP 2001 – 2012: SDD (incl. 465 LRIP A/C) 2012 – 2030: FRIP (2,128 A/C)

15 Nov 96: Milestone I, 

Acquisition Decision 

Memorandum Signed

26 Oct 01: 

SDD Award

Jun / Jul 11: 

Multi-year 

decision

Apr 2010: IOC USMC

Apr 2011: IOC USAF

Apr 2012: IOC USN 

Mar 03: PDR

Apr 04: CDR I

Sep 04: CDR II

Jun 05: CDR III
EXECUTIVE S UMMARY

4

Focusing solely on revenues to be derived from SDD, LRIP, and FRP contracts, and 

assuming no further production beyond the current baseline US/UK procurement 

schedule of 2,593 aircraft, estimated potential JSF-related revenues are significant. 

They range from about $4 billion to $40 billion for the United Kingdom, Italy, the 

Netherlands, and Canada. Based on margin assumptions, program earnings for these 

four countries range from over $500 million to several billion dollars through 2026. 

We estimate that the annually-compounded return from the partners’ SDD investments 

range from 25% to over 100%. In other words, JSF partner countries will potentially 

earn between approximately $5 and $40 of revenue in return for every $1.00 invested 

into the program, as shown below. While Canada’s dollar-for-dollar return is nearly 

twice that of the UK, due to their relatively small partnership investment, the UK’s 

annually-compounded rate of return is much higher due to the earlier timing of industrial 

revenues.123

 

1

 Canada received a $5 million discount from its $100 million commitment due to early payment of 

participation investment 2

 Disproportionately high relative to UK due to dramatically lower participation investment 3

 Canada’s annually compounded rate of return is low relative to the UK because of compounding effects 

from early revenues in the UK program 

SUMMARY OF COUNTRY FINANCIAL IMPACT

2002-2011 2012-2026 2002-2011 2012-2026

United Kingdom $11,749.6 $31,706.9 $956.1 $2,723.8 8.5%

Italy 942.5 3,953.9 100.6 438.0 11.0%

The Netherlands 1,275.0 4,466.7 133.8 464.5 10.4%

Canada 1,093.8 2,817.0 110.2 384.0 12.6%

Summary (US$M) 

Revenues

Earnings Before 

Interest & Taxes EBIT Margin 

Assumption

Source: ODUSD(Industrial Policy) and First Equity 

Methodology discussion in Appendix A 

SUMMARY OF PARTNER COUNTRY RETURN POTENTIAL

SDD - FRP 

Revenues 

2002-2026

United Kingdom $43,456.5 $2,056.0 2113.6% 109.2%

Italy 4,896.4 1,028.0 476.3% 23.8%

The Netherlands 5,741.7 800.0 717.7% 38.1%

Canada 3,910.8 95.0 1 4116.6% 2 66.7% 3

Summary (US$M)

Annually 

Compounded 

Rate of Return 

2002-2026 2002-2026

Partnership 

Investment 

Nominal 

Return 

2002-2026

Source: ODUSD(Industrial Policy) and First Equity 

Methodology discussion in Appendix A 
EXECUTIVE S UMMARY

5

COUNTRY STRATEGIES AND CONCERNS

Our assessment of the financial earnings impact on partner country companies and on 

the overall investment return potential for partner countries has shown a notable 

correlation – between multiple contracts/high financial return potential and early, active, 

and far-reaching government involvement in structuring an in-country industrial strategy 

for the program. While the U.K. may have been expected to generate high returns 

based on its involvement in the program’s R&D phase, Canada’s approach to the 

program certainly helped it assure the 60-70% annually-compounded rate of return 

currently anticipated from the program. 

Canada created an interagency group to administer the JSF program that has important 

features that other countries’ similar organizations do not, such as the proactive 

identification of JSF requirements and bidding opportunities, the fact that they worked to 

match Canadian industrial capabilities with these requirements, and the team’s outreach 

initiatives to other international partner countries. Canadian government and industry 

expended significant resources to compete within the best value sourcing model and 

relied heavily upon the best value concept when promoting JSF participation to the 

Canadian government. As such, Canada does not want to see the credibility of the best 

value model damaged due to the inability of certain partner countries to effectively 

compete in this environment. 

Canada also made available funds from which companies interested in participating in 

the JSF program can borrow a portion of their development costs. Canada is the only 

country that has complete control of these industrial funds. The pool of $75 million set 

aside for loans is not only larger than any of the other partner countries, but its 

distribution is solely at Canada’s discretion. Italy, The Netherlands, Norway, Denmark, 

and Turkey have bilaterally controlled funding available totaling approximately $100-150 

million. 

Another feature that made a difference in the amount of support the program had from 

the government and industry was the extent to which partner countries were committed 

to purchasing JSF for their own forces. Countries committed to purchasing the aircraft 

for themselves have greater incentive in helping to market the aircraft elsewhere for 

reasons of investment recoupment via price reduction, return levies from non-partner 

sales, and larger incremental revenues for their participating companies. In addition, in 

the cases where a mix of JSF and Eurofighter aircraft are envisioned, countries with 

clear plans such as Italy were better able to “referee” industrial interests attached to the 

two platforms. Finally, in these countries, the government, the military services, and the 

industry were able to most effectively lobby their parliamentary bodies on behalf of the 

program. That said, the program is still bedeviled by the spoiler strategies of industrial 

interests that would be better served by purchases of the Eurofighter – which has made 

for something less than a level playing field for the JSF program. 
EXECUTIVE S UMMARY

6

An interesting paradox worth noting is the fact that the UK and Canada and their 

industries have, to date, been the most successful JSF partners despite the fact that 

they neither procured Lockheed’s F-16, nor leveraged any industrial connections from 

F-16 procurement. This leads one to question the industrial effectiveness of 

designated, short-term work arrangements which did not lead to commensurate 

industrial success in F-16 countries. 

However, by all partner country accounts, the single most important factor to de-level 

the playing field has been the lateness and ineffectiveness of the Global Project 

Authorization (GPA). This had the greatest impact on those suppliers that did not have 

well-established relationships pre-existing with US primes and first-tier suppliers. Even 

Canada’s statutory advantage of exemption from some US International Traffic in Arms 

SUMMARY COUNTRY STRATEGIES AND CONCERNS

United Kingdom

Italy

The Netherlands

Canada

Norway

Denmark

Australia

Turkey

Countries

Major Key to Government 

Approach to JSF Program

Main Concerns with 

JSF Program

Primary Motive behind 

SDD Participation

Early Commitment to JSF Program

Worked with Lockheed Martin to 

develop industry support

"Public - Private Partnership"

MoD liason between industry and 

Lockheed Martin

Government liason between Austalian 

industry and progam IPTs

Teaming with other partner countries 

to increase competitiveness

Liaison between Danish industry and 

Lockheed Martin and sub-contractors

Pro-active "JSF Canada" organization

Delayed information 

disclosure 

US contracting practices 

unfamiliar, Lengthy TAA 

approvals

US sub-tiers unwilling to 

source work to global 

suppliers, Lengthy TAA 

approvals

Lack of communication

Export regulations - 

TAAs and GPA

US top tier contractors 

favor established 

suppliers

Large companies often 

absorb upfront 

development costs

"Strategic Sourcing"

Operational Requirement

Operational Requirement

Industrial Benefit

Industrial Benefit

Operational Requirement

Industrial Benefit

Operational Requirement

Industrial Benefit

Source: ODUSD (Industrial Policy) and First Equity 
EXECUTIVE S UMMARY

7

Regulations (ITAR) did not eliminate their need for Technical Assistance Agreements 

(TAAs). Export control issues have plagued virtually all of the JSF international 

partners. As the table below shows, the GPA request was initially submitted by 

Lockheed in March 2000 in order to facilitate the transfer of technical information. It 

took over two years for the GPA process to be approved, owing to internal government 

negotiations regarding sensitive technology areas. It then took a further year and a half 

until, in March 2003, the associated Lockheed compliance plan was approved and the 

GPA entered into effect. 

As a consequence, valuable time between the SDD decision in October 2001 and 

spring 2003 was lost for partner countries and companies to craft strategies based on 

full insight of the broad array of classified and unclassified program opportunities 

available. Indeed, some of the partner countries and companies maintain that the GPA 

was rendered so restrictive that it is almost meaningless and countries would have done 

better to craft individual TAAs on technologies where they thought their companies 

might make a relevant contribution. Most notably, few countries took advantage of the 

bid and proposal exemption, an effort initiated by the JSF Joint Program Office (JPO) to 

help alleviate the necessity for TAAs during the Concept Development Phase (CDP), 

and later extended through March 2004. This exemption does not appear to be a 

widely known or used mechanism. 

CONCLUSION

It is important to remember that industrial participation opportunities on JSF, and indeed 

on other major US defense programs, will continue to become available as these 

programs mature. It is also important to remind ourselves of the incalculable benefits of 

coalition warfare where multinational war fighters use the same platform, tactics, and 

GLOBAL PROJECT AUTHORIZATION (GPA) DESCRIPTION AND TIMELINE

GPA licenses are intended to reduce the number of authorizations governments must seek to 

perform activities in furtherance of government-to-government international agreements or 

Memorandums of Understanding (MOUs) concluded between the governments or DoD and a 

foreign Ministry of Defense to carry out cooperative programs for research and development, 

including test and evaluation of defense systems and technologies or cooperative production.

May 24, 2000: GPA 

submitted for approval 

to Department of State

Oct 25, 2002: GPA process approved, 

contingent upon State’s approval of 

Lockheed compliance plan

March 14, 2003: Lockheed 

compliance plan approved; 

GPA enters into effect

2000 2002 2004

Mar 03: PDR

Apr 04: CDR I

Sep 04: CDR II

Jun 05: CDR III

May 24, 2000: GPA 

submitted for approval 

to Department of State

Oct 25, 2002: GPA process approved, 

contingent upon State’s approval of 

Lockheed compliance plan

March 14, 2003: Lockheed 

compliance plan approved; 

GPA enters into effect

2000 2002 2004

Mar 03: PDR

Apr 04: CDR I

Sep 04: CDR II

Jun 05: CDR III

Source: ODUSD (Industrial Policy) and First Equity 
EXECUTIVE S UMMARY

8

operational concepts. We must also not forget the technological innovation available in 

the global industrial base. While these contributions have historically been modest 

relative to overall program value,4 there are two conclusions reached again and again 

by our industrial base assessments: first, innovation typically comes from smaller, 

second- and third-tier suppliers of the scale of many of our partner country companies 

and second, the US does not have the global monopoly on good ideas.5

 

As the study indicates, the JSF program and its new international acquisition strategy 

are works in progress and provide insightful lessons learned for future international 

programs. If we stay the course with minor rudder adjustments, JSF will provide great 

benefits to the US and global defense industrial base and war fighters alike. Not to do 

so would undermine US credibility in the global market place and among our important 

friends and allies. 

 

4

 Study on Impact of Foreign Sourcing of Systems, October 2001 (Required by Section 831 of the 

National Defense Authorization Act for Fiscal Year 2001) concluded that foreign subcontracts 

represented less than 2% of the dollar value of all subcontracts for the programs studied (Apache 

helicopter upgrade program, F/A-18E/F aircraft, M1A2 Abrams tank system enhancement package, 

Advanced Medium Range Air-to-Air Missile, Patriot missile ground system, Longbow Hellfire missile, 

Joint Direct Attack Munition, and Advanced Amphibious Assault Vehicle. 5

 Space Research and Development Industrial Base Study Phase Two Final Report (Booz-Allen & 

Hamilton) indicated that 26% of all space innovation would derive from foreign sources. 
9 

JSF P ROGRAM OVERVIEW
JSF P ROGRAM OVERVIEW

10

The Joint Strike Fighter (JSF) program is the largest development and procurement 

program in US, or for that matter, world history. With a planned current procurement 

volume of over 2,500 aircraft and a programmed cost of over $200 billion, this program 

is not only critical to US and partner countries’ future force structures and military 

capabilities, but is also critical to the health of the international defense industrial base. 

On October 26, 2001, the Department of Defense (DoD) selected Lockheed Martin as 

the winner of the JSF downselect to proceed into SDD. The first SDD aircraft will fly in 

October 2005 (Conventional Take-Off and Landing (CTOL) variant). The first of six Low 

Rate Initial Production (LRIP) lots is scheduled to begin production in late FY 2006, with 

delivery of the first operational JSF in 2008. LRIP Lot I will be for 10 aircraft with 

successive quantity increases to 168 aircraft in Lot VI. A total of 465 aircraft will be 

delivered by the end of SDD – a span of about 101⁄2 years. Procurement is planned to 

continue through 2026 and possibly beyond. JSF aircraft may well stay in service until 

2060 or longer. 

Many major system-level suppliers have been selected for the SDD phase. However, 

there is still significant opportunity for suppliers to win work on the program – sources 

for many important subsystems are yet to be selected. In all, 55% of the total value of 

the JSF work in the SDD phase will be subcontracted. A further 15% is expected to be 

subcontracted once the fighter goes into production. 

JSF is a single-seat, supersonic aircraft, incorporating stealth technology, capable of 

performing multi-role operations from both sea and land. As many as 2,593 aircraft are 

currently programmed for the US and UK. The JSF will be the first aircraft to put stealth 

into the multi-role environment. JSF aircraft will be able to carry the usual range of airto-air and air-to-ground munitions, including Joint Direct Attack Munitions (JDAMs), 

Joint Standoff Weapons (JSOWs), and AIM-120 AMRAAMs. An internal weapons bay 

will preserve stealth characteristics. 

A NEW PARADIGM

While JSF is accomplishing many technological firsts, perhaps the more important story 

is the programmatic firsts that may very well make the JSF program a model for future 

joint and multinational acquisitions. The program was structured from the beginning to 

be a model of acquisition reform, with an emphasis on: jointness, affordability, an 

international interchangeable engine, international participation, and “best value” 

acquisition. 

Jointness 

Three JSF variants will be produced as a highly-common family of aircraft for the US 

Navy, Air Force, Marine Corps, and partners. The Carrier Variant (CV) will provide the 

Navy with a multi-role, stealthy strike fighter aircraft to complement the F/A-18E/F. The 

Short Take-Off and Vertical Landing (STOVL) variant will provide a multi-role strike 
JSF P ROGRAM OVERVIEW

11

fighter to replace the Marine Corps AV-8B and F/A-18A/C/D. The US Navy/Marine 

Corps planned buy of Carrier Variant (CV) and STOVL is 680. The CTOL will provide 

the Air Force with a multi-role aircraft, primary air-to-ground, to replace the F-16 and A10 and to complement the F-22 Raptor air superiority fighter – a planned buy of 1,763 

aircraft. 

JSF is also a strong contender to meet the UK’s need for a future strike fighter aircraft to 

replace the Sea Harrier and the Harrier GR7/T10 aircraft operated by the Royal Navy 

and Royal Air Force. The UK planned buy is 150 aircraft. Many other international 

customers are also interested in JSF to replace their various strike and multi-role fighter 

aircraft, with particular interest in the CTOL and STOVL variants. 

Among all of the Level 2 and 3 international partners, Italy is most committed in principle 

to its decision to replace the Tornado and AMX for ground attack roles, and Harriers for 

naval defense roles with a buy of up to 150 JSF aircraft. The Netherlands is 

considering an F-16A/B replacement for NATO close-air support and could buy up to 85 

JSFs, most likely the CTOL variant. Canada is evaluating JSF as a potential 

conventional multi-role replacement for their CF-18A/Bs. Other prospective customers 

include Norway, Denmark, Turkey, Australia, Singapore, and Israel – many of whom 

plan to replace existing F-16 fleets. While a direct comparison cannot be made, it is 

expected that many of the 24 countries who bought more than 4,200 F-16 aircraft could 

be future customers of JSF. 

MULTI-SERVICE COMMONALITY

 

Source: Lockheed Martin 

STOVL CV

Continuous Wing/Body Structure

F119 Derivative 

Engine

• Wing Tip Fold

• Higher Strength Gear 

and Fuselage Structure

• Unique Control Surfaces

• Missionized Gun

• Lift Fan

• 3 Bearing Swivel Nozzle

• Missionized Gun

Common Radar Common Avionics

And Data Bus

Diverterless Inlet

Integrated Power

Package

CTOL

• Lo Axi Nozzle

• Internal Gun 

Service Tailoring

Four External Hard Points

Common Wing Box Geometry

Common Weapons Bay Geometry

Common Characteristics

STOVL CV

Continuous Wing/Body Structure

F119 Derivative 

Engine

• Wing Tip Fold

• Higher Strength Gear 

and Fuselage Structure

• Unique Control Surfaces

• Missionized Gun

• Lift Fan

• 3 Bearing Swivel Nozzle

• Missionized Gun

Common Radar Common Avionics

And Data Bus

Diverterless Inlet

Integrated Power

Package

CTOL

• Lo Axi Nozzle

• Internal Gun 

Service Tailoring

Four External Hard Points

Common Wing Box Geometry

Common Weapons Bay Geometry

Common Characteristics
JSF P ROGRAM OVERVIEW

12

Affordability 

The cornerstone of the JSF program is affordability – reducing the development cost, 

production cost, and cost of ownership. JSF is accomplishing this objective through an 

evolutionary requirements definition process based on early and extensive cost and 

performance trades, maturing and demonstrating technology prior to the SDD phase, 

competitive procurement of subsystems from a global supplier base, and flying concept 

demonstrator aircraft. 

International Interchangeable Engine 

Two engine sources are being developed and will compete in the production phase. 

The General Electric and Pratt & Whitney engines will be physically and functionally 

interchangeable in order to minimize development and support costs. Pratt & Whitney 

powered the JSF in CDP and leads the way in SDD and will power LRIP lots 1-5. Pratt 

& Whitney is also the lead propulsion system integrator for SDD. 

The power plant competition starts in 2011 and is slated to continue through the life of 

the program. The winning engines for each lot will be supplied to Lockheed Martin as 

Government Furnished Equipment. Additionally, international customers have their 

choice of engines – a commercial best practice concept. 

International Participation 

The UK became the only Level I 

partner on the program. Denmark, 

Norway, the Netherlands, Canada, 

Australia, Turkey and Italy signed 

INTERNATIONAL INTERCHANGEABLE ENGINE

Source: Lockheed Martin 

“Our suppliers are working with [foreign companies] and

we’re going to make sure [partner countries] get the

return on their initial investment that they expect to get

as a part of this program.” 

 - Tom Burbage 

April 21, 2003 

3-Bearing

Swivel Duct

Nozzle

Drive Shaft

Clutch

Lift Fan

Roll Posts

Conventional

Exhaust Duct

F135 or F136

engines/turbomachines

Common Propulsion

System Components

Controls

CV/CTOL

Propulsion

System

STOVL

Propulsion

System
JSF P ROGRAM OVERVIEW

13

Memoranda of Understanding (MOUs) becoming Level 2 and 3 SDD partners during 

2002. Singapore and Israel are currently in preliminary discussions to join the program 

as Security Cooperation Participants. 

“Best Value” Acquisition 

Another new feature of the JSF acquisition strategy is to facilitate the selection of 

foreign suppliers for production of all aircraft via a “best value” or “best athlete” 

approach rather than by traditional offset arrangements. Offset programs are largely 

limited to short, build-to-print production runs for a limited quantity of aircraft. Typically, 

due to the inefficiency of this process, they result in increased program price to the 

customer. 

The best value approach requires industrial partners, whether international or domestic, 

to qualify for participation through demonstration of world-class products and 

technologies representing cost advantages to the program. Once Lockheed Martin and 

its top-tier partners have chosen a supplier, they will pursue sole source contracts with 

these companies based on schedule, performance and cost benchmarks. If the 

suppliers do not meet these benchmarks, they open themselves to re-competition. 

In addition, Lockheed Martin has developed the Strategic Best Value Sourcing (SBVS) 

Plan – a limited number of air system work packages designated to supplement the 

industrial opportunities/awards through best value competition. Production MOUs will 

be generated by Lockheed Martin for these work packages with targeted companies to 

attain industrial participation on the JSF program. If the targeted company cannot 

complete the work for the pre-determined cost goal, the work will then be fully 

competed. Although an apparent compromise between directed workshare and a fulland-open competition, SBVS promises to strengthen international partnerships and 

expand industrial participation. 

IMPORTANCE TO DOMESTIC AND GLOBAL INDUSTRIAL BASE

The JSF program, with its sheer size and global reach is critically important to the 

worldwide defense industrial base. Companies that are on the team are in a good 

position to retain their single source positions on the program and enhance their 

competitiveness – assuming schedule and cost goals are met and maintained. Those 

that are not JSF suppliers may see their tactical aircraft business dissipate as JSF 

comes to dominate the market for tactical aircraft. 

 

For many firms, the JSF program stands to represent a significant percentage of future 

business. The program also offers opportunities for additional financial return from 

partner and non-partner country sales, recoupment for level 1 and 2 partner country 

JSF purchases, price levies on non-partner country sales, associated logistics and 

training, and spin off technologies or sales. Thus, for many of the JSF companies and 

some of their respective countries’ defense industrial bases, this $200+ billion dollar 
JSF P ROGRAM OVERVIEW

14

program could be the most important driver of financial success well into this century. 

In addition, the access that this program will provide foreign countries into the business 

base of major US defense primes, subcontractors, and other program opportunities is 

incalculable. 
15 

U NITED KINGDOM

DETAILED CASE STUDY
U NITED KINGDOM

16 

Key Features of Government Approach:

 Royal Air Force/Navy operational requirements are the key reason for JSF

participation 

 Early involvement in program has helped UK firms gain entry to the program 

 UK government and industry are committed to best value strategy—government

trusts industry to fight for work while it acts to ensure a “level playing field” 

Concerns:

 Lack of disclosure of technical information has potential to limit industrial

competitiveness 

 International nature of JSF exposes UK to potential risks, particularly cost impacts

of US reprogramming or Congressional intervention via “Buy-America” legislation 

Financial Impact:

 Incremental earnings attributable to JSF work will likely run well into the billions of

US dollars over the life of the program bringing great vitality to UK industry 

 Nominal return on investment is likely to be very high, perhaps exceeding 21 dollars

for every dollar of direct program investment over the life of the program 

KEY FEATURES OF GOVERNMENT APPROACH

Motives behind JSF Systems Design and Development Participation 

In the late 1980’s, anticipated future operational requirements of the Royal Navy drove 

the United Kingdom to seek a replacement for the aging Sea Harrier. Studies with the 

US to improve Advanced Short Take-off and Vertical Landing (ASTOVL) technology led 

to the Common Affordable Lightweight Fighter (CALF) program in the early 1990’s, 

which further developed into the Joint Affordable Strike Technology (JAST) program 

and finally, JSF in 1996. 

UNITED KINGDOM – PLANNED TACTICAL FIGHTER FLEET EVOLUTION

F-35 (STOVL) 

Entry to Service: 2012 – 

Sea Harrier FA2 (Royal Navy) 

Replacement: F-35 (STOVL)

Harrier GR7 (Royal Air Force) 

Replacement: F-35 (STOVL)

Eurofighter Typhoon

Entry to Service: 2003 – 

Tornado GR4/F3 

Replacement: Eurofighter Typhoon

Jaguar GR3 

Replacement: Eurofighter Typhoon

Source: First Equity 
U NITED KINGDOM

17 

“Collaboration is a central plank of UK

defense and procurement policy...and

JSF is a great example of this.” 

- Ken Furber, Joint Combat

Aircraft Office, UK DPA 

In 1998, the Strategic Defense Review concluded that the Royal Air Force (RAF) Harrier 

fleet should merge with that of the Royal Navy (RN) and that the joint aircraft should 

operate from carriers. This followed 1995 US Congressional direction that the US DoD 

combine USMC AV-8B replacement, USAF F-16 and USN A-6 replacement into a 

single platform with high commonality. The aggregation of UK RN and RAF 

requirements increased the overall size of its future procurement requirement and 

meant that both the CV and STOVL variants of JSF could be considered. In September 

of 2002, the Ministry of Defence selected the 

STOVL over the CV variant. The UK also has a 

program underway to address long-term needs 

for deep strike capability: the Future Offensive Air 

Systems program. Under consideration for this 

requirement are standoff missiles, unmanned 

UNITED KINGDOM – JSF PROGRAM SUMMARY

United Kingdom

JSF Program Participation Summary

Partnership Level: I

SDD MOU signing date: 17 January 2001

Value of CDP funding: US$200 million

Value of SDD funding: US$2.056 billion

Primary Reasons for Participation

1. To meet operational requirements of RAF and Royal Navy

2. To achieve operational commonality with United States

3. To achieve an affordable Air System through economies of scale

Current Tactical Fighter Fleet

Type: Harrier GR7 / Sea Harrier FA2

Prime Contractor: BAE Systems

Procurement Dates: 1990 - 1993

Number in Fleet: 96

Typical Deployment: Ground Attack / Naval Defense (STOVL)

Planned Retirement: Exact dates as yet undecided

Type: Tornado GR4/F3

Prime Contractor: Panavia Consortium

Procurement Dates: 1980 - 1990

Number in Fleet: 224

Typical Deployment: Ground Attack (GR4); Air Superiority (F3)

Planned Retirement: Dependant on Eurofighter deliveries

Type: Jaguar GR3

Prime Contractor: Sepecat Consortium

Procurement Dates: From 1973

Number in Fleet: 52

Typical Deployment: Ground Attack; Reconnaissance

Planned Retirement: Dependant on Eurofighter deliveries

Source: First Equity
U NITED KINGDOM

18 

combat aircraft, and manned platforms, such as the JSF. Thus, there is a chance the 

UK will ultimately purchase more JSF aircraft than are currently reflected in the current 

procurement baseline. 

The UK was involved in the program very early and with significant investment, in order 

to have sufficient influence over affordability issues, and to achieve a high degree of 

commonality with the US for operations and system sustainment. The UK was the only 

country to invest in CDP as a full partner with $200 million invested, and then in SDD as 

the only Level I partner, with investment in excess of $2 billion. An additional $882 

million investment over the duration of the development program is to provide 

infrastructure necessary to bring the JSF into service, covering such things as weapon 

system integration, training, simulators and noise management. Unique among partner 

nations, and a testament to the UK commitment to the program, the SDD MOU was 

signed well in advance of the down-select of a winner from CDP. Their early signing 

permitted the UK to participate on the source selection team and in approving the Joint 

Operational Requirements Document (JORD). 

Government Management 

Industry led the way into the JSF program, notably via early involvement of Rolls Royce 

and BAE Systems (then British Aerospace), with presence on both competing teams in 

CDP. The UK government has provided excellent leadership to the program, primarily 

through the Future Joint Combat Aircraft Office (JCA) of the Defence Procurement 

Agency (DPA), the Ministry of Defence, and through a strong presence in the JSF Joint 

Program Office (JPO). The JCA is responsible for delivering the JSF in the UK, but is 

not responsible for overall JSF program management, which is, of course, a JSF JPO 

responsibility. Nor has the JCA or any other MoD entity taken an active role to help UK 

industry seek and obtain JSF business. Rather, the MoD truly embraced the concept 

of best value acquisition and trusted UK industry to fight for work, while helping where 

appropriate to ensure the “playing field” was level for UK firms to have a fair shake at 

opportunities. The UK believes that this approach has brought added value to the 

program that benefits all partners, including the US. 

Beyond the MOD, the Department of Trade and Industry (DTI) has also been involved in 

the UK JSF efforts. DTI has run the technology transfer process, and along with the 

Society of British Aerospace Companies (SBAC), an aerospace/defense industry 

association, has helped monitor UK industrial involvement. SBAC also provides liaison 

with the UK Parliament. DTI was particularly important in the period of time leading up 

to the UK decision to join SDD in 2001, canvassing industry to assess the implications 

and prospects for UK firms. 
U NITED KINGDOM

19 

‘Best value’ concept accepted: 

“It [best value acquisition strategy] is not

Nirvana or a Shangri-la state to reach, but

it is a worthy attempt to increase

affordability—and we support it.” 

- Ken Furber, Joint Combat Aircraft

Office, DPA, UK MOD 

Parliamentary approval was not difficult in the UK, particularly relative to other partner 

countries, as will be discussed later in the report. This is because there has been lively 

interest in the JSF from the outset that has not been hostile. There was some 

Eurofighter interest on the part of members of Parliament, but the MoD has always been 

clear on the distinct need and respective roles for JSF and Eurofighter. The need for a 

mixed aircraft fleet appears to be widely accepted now in Parliament. Although 

industrial and economic issues are always relevant, at present, Parliament’s chief 

concerns seem to revolve around capability and affordability, and thus align well with 

those of the MoD. 

Early Involvement Key to Success 

The MOD was as adept at “selling” JSF and the best value strategy to the broader 

industry as it had been in selling the concept 

in Parliament. Industry was not overly 

concerned with the change of approach from 

directed offset as long as it was convinced it 

would get a fair shot at work. The impressive 

track record of UK industry to date at all 

supply levels is a success by almost any 

standard. 

The UK does not believe the size of its SDD investment is responsible for the success 

of its industry. Rather, MoD officials attribute their success to early involvement in the 

UNITED KINGDOM JSF PLAYERS & ORGANIZATIONAL STRUCTURE

Defence

Procurement 

Agency (DPA)

Ministry

of

Defence

(MoD)

Future Joint 

Combat Aircraft (JCA)

JSF Acquisition 

Activity

JSF JPO

Department of 

Trade & Industry (DTI)

• Program 

Management/Liaison

• Joint Procurement Responsibility

• Ensure “level playing field” for industry

• Survey industry 

involvement

• Coordinate 

technology 

transfer process

Society of British 

Aerospace Companies 

(SBAC)

• Monitor Industry 

involvement/assess 

industrial impact

• Interface with 

Parliament

Source: ODUSD (Industrial Policy) 
U NITED KINGDOM

20 

“The TAA process is appalling. Talk of streamlining is good, but

we continue to live in hope.” 

- DPA Employee

program, an inherently competitive and vital aerospace/defense industry, and a history 

of robust international supply relationships. These explanations would appear to be 

particularly relevant with regard to STOVL technologies. 

 

To ensure a level playing field for lower tier firms who may not have otherwise been 

visible to the program and Lockheed Martin, JCA/IPT sponsored an “industry day” in 

cooperation with Lockheed Martin, BAE Systems and several other large JSF suppliers 

in March 2002. The purpose of the event was to provide an opportunity for smaller 

firms to increase their awareness of business opportunities and learn techniques for 

pursuing them. The event was attended by over 400 representatives from more than 

200 firms. Although no quantifiable feedback is yet available, indications are that the 

event was a success. 

CONCERNS

Disclosure delays compromising industrial competitiveness? 

Perhaps one of the most compelling—and demanding—advantages of the international 

cooperative JSF program is access to groundbreaking new technologies. However, 

difficulty in obtaining Technology Assistance Agreements (TAAs) which are required for 

sensitive US technical information has proven to be difficult in many cases. As will be 

discussed in later sections of the report, delays imposed by the TAA application process 

are purported to be 

responsible for hindering 

the competitiveness of nonUS firms across all 

countries. 

The JPO undertook an ambitious initiative to create a blanket export control license 

called a Global Project Authorization or GPA. This was intended to make information 

transfer simpler, and reduce the overhead expenses and delays associated with filing 

TAAs to address every individual need. However, by all counts, the GPA has not lived 

up to its promise, in part because of delays in its implementation, and in part to due its 

applicability only to unclassified materials. Most firms have had to “run the gauntlet” 

and obtain TAAs from the US State Department anyway—in many cases, after delaying 

the submission of applications in hopes that the GPA would help provide required 

technology access. 

Emerging program risks associated with Congressional “Buy America” and other 

budgetary legislation 

Lack of control is another risk that comes with cooperative international programs. This 

is particularly true with JSF because the US has such a dominant role on both the 

industrial and government levels due to the scale of its commitment. There are several 

factors not under control of the UK that could jeopardize the affordability or viability of 
U NITED KINGDOM

21 

the JSF solution. Among these are: potential US Congressional interference, potential 

reprogramming vis-à-vis other US programs, scaling back or eliminating JSF within DoD 

independent of other programs, and system design changes that are not favorable to 

UK needs or interests. Although these risks are for the most part remote, they do exist, 

for JSF and all cooperative procurement programs. Thus, they are concerns for the UK 

and all member countries. But it is up to the UK and other partner countries to balance 

such risks against the potential costs of withdrawl, which can be quite significant. 

With affordability being such a central consideration for the UK as well as other 

partners, changes to the program baseline, and termination risk, are of paramount 

concern. Changes to the program baseline tend to increase unit cost and decrease 

overall program revenues available to suppliers over the life of the program. In the case 

of the US Navy/Marine Corps Tactical Aircraft (TACAIR) Integration Study, a reduction 

of 409 units in the program baseline is likely to decrease overall program value on the 

order of 10% while having a price impact on all variants, but particularly the STOVL and 

CV. 

Of further concern is the potential for US Congress to institute procurement 

requirements that severely disadvantage international suppliers. Although the US DoD 

does not support statutory provisions that could restrict or eliminate international supply 

relationships, Congresional “Buy America” initiatives would lead to degradation of 

military capability, endanger international support and potentially lead to retaliatory 

policies among partner nations. It is critical to the success of the JSF program, on both 

affordability and operational terms, that the international supply regime be made more 

efficient and effective rather than more restrictive. 
U NITED KINGDOM

22 

FINANCIAL IMPACT

Given the early involvement of BAE Systems, Rolls Royce, and Smiths Group, the 

revenue and earnings impact of the program on UK industry is the largest of any partner 

country. Over the course of the program, UK industry could expect to see several billion 

dollars in incremental earnings attributable to potential JSF-related revenues of over 

$40 billion as shown in the table below. 

Although the UK neither tracks the return on their JSF investment explicitly nor uses it 

as a discrete decision variable, by any measure the country appears poised to earn a 

significant return from the JSF program. As highlighted in the table below, the UK could 

potentially see a nominal return on its direct program investment of nearly 2114% - a 

nominal payback of $21.00 for every $1.00 invested into JSF. This translates into an 

annual compounded rate of return of over 100% over the course of SDD, LRIP, and 

FRP at the current US/UK procurement baseline of 2,593 aircraft. 

High British SDD content and the early onset of relatively large STOVL revenues during 

LRIP are largely responsible for the high annually compounded return on investment. 

Actual program returns may be significantly higher as this analysis includes neither the 

ESTIMATED POTENTIAL FINANCIAL IMPACT OF JSF

2002-2011 2012-2026 2002-2011 2012-2026

BAE Systems $4,269.6 $9,708.9 $318.3 $723.7 7.5%

Rolls Royce 2,130.7 5,404.3 167.6 425.1 7.9%

Smiths Aerospace 579.7 2,877.5 74.6 370.3 12.9%

Goodrich / TRW AS 159.0 614.2 20.0 77.2 12.6%

Ultra Electronics 13.7 61.7 1.6 7.3 11.8%

Others3 4,596.8 13,040.4 374.1 1,120.2 8.5%

Total Country Estimate3 $11,749.6 $31,706.9 $956.1 $2,723.8 8.5%

(US$M) 

United Kingdom

Revenues1 EBIT2 EBIT Margin 

Assumption2

Sources: ODUSD (Industrial Policy) and First Equity 

Footnotes and methodology discussion on page 23 and Appendix A, respectively 

Company case studies at Appendix B 

ESTIMATED POTENTIAL COUNTRY-LEVEL RETURN ON JSF INVESTMENT

SDD - FRP 

Revenues1

Partnership 

Investment4

Nominal 

Return5

Annually 

Compounded 

Rate of Return6

2002-2026 2002-2026 2002-2026 2002-2026

Total Country Estimate3 $43,456.5 $2,056.0 2113.6% 109.2%

(US$M) 

United Kingdom

Sources: ODUSD (Industrial Policy) and First Equity 

Footnotes and methodology discussion on page 23 and Appendix A, respectively 
U NITED KINGDOM

23 

potential revenue derived from training, maintenance, repair, and overhaul activities, nor 

additional UK or potential export sales. 

Discrete case studies on five British companies, including BAE Systems, Rolls Royce, 

Smiths Group, Goodrich (former TRW AS), and Ultra Electronics are located in 

Appendix B. 

 

1

Revenues – JSF-specific revenues for each company are derived from company-provided data, or when such data 

was not supplied, from ODUSD(IP) estimates. These data include all contracts that have been awarded to the specific 

company, and future contracts the company hopes to win. In the analysis, SDD contracts are expected to translate 

into LRIP and FRP contracts, although single-source contracts are not necessarily assumed. LRIP and FRP revenues 

assume the current US/UK procurement baseline of 2,593 aircraft through 2026 and, as such, neither include potential 

revenues derived from training, maintenance, repair, and overhaul activities, nor additional domestic or potential export 

sales. The time periods shown depict combined SDD plus LRIP expected revenues (2002-2011) and expected FRP 

revenues (2012-2026), or all three phases combined (2002-2026). 

2

EBIT (Earnings Before Interest and Taxes) – JSF-specific EBIT is derived as follows. Where supplied by an individual 

company, a JSF-specific target EBIT margin has been applied to expected JSF revenues. In all other cases, a 

historical pro-forma EBIT margin, calculated as the company’s average EBIT margin over the last four fiscal years, 

less any non-recurring or extraordinary income or expenses, has been applied. Please see Appendices B through F for 

a more detailed analysis of the relative impact and importance of JSF business to individual firms profiled. 

3

Others and Total Country Estimate – Total Country Estimate shows the expected potential country-level financial 

impact of JSF’s SDD through FRP phases at the current baseline US/UK production total of 2,593 aircraft. Countrylevel revenues have been calculated via aggregated company-level data, as well as estimates for companies’ and 

other earnings not captured in our case studies. This data has been provided by respective governments or industry 

associations. Where necessary, these data have been adjusted downward by ODUSD(IP) to reflect the new baseline 

US/UK procurement of 2,593 aircraft. In addition, the adjusted aggregate estimate has been split into two time periods 

(2002-2011 and 2012-2026) in proportion to the total JSF program budget over the specific time periods. “Others” 

refers to the rest of the companies in the country’s aerospace industry that are or may become involved in the JSF 

program and are not specifically studied in this report. 

4

Partnership Investment – Partnership investment is the direct financial investment made by each country in order to 

be a partner in the SDD phase of the JSF program. This investment does not consider funds for potential aircraft 

procurement to be an investment nor are any assumption made for potential rebates for future JSF sales. 

5

Nominal Return – “Nominal Return” shows the ratio of total country-level expected JSF revenues to partnership 

investment. In simple terms, the nominal return represents the ratio of “dollars in” over “dollars out.” A ratio greater 

than 100% indicates that a country is forecast to receive more money from the program than it has actually invested 

into the program. 

6

Annually Compounded Rate of Return – Annually compounded rate of return is the internal rate of return (IRR) 

generated by expected SDD-FRP annual revenues net of all partnership investment payments to JPO. 
U NITED KINGDOM

24 

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25 

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DETAILED CASE STUDY
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26 

Key Features of Government Approach:

 Air Force/Navy operational requirements are the key reason for JSF participation 

 Italian JSF investment ($1.028 billion) funded by Ministry of Defense, with support

from Ministry of Productive Activities 

 Lockheed Martin-Italian Ministry of Defense LOIs and MOU outlining expected JSF

participation with Italian industry precede Parliamentary approval 

Concerns:

 Late commitment to SDD might have limited potential Italian contract wins 

 Italy believes that several issues have impaired their SDD participation on a “level

playing field” basis 

o Italian industry upset by short RFP response times, and lack of familiarity

with the “best-and-final-offer” concept (no interim negotiations) – both 

standard US contracting practices 

o Limited effectiveness of GPA has forced firms into lengthy TAA processes 

Financial Impact:

 Italy will likely see a nominal return of over 476% on their SDD investment – ~25% 

compounded annually – over the course of SDD, LRIP, and FRP 

KEY FEATURES OF GOVERNMENT APPROACH

Motives behind JSF Systems Design and Development Participation 

Operational requirements of the Italian Air Force and Navy led MoD officials to push for 

Italian participation in the JSF program. The Italian Air Force intends to build its future 

tactical fighter fleet around the Eurofighter Typhoon (air superiority) and JSF (ground 

attack and naval defense) as shown in the chart below. In all, Italy expects to be the 2nd

or 3rd largest JSF operator behind the United States, depending on UK quantities. 

ITALY – PLANNED TACTICAL FIGHTER FLEET EVOLUTION

 

Source: First Equity 

AV-8B+ Harrier (Navy) 

Retirement: 2012 

Replacement: F-35 (STOVL) 

AMX / AMX-T 

Retirement: 2012 

Replacement: F-35 (CTOL) 

Tornado IDS/ECR 

Retirement: 2020 

Replacement: F-35 (CTOL) 

Tornado ADV 

Lease Expires: 2004 - 2006 

Replacement: Eurofighter (F16) 

F-104 Starfighter 

Retirement: 2004 

Replacement: Eurofighter (F16) 

F-16 A/B 

(Temporary Stopgap) 

Lease Expires: 2008 - 2010 Eurofighter Typhoon

Entry to Service: 2003 – 2015 

F-35 (CTOL & STOVL)

Entry to Service: 2012 – 2020 
I TALY

27 

Foreseeing this operational need, Italy invested $10 million during CDP (though not as a 

full partner like the UK with a CDP investment of $200 million). As JSF progressed into 

SDD and due to the relatively large expected procurement, Italy chose to be a level II 

partner with a financial commitment of $1.028 billion. $65 million of this commitment is 

bilaterally controlled by both the Italian government and JSF program office, and 

specifically earmarked for investments within Italy to aid Italian industry’s SDD efforts. 

To date, however, there has been no mechanism through which this funding can be 

distributed to industry, and it has therefore remained unused. 

ITALY – JSF PROGRAM SUMMARY

Italy

JSF Program Participation Summary

Partnership Level: II

SDD MOU signing date: 24 Jun 2002

Value of CDP funding: US$10 million

Value of SDD funding: US$1.028 billion

Primary Reasons for Participation

1. Italian Air Force & Italian Navy requirement for future tactical fighters

2. To facilitate Italian industry participation in JSF program

Current Tactical Fighter Fleet

Type: Tornado IDS/ECR (Tornado ADV)

Prime Contractor: Panavia (ADVs leased from UK RAF)

Procurement Dates: 1982 - 1989 (plus recent ADV leases)

Number in Fleet: 100 (plus ADV leases)

Typical Deployment: Ground Attack (IDS), Electronic 

Surveillance (ECR); Air Superiority (ADV)

Planned Retirement: 2020 (leased ADVs to be returned in 2004 - 2006)

Type: F-104 Starfighter

Prime Contractor: Lockheed Martin

Procurement Dates: From 1969

Number in Fleet: 85

Typical Deployment: Air Superiority

Planned Retirement: 2004

Type: AV-8B+ Harrier II

Prime Contractors: Boeing / BAE Systems

Procurement Dates: From 1981

Number in Fleet: 18

Typical Deployment: Naval Fleet Defense

Planned Retirement: 2012

Type: AMX/AMX-T

Prime Contractors: Alenia / Embraer

Procurement Dates: 1989 - 1998

Number in Fleet: 136

Typical Deployment: Ground Attack; Training

Planned Retirement: 2012

Source: First Equity 
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28 

“They all [industry] looked at likely JSF

wins versus likely Eurofighter wins [ and

determined that] a dollar for JSF took

away a dollar for Eurofighter.” 

- Gaetano Monetti, Multiconsult,

Lockheed Martin representative 

Government Management 

Government management of JSF is the responsibility of the National Armaments 

Director (NAD) due to the cross-service interest as shown in the diagram below. JSF is 

one of the many aeronautical programs managed by the very limited NAD staff of about 

five people. This overburdened staff also serves as the conduit between MoD, 

Parliament, and Italian industry. 

Although Italy first expressed interest in JSF in 1997, their SDD participation was 

delayed for an extended period due in large part to changes in government. Part of the 

delay can also be attributed to JSF’s new procurement philosophy. Italian industry – 

and therefore Parliament – was reluctant to embrace the “best value” concept. 

Since Italy plans to procure a mix of JSFs and 

Eurofighters, Italian defense firms fear that 

funding for JSF will encroach on Eurofighter 

funding, the latter of which has guaranteed Italian 

industry at least 100% offset. Due to this 

difference in the programs’ approaches to 

participation, Italian industry understandably 

seemed to initially prefer the guarantees of Eurofighter to the risk/reward nature of JSF. 

In addition, Italy has one of the smallest defense budgets in all of Europe (~$20 billion 

annually) and one of the most consolidated defense industries in the world. Partially 

government-controlled Finmeccanica accounts for over 70% of Italian defense industry 

ITALY MOD ORGANIZATIONAL STRUCTURE

Source: ODUSD (Industrial Policy) 

National

Armaments

Director

Joint

Staff

Ministry

of

Defense

Army

Navy

Carabinieri

Land

Water

Air

• Purchasing

• National Industrial Coordination

• International Agreements

• Requirements

• Budgets

Air Force

JSF 

Management 

Activity
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29 

“Eurofighter was a ‘self-made

case’...there was an operational need,

plus Italy had a specific share of the

program.”

- Colonel Salvestroni, Office of the

National Armaments Director

revenues. With such a limited supplier base, virtually all Italian defense companies 

have historically been involved in all defense programs, most of which have been fueled 

by offsets and workshare. Alenia has typically been awarded large system integration 

contracts from such offset programs and effectively played the role of country-wide 

prime contractor to other Italian firms. The responsibility that the JSF program places 

on Alenia’s subcontractors to bid in their own right also contributes to Italian industry’s 

skepticism of JSF’s best value concept. 

Recognizing these misgivings, the Ministry of Productive Activities (MPA) joined MoD to 

help secure Italy’s SDD participation. MPA and MoD worked together with Lockheed 

Martin and Pratt & Whitney to survey Italian industry and identify specific areas of JSF 

opportunity that would play to Italy’s strengths. Between November 2001 and June 

2002, these efforts generated 20 Letters of Intent (LOIs) and one Memorandum of 

Understanding (MOU) with individual Italian companies. All LOIs/MOU specified certain 

opportunities for JSF design and development work, and many specified the value of 

the work. The industry LOIs/MOU paved the way for an LOI between Lockheed Martin 

and the MoD – the only such contractor to partner government LOI on the JSF program. 

In the LOI, Lockheed guarantees SDD/LRIP participation of at least $320 million, with 

high confidence that this will eventually reach $590 million. Only after a satisfactory 

level of potential value was reached in June 2002 – five years after their initial interest in 

the SDD program – did MoD approach Parliament to obtain approval of participation. 

Justification of JSF during Parliamentary debates 

stressed both operational requirements and 

industrial benefits of the JSF, but the best value 

strategy remained a more difficult sell than a 

traditional offset strategy. According to NAD, 

without the LOIs/MOU in place, JSF would have 

been an impossible sell, despite the Air Force requirement. Opposition to JSF remains; 

the upcoming summer Parliament session will likely host debates over the benefits of 

remaining in the JSF program since JSF contracts have fallen far short of the 

expectations upon which Italian participation had been based. 

Ambitious Expectations 

As of May 2003, Lockheed Martin had identified 30 Italian companies with 164 

opportunities for possible JSF design, development, or manufacturing work with an 

estimated potential SDD/LRIP value of more than $1.05 billion, nearly double the target 

estimate in the 2002 MOU. These opportunities could amount to several billion dollars 

through FRP. 

Even in the face of such robust long-term prospects, the LOIs/MOU negotiated between 

Lockheed Martin/Pratt & Whitney with Italian firms set high near-term expectations. To 

date, actual work contracted to Italian has fallen short of these expectations much to the 

concern of Italian firms, although our estimate foresees the potential for Italian industry 
I TALY

30 

Being new to the SDD program and having little

time to respond to RFPs cost Galileo

approximately 25% of their SDD/LRIP potential

(as outlined in their LOI) within the first few

weeks after Italy entered the SDD phase.

Further, little warning of an RFP’s impending

arrival complicated some of Galileo’s early RFP

submissions. 

to win $950 million of SDD and LRIP work through 2011. Perhaps industry’s discontent 

with the program is, in part, caused by the perceived disconnect between the work as 

described in these LOIs/MOU and the actual opportunities to compete. Additionally, 

expectations within Italian industry may be influenced by a non-competitive, sole source 

award of aerostructure work to Alenia which arguably established a precedent 

apparently inconsistent with the overall acquisition strategy. However, industry 

representatives on both sides of the Atlantic maintain that Alenia would have been a 

strong contender in a competitive bidding process had the Italian government entered 

the program earlier. 

Long-term, Italy also plans to establish a national support center to provide an organic 

capability to maintain the Italian fleet of JSF aircraft that will feed additional long term 

revenues. Several senior Italian defense industry officials express hope that Italy 

participates in the maintenance of the JSF European fleet and suggest that, if an 

additional final assembly facility is needed, Italy should be considered a prime 

candidate. Also, these same officials would like to see Italy establish facilities that would 

be utilized by European and other JSF countries to train pilots and maintenance 

personnel. 

CONCERNS

Late Involvement Forecloses Opportunities 

Italy’s late involvement in the program has 

clearly limited their opportunities to 

compete and leveraged their companies’ 

competencies into the program. Many of 

the major subsystems of the airplane had 

already been sub-contracted by June 

2002. This was an especially large 

problem for aerostructures companies. 

For example, because Lockheed Martin had designed most of the JSF structure prior to 

Italian participation, Alenia could not participate in the wing design and had to content 

itself with being the second source for the wing. However, Alenia engineers are 

assigned to the Lockheed Martin aerostructures Integrated Product Team (IPT) and 

over a hundred engineers from Alenia, Galileo, Datamat, and Piaggio Aero will 

participate in other IPTs in Fort Worth, Texas, and El Segundo, California. 

Lack of a “Level Playing Field” 

In the year since Italy signed the SDD MOU, Italian industry has won only one additional 

significant JSF contract. However, there are a number of substantial contracts valued 

at over $100 million that may materialize soon. 
I TALY

31 

Point and Counterpoint: 

“[Strategic sourcing] may help by limiting

competitions to companies on a level

playing field.”

- Colonel Salvestroni, Office of the

National Armaments Director

“Are we going back to workshare? We

want open competition!” 

- Alenia Aeronautica

“It’s not the fact that [Italian industry] is

losing competitions, it’s the way in which

they lose” 

 - Colonel Salvestroni, Office of the

National Armaments Director 

Future Considerations: 

“More preparation and collaboration from

the US side before the start of the

program would have helped to make the

best value concept more successful and

helped to level the playing field.” 

- Colonel Salvestroni

All the same, differences in scale between 

actual contract awards and best value 

opportunities outlined in the LOIs/MOU on one 

hand, and the Italian government’s sizable 

investment in SDD, have created an air of 

discontent with JSF. Italian government and 

industry officials cite numerous frustrations with 

their experience thus far, including short RFP 

receipt and response times; a general lack of 

access to necessary program information due 

to delays in TAAs and licenses; limited 

communications between the bidder and 

contractor, particularly with respect to proposal feedback and discussion; the positive 

impact of government funded R&D in other partner countries and the US; and the lack 

of available JSF work due to the late contract signing. 

A Broken RFP Process? 

Differences in contracting cultures have also 

led to some misunderstandings of the bidding 

process. Many Italian industrialists expected 

that RFPs would lead to negotiations that 

would give their companies an opportunity to 

improve their proposals, but learned the hard 

way that the “best value”/best-and-final-offer 

model doesn’t accommodate such 

opportunities. Italian industry believes that 

many competitions were initially lost due to 

relatively “minor” issues such as high bid prices, and wish that they had been given the 

opportunity to discuss changes to their bids that might have made them more 

competitive. 

Other Italian firms felt price-disadvantaged from the start when bidding against large 

foreign companies able to absorb R&D and other non-recurring expenses. Several 

companies complained that American government-funded R&D – both directly through 

the JSF program and indirectly through other programs such as the F-22 – gives the US 

defense industrial base an unfair advantage when competing on price. 

A GPA Without Teeth? 

Several Italian companies have expressed disappointment in the Global Project 

Authorization (GPA), echoing the sentiments of the UK and other partner countries. 

Many international partner industries were initially encouraged to postpone TAA 

applications in favor of the forthcoming GPA in order to gain access to the information 

necessary for successful proposals. When finally approved, however, the GPA was so 
I TALY

32 

“JSF is very important. [FiatAvio] is

keen to strengthen its US market

position, especially in the military.” 

 - Riccardo Brussa, FiatAvio 

“You sign a $1 billion MOU between two governments

and can’t get the TAAs done? That’s ridiculous!” 

- a Marconi Selenia employee

“Less than a year after signing up, we’ve 

already achieved contracts and commitments 

far in excess of our stated minimum in the LOI.”

- Robert Haskell, JSF International

Program Manager for Italy, 

Lockheed Martin

Lesson Learned: 

“Timely issuance of TAAs and necessary

licenses are critical issues for companies

to be competitive on RFPs.” 

- Dennys Plessas, VP Business

Development Initiatives for

Europe, Middle East, and Africa,

Lockheed Martin 

generic in nature that it didn’t include most of 

the necessary competitive areas. This 

essentially required that all potential partner 

companies receive TAAs prior to winning any 

JSF SDD work. The process of obtaining 

these TAAs, however, has cost significant 

time; in many cases, international partner 

industries and companies measured the 

progress of their TAAs in years rather than months or weeks. These delays are not due 

to the US Department of State, however; the Italians claim, as do the Dutch, that TAAs 

are held-up in the legal departments of potential US subcontractors well before ever 

reaching the State Department. In any case, the lack of a TAA is detrimental to a 

company’s ability to compete as certain technical information essential to understanding 

the exact function, specifications, or requirements of the RFP are available only with 

TAAs. Additionally, without TAAs, Italian industry has been largely unable to gain 

enough insight into the program to 

carry out their own “anticipatory” 

R&D efforts to prepare for expected 

RFPs. 

In the minds of several Italians, these factors have combined to eliminate the possibility 

that Italian industry can compete on a “level playing field” with larger foreign and US 

companies. NAD hopes that Lockheed Martin’s new “best value strategic sourcing” 

plan will help level the playing field for potentially disadvantaged countries – a strategy 

that, in turn, isn’t being welcomed by all partner countries. 

FINANCIAL IMPACT

To date at least $475 million in SDD and 

LRIP commitments have been awarded to 

Italian industry, more than half of this from 

a second source contract between Alenia 

and Lockheed Martin for wing production. 

The two companies have agreed that 

Alenia will produce 80-84 wings during LRIP, starting with Lot 2 at a “must cost” price 

below the cost to produce wings in Fort Worth. Additionally, Marconi Selenia 

Communications has been chosen to design JSF’s back-up UHF radio. Considering the 

potential SDD and LRIP contracts that remain to be 

awarded, plus follow-on FRP contracts and 

FiatAvio’s MOUs with GE and Rolls Royce to be a 

5% risk-sharing partner on the F136 interchangeable 

engine, the JSF program could return nearly $5 

billion of revenue to Italy baselined on the US/UK procurement of 2,593 aircraft. These 

revenues could potentially translate into more than $500 million in earnings before 

interest and taxes. 
I TALY

33 

Despite initial disappointment with bidding success, Italy is expected to earn a large 

return on their SDD investment. Through FRP, Italy could potentially see a nominal 

return on their investment of over 476% - a nominal payback of almost $5.00 for every 

$1.00 invested into the program. In real terms, this translates to an annually 

compounded rate of return of approximately 24%, representing a significant value to the 

Italian economy. Italy expects additional opportunity for even greater financial returns 

through training, maintenance, repair, and overhaul activities, and royalty payments for 

export sales of JSF. 

Discreet case studies highlighting the impact of JSF have been prepared for three 

Italian companies; the Finmeccanica case study specifically includes Alenia 

Aeronautica, Galileo Avionica, and Marconi Selenia Communications. All of the Italian 

case studies are located in Appendix C. 

ESTIMATED POTENTIAL FINANCIAL IMPACT OF JSF

2002-2011 2012-2026 2002-2011 2012-2026

ASE $5.3 $14.3 $0.6 $1.7 12.0%

Fiat Avio 28.4 343.0 4.3 51.9 15.1%

Finmeccanica* 499.4 2,095.0 52.0 218.0 10.4%

*includes Marconi Selenia Communications, Alenia Aerostructures, and Galileo Avionica

Others3 409.4 1,501.7 43.7 166.4 11.0%

Total Country Estimate3 $942.5 $3,953.9 $100.6 $438.0 11.0%

(US$M) 

Italy

Revenues1 EBIT2 EBIT Margin 

Assumption2

Sources: ODUSD (Industrial Policy) and First Equity 

Footnotes and methodology discussion on A-7 and Appendix A, respectively 

Company case studies at Appendix C 

ESTIMATED POTENTIAL COUNTRY-LEVEL RETURN ON JSF INVESTMENT

SDD - FRP 

Revenues1

Partnership 

Investment4

Nominal 

Return5

Annually 

Compounded 

Rate of Return6

2002-2026 2002-2026 2002-2026 2002-2026

Total Country Estimate3 $4,896.4 $1,028.0 476.3% 23.8%

(US$M) 

Italy

Sources: ODUSD (Industrial Policy) and First Equity 

Footnotes and methodology discussion on A-7 and Appendix A, respectively 
I TALY

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35 

T HE N ETHERLANDS

DETAILED CASE STUDY
T HE N ETHERLANDS

36 

Key Features of Government Approach:

 During CDP, JSF was selected by the Dutch government as one of two aircraft

platforms upon which to build the Dutch aerospace industry of the future 

 Early (1997) financial support from Dutch government to Dutch industry promoted

JSF participation 

 Public-Private Partnership (PPP) provided government sponsorship of SDD

investment in exchange for a 3.5% tax on all Dutch JSF production and support

revenues in order to repay SDD investment 

 JSF CDP and SDD efforts are being led by the Ministry of Economic Affairs, with

key input by industry, MoD, and Royal Netherlands Air Force 

 Dutch JSF organization intended to be a “first responder” contact with Lockheed

Martin and other JSF contractors and an “enabler” of business relationships for

Dutch industry – however,it was unable to prevent two non-compliant bids 

Concerns:

 Dutch companies feel that they can not compete on a level playing field with

American counterparts due to geographic, financial, export control, and security of

supply limitations 

 Dutch Parliament’s early concerns related to return on investment a constant threat

to future participation in JSF program 

Financial Impact:

 The Netherlands is expected to earn a nominal return on their SDD investment of

well over 700% - ~40% annually-compounded return

KEY FEATURES OF GOVERNMENT APPROACH

Motives behind JSF System Design and Development Participation 

Following the mid-1990s financial failure of Fokker, the Netherlands’ leading aerospace 

company, the Dutch government decided that it would be necessary to re-build a highly 

capable cluster of aerospace companies in the Netherlands. Shortly thereafter, JSF 

(then “JAST”) and the Airbus A380 (then “A3XX”) were chosen as the military and 

commercial aircraft platforms, respectively, from which to build the technical capabilities 

of the Dutch aerospace industry of the future. At the end of the 1990s, the Dutch 

government invested $100 million to directly enhance Dutch industrial capability prior to 

JSF’s SDD phase. As an example of such Dutch efforts to prepare for SDD, Stork used 

this funding to research the application of it’s new “Glare” material – a high-strength, 

lightweight composite / metal material – to the JSF. 

As SDD neared, the Dutch government hesitated before making another large financial 

commitment to JSF. Many feared the risk that a non-offset program carried and 

questioned why the Dutch government should commit such a large amount of money 

without any assurance that their investment would be returned to the Dutch government 

or economy. Lockheed Martin and Pratt & Whitney, in conjunction with the Dutch 

government, surveyed Dutch industrial capabilities and concluded that the Netherlands 

would likely have a high level of success in JSF SDD competitions. Pratt & Whitney 
T HE N ETHERLANDS

37 

Dutch government opinion of SDD: 

“SDD is for the benefit of industry. The

Netherlands could have just bought JSF in 2012.” 

- Rini Goos, Ministry of Economic Affairs

PPP 

1. Government/industry partnership to

achieve consensus for SDD investment. 

2. Intended to facilitate Dutch industrial

participation by transferring up-front risk to

government. 

3. Funds recouped through 3.5%

surcharge on JSF production and support

profits through 2052. 

actually guaranteed that the Netherlands would receive a share of the F135 program 

proportionate to any Dutch purchase of the F135 engine. 

Public-Private Partnership 

Following the comfort level provided by the 

industrial assessment, Dutch government 

and industry (through the 50 members of 

NIFARP – the Netherlands Industry Fighter 

Aircraft Replacement Platform) created the 

“Public-Private Partnership” (PPP). With the 

consensus embodied in PPP, the Dutch 

government then made the Level II 

Partnership investment in the program. 

The Netherlands Level II investment of $800 million consists of $750 million paid directly 

to the JPO, and an additional $50 million bilaterally co-controlled between the JPO and 

the Dutch government. 

To recoup the $800 million Dutch 

government industrial investment from 

Dutch JSF contract proceeds, the Dutch 

government has instituted a 3.5% levy 

against all JSF production and service 

contracts commencing after 2008. Although many Dutch firms and the Dutch 

government do not believe that the tax will impair their ability to win production work, in 

THE NETHERLANDS – JSF PROGRAM SUMMARY

The Netherlands

JSF Program Participation Summary

Partnership Level: II

SDD MOU signing date: 06 June 2002

Value of CDP funding: US$10 million

Value of SDD funding: US$800 million

Primary Reasons for Participation

2. To evaluate JSF as a potential replacement for F-16

Current Tactical Fighter Fleet

Type: F-16 A/B

Prime Contractor: Lockheed Martin

Procurement Dates: 1979 - 1990

Number in Fleet: 137 (213 originally purchased)

Typical Deployment: Multirole (Conventional)

Planned Retirement: Undecided

1. To use JSF as the military aircraft platform off which the Dutch aerospace 

industry would be technically based for the future
T HE N ETHERLANDS

38 

“If you pay, you get a say.” 

- Dutch government attitude

toward industry inclusion in

Dutch JSF organization

“Stork plays a leading role in the

Dutch aerospace cluster, but without

a successful [Dutch] aerospace

cluster [at the lower tiers], there is no

successful Stork.” 

– a Stork representative

a highly competitive environment a 3.5% levy will be reflected in a bid price premium 

that could well affect their competitiveness. However, many NIFARP members seem 

confident that the 3.5% taxation scheme will be relaxed or perhaps repealed when PPP 

is reviewed in 2008 prior to the letting of the affected production contracts. 

Dutch JSF Management and Oversight Organization 

A loose consortium of government entities and industry groupings manages Dutch 

participation in the JSF program. The Ministry of Economic Affairs (MEA) currently 

chairs this consortium, leading Dutch industrial JSF efforts and interdepartmental 

coordination. If the Netherlands buys JSF, this role will shift to the Ministry of Defense 

(MoD) and Royal Netherlands Air Force (RNLAF) once the procurement MOU is signed. 

The RNLAF stresses the need for a new Dutch fighter aircraft and intends to purchase 

JSF as a replacement for Dutch F-16s. Other participants in the Dutch JSF effort 

include NIFARP, the Netherlands Defense Manufacturers Association (NIID) and the 

Netherlands Agency for Aerospace Programs (NIVR). Currently, MEA has a staff of two 

full-time people dedicated solely to management of JSF – one of whom is based in the 

Dutch embassy in Washington, DC – and the support of a handful of MEA employees 

who work with the JSF program on a part-time basis. Furthermore, MoD and RNLAF 

have also created a project team to manage the replacement of the Dutch F-16 fleet. 

Within the JSF program, the role of this consortium is twofold: 1) to be a liaison 

between Lockheed Martin, Northrop Grumman, BAE Systems, and their sub-tier 

suppliers and Dutch industry, and 2) to be an “enabler” of relationships between such 

companies and Dutch industry (although in some cases, they haven’t been successful 

in preventing mistakes in the bidding process). Within the Netherlands, this JSF 

organization acts as a voice for industry, government, 

and the military, particularly during political debates. 

Inclusion of industry in a government-led JSF 

organization is unique to the Netherlands, although 

other partner countries have government-only, or 

industry-only facilitating organizations. 

Additionally, the JSF organization – and NIFARP in particular – intend to promote JSF 

participation across a multitude of Dutch aerospace capabilities. The Netherlands does 

not want to see just its largest companies win JSF contracts. With Fokker’s (Stork’s) 

historical significance in the Dutch aerospace industry, there were early concerns that 

the Dutch JSF effort might become the “Joint 

‘Stork’ Fighter.” However, Stork appears to agree 

that a high rate of participation across Dutch 

industry is important – accordingly, Stork plans to 

outsource $30-50 million of SDD work to lower tier 

Dutch companies. 
T HE N ETHERLANDS

39 

“Lockheed Martin has been very open

with [RFP opportunities] for things under

their control. It’s the lower-tier

[contractors] that are a problem.” 

- a Stork representative

“[It is unclear] how ‘best-value’

is defined... it seems that it

means you have to be within

50 miles of the contractor [in

order to win any contracts.]” 

- a Philips representative

CONCERNS

Lack of a “Level Playing Field” 

Similar to the concerns expressed by the Italians and 

Norwegians, Dutch officials and industry 

representatives repeatedly remark that JSF has not 

achieved the promised “level playing field” for SDD 

contract competitions. Most Dutch cite U.S. second and 

third tier suppliers as the largest impediment to equality 

in international competitions. While the Dutch believe that Lockheed Martin accurately 

assessed their country’s capabilities, they complain that the sub-tier JSF contractors 

seem to have no intentions of outsourcing work into the Netherlands. Despite Lockheed 

Martin’s efforts to persuade sub-tier contractors to look for outsourcing opportunities 

outside the United States, discussions between Dutch industry and sub-tier U.S. 

contractors rarely materialize because “[the contractors] say they can’t talk due to TAA 

reasons.” But MEA believes that these contractors have “deliberately slowed down” the 

approval of TAA applications submitted by Dutch industry, presumably to protect their 

own internal capabilities or those of a local, trusted supplier. This, according to industry 

and government, has been a major factor behind the lack of SDD contracts awarded in 

the Netherlands. 

In a more questionable argument, the Dutch cite differences in business practices and 

risk profiles as an impediment to the “level playing field” concept. “U.S. companies will 

eat non-recurring cost in order to get [a full rate production contract],” claims MEA. 

While the Dutch government has told their industry to try to do the same, industry is 

reluctant due to the lack of any guarantees for follow-on FRP contracts. This risk is 

heightened in the eyes of Dutch industry due to the chance that the Netherlands could 

postpone or cancel their proposed JSF purchases. The Dutch believe that, contrary to 

the program acquisition strategy, production contracts for Dutch industry will be 

contingent on Dutch aircraft purchases. They are also concerned that the US 

government will be biased towards establishing “trusted” second sources for all 

production inside the United States for security of supply reasons. Additionally, Dutch 

industry fears a rise in non-recurring development expenses due to the need to reduce 

the weight of the aircraft, a significant burden that is increasingly pushed down to lowertier suppliers. 

Most questionable, however, are the viewpoints of the CEO of the aerospace division of 

one well-known Dutch company, who claims that because the Dutch government has 

paid $800 million to be part of SDD, his company “should not have to [actively search 

for work]” and that “it is Lockheed Martin’s 

responsibility to bring work to us.” While this 

sentiment is not necessarily shared by all of the 

Netherlands, it puts into stark contrast the 

difference between traditional offset programs 
T HE N ETHERLANDS

40 

and the new “best-value” strategy. 

Dutch Political Debates

Increased parliamentary concern over return on JSF investment causes concern among 

many Dutch proponents of the JSF program, as there is the risk that Parliament may 

cancel Dutch participation in JSF. Above all, Dutch Parliament wants to see at least 

$800 million of benefit to Dutch industry in order to make their investment worthwhile. 

However, there also exist minorities whose viewpoints exacerbate the JSF investment 

debate by claiming that the F-16 fleet does not need replacement or asserting that the 

Netherlands purchase a “European” aircraft. This last argument is quickly losing 

ground, however, as JSF can claim as many European partners as Eurofighter 

Typhoon, Dassault Rafale, and Saab Grippen combined. Along these lines, senior 

Dutch government officials and industry representatives are beginning to recognize the 

benefits of the JSF program, even in a Eurocentric context. 

FINANCIAL IMPACT 

In the year since the Netherlands signed the SDD MOU, Dutch industry has won 

approximately $95 million in SDD contracts, including a significant contract awarding 

Fokker Elmo the design of several JSF wiring harnesses. Additional SDD contracts 

awards worth $50-100 million are expected within the next few months. It is estimated 

that these contracts, plus additional potential contracts to be won by Dutch companies, 

could amount to over $5.7 billion over the course of SDD, LRIP, and FRP at the current 

US/UK procurement baseline of 2,593 aircraft. At targeted EBIT margins, this revenue 

stream could generate $625 million in incremental earnings through 2026. 

ESTIMATED POTENTIAL FINANCIAL IMPACT OF JSF

2002-2011 2012-2026 2002-2011 2012-2026

Philips Aerospace $123.3 $659.7 $12.3 $66.0 10.0%

SP Aerospace 20.5 96.6 2.0 9.7 10.0%

Stork N.V.* 474.9 1,645.9 57.0 197.5 12.0%

*includes Fokker Elmo and Stork AESP

Thales Nederland 148.5 549.8 8.8 32.4 5.9%

Urenco Ltd 24.3 85.3 2.9 10.2 12.0%

Others3 483.5 1,429.5 50.7 148.6 10.4%

Total Country Estimate3 $1,275.0 $4,466.7 $133.8 $464.5 10.4%

(US$M) 

Netherlands

Revenues1 EBIT2 EBIT Margin 

Assumption2

Sources: ODUSD (Industrial Policy) and First Equity 

Footnotes and methodology discussion on A-7 and Appendix A, respectively 

Company case studies at Appendix D 
T HE N ETHERLANDS

41 

The Netherlands’ financial commitment to the program consists of $800 million of 

funding through 2010. The Dutch economy is expected to earn a significant return on 

this investment over the course of SDD, LRIP, and FRP. Although the majority of direct 

JSF revenues will be realized many years from now during FRP, the size of the program 

revenue stream is expected to generate a nominal payback on the Netherlands’ $800 

million SDD investment in excess of 717% - better than a $7.00 payback for $1.00 of 

direct investment – or an annually-compounded rate of return of approximately 38%. 

Because the data below include only the current baseline for US and UK commitments 

to purchase 2,593 aircraft, export sales could dramatically increase the Netherlands’ 

return potential. 

Discrete case studies highlighting the impact of JSF have been prepared for five Dutch 

companies involved in or bidding for JSF contracts. These case studies are located in 

Appendix D. 

ESTIMATED POTENTIAL COUNTRY-LEVEL RETURN ON JSF INVESTMENT

SDD - FRP 

Revenues1

Partnership 

Investment4

Nominal 

Return5

Annually 

Compounded 

Rate of Return6

2002-2026 2002-2026 2002-2026 2002-2026

Total Country Estimate3 $5,741.7 $800.0 717.7% 38.1%

(US$M) 

Netherlands

Sources: ODUSD (Industrial Policy) and First Equity 

Footnotes and methodology discussion on A-7 and Appendix A, respectively 
T HE N ETHERLANDS

42 

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43 

C ANADA

DETAILED CASE STUDY
C ANADA

44 

Key Features of Government Approach:

 The Department of National Defense and Industry Canada took the lead in 

championing Canadian participation in the JSF program through the innovative

organizational structure of “JSF Canada” 

 JSF Canada pro-actively sought opportunities for Canadian industry by meeting

with major JSF contractors and surveying the Canadian industrial base 

 Canada hopes to foster best value performance on a global scale through

partnerships with other JSF countries 

Concerns:

 “Strategic sourcing” may hurt the credibility of best value programs in future

Canadian parliamentary debates on JSF and potentially other programs that are

similarly structured, e.g., Multi-Mission Maritime Aircraft 

 Canada’s ITAR exemption has not been used, which has created delays in

obtaining clearances to access technical RFP information

Financial Impact:

 Canada will likely see an annual compounded rate of return on their SDD

investment greater than 75% over the life of the JSF program 

 Technical knowledge gained through SDD is expected to fuel future earnings

through “spin off” products 

 “JSF supplier” label will boost earnings from other programs due to marketing

appeal 

“Technology transfer from JSF

will be critical to maintaining

[double-digit revenue] growth in

the future.” - Ron Kane, AIAC 

KEY FEATURES OF GOVERNMENT APPROACH

Initial Efforts and Motivations 

The Canadian Department of National Defense (DND) and Industry Canada led the 

initial push for Canadian commitment to the SDD phase of the JSF program. The major 

motivator for this was to facilitate Canadian industry participation. The DND and 

Industry Canada worked to gain an early approval for Canadian participation in order to 

give Canadian industry a time advantage over international competitors. Other 

motivators for SDD participation included: a desire to thoroughly evaluate JSF as a 

replacement for the Canadian Forces CF-18 (due for retirement in 2017-2020); the need 

for interoperability with the US military; and the wish to gain insight into US procurement 

methodologies and best practices. Additionally, Canada wished to take advantage of 

the potential for R&D cost recuperation should Canadian Forces decide to purchase the 

JSF, as well as of potential return levies on future JSF sales to other countries. 

Paradoxically, Canadian industry was a late convert to 

the program relative to the significant efforts of the 

DND. During the early stages of the JSF program, 

Canadian industry felt that there was little chance of 

winning significant JSF business without a certain 

level of financial commitment to JSF by the Canadian government. Lacking a high 

probability of potential return, companies would not commit to investing time and capital 
C ANADA

45 

“Winning JSF contracts isn’t so

much about the potential to supply

JSF production—although that

certainly is an attractive aspect—but

rather, the competitive position in

which such technology puts our

company for its future.” 

- Bill Matthews, Magellan Aerospace

into JSF-related research and development. Additionally, in the late 1990s, the 

Canadian aerospace industry was in the midst of a booming commercial aviation 

market, further adding to their reluctance to commit significant resources to JSF. 

Canadian industrial attitudes changed quickly in late 2001 as their government began to 

show signs of commitment to JSF and also guaranteed up to $75 million to help 

Canadian industry in R&D for the program. Also, the commercial aircraft markets began 

to falter. As the market downturn worsened, the Aerospace Industries Association of 

Canada (AIAC) stressed that JSF participation would be crucial to maintaining the 

Canadian aerospace industry’s double-digit revenue growth rate and strong position in 

the global aerospace marketplace. Canada had seen aerospace revenues double – to 

more than $23 billion – between 1995-2002 and now ranks as the world’s fourth largest 

aerospace industry after the US, UK, and France. 

Since late 2001, not only have potential JSF 

production revenues attracted Canadian industry, but 

potential “side-effects” of such a large, technically 

oriented defense program have been viewed as 

opportunities to further bolster the Canadian 

aerospace industry for decades to come. Most 

significantly, the transfer of JSF-inspired technologies, 

business practices, and production efficiencies are 

expected to have a positive effect on the Canadian economy equal to or greater than 

that of the direct JSF revenues. For example, Pratt & Whitney Canada is taking on a 

considerable portion of the research and development burden for the F135 engine, not 

CANADA – JSF PROGRAM SUMMARY

Canada

JSF Program Participation Summary

Partnership Level: III

SDD MOU signing date: 07 Feb 2002

Value of CDP funding: US$10 million

Value of SDD funding: US$100 million

Additional TPC funds: up to US$75 million

Primary Reasons for Participation

1. To facilitate Canadian industial participation in JSF program 

2. To evaluate JSF as a potential candidate for the Canadian Forces

3. To promote interoperability between US, British, and Canadian militaries

4. To gain insight into US procurement methodologies and best practices

Current Tactical Fighter Fleet

Type: CF-18A/B

Prime Contractor: Boeing

Procurement Dates: 1982-1988

Number in Fleet: 122

Typical Deployment: Multirole (Conventional)

Planned Retirement: 2017-2020

Source: First Equity 
C ANADA

46 

TPC FUNDS 

1. The Canadian government has set 

aside up to $75 million of additional TPC 

funding to support JSF-specific research 

and development as part of Canada’s 

financial commitment to SDD. 

2. Money borrowed from TPC must be 

repaid in full if the funded technologies 

result in production revenues. 

3. TPC funds are limited to 40% of total 

R&D cost of a project. 

for gains in defense revenues, but because the technical know how that they gain from 

their JSF work will be directly applicable to the commercial aircraft sector and will 

position Pratt & Whitney Canada’s future commercial product families in a commanding 

market position. 

JSF will also offer Canadian companies visibility and prestige. The marketing cachet of 

the “JSF supplier” label alone will bring much additional business to SDD participants. 

Lastly, the global nature of the JSF program is being used as an opportunity to seek 

new relationships internationally, which may foster new commercial opportunities for 

Canadian industry in previously closed international markets. 

Ultimately, the projected importance of JSF to Canada’s aerospace industry and 

economy were essential in winning parliamentary approval for JSF SDD participation, 

as Canada’s political climate typically shuns aggressive military policy, large defense 

programs, and major weapons acquisitions. In this light, although Canadian industry 

was slow to accept JSF, AIAC and its partner companies may have played a crucial role 

in gaining approval for Canadian SDD participation not only because they have the 

ability to lobby the government, but also because AIAC support helped emphasize 

economic and industrial benefits. 

Innovative Organizational Structure 

Following Canada’s official entry into the SDD phase in February of 2002, the chart of 

Canadian government set up a five-pronged organization (“JSF Canada” – 

organizational structure shown on next page) to lead and optimize Canada’s JSF 

program effort within the new best value sourcing model. The significance of the 

Canadian approach lies not in its organizational form, but rather its three-step function: 

1) to proactively identify JSF requirements and bidding opportunities; 2) to match them 

to Canadian industrial capabilities; and 3) to encourage JSF participation by decreasing 

industries’ financial burden through government-sponsored performance guarantees 

and research and development loans. 

Two government entities exist within the JSF 

Canada organization with noteworthy roles. 

The Canadian Commercial Corporation 

(CCC) acts as an intermediary between 

Canadian companies and the US (or 

international) contractor. CCC carries out 

strict quality assurance and auditing 

procedures that effectively provides JSF 

contractors government “certification” – 

highly incentivizing program participation. In 

addition, Technology Partners Canada 

(TPC), a Canadian government-sponsored technology investment fund ($75 million of 

which has been set aside for the JSF program) provides loans for strategic technology 
C ANADA

47 

“You have to know who your

supply base is, and what they are

capable of doing in order to

maximize probability of bid

success.” – Michael Slack,

Director US-Canada Material

Relations. 

investments. TPC provides a significant benefit to Canadian industry as TPC bears the 

cost of capital and the risk if JSF-related R&D fails to result in production revenue. 

Although both the TPC and CCC are optional, these programs can greatly reduce the 

financial burden of SDD participation for Canadian companies. 

Proactive Search for JSF Opportunities 

In addition to establishing a JSF program specific government entity and R&D funding, 

members of the JSF Canada team traveled extensively throughout the United States 

and United Kingdom in 2002 to meet not only with the JSF co-primes (Lockheed Martin, 

Northrop Grumman, and BAE Systems), but also with their second and third-tier 

contractors (e.g. Moog, Goodrich, Smiths Aerospace, and Parker Aerospace). To date, 

JSF Canada has identified 156 companies as potential partners in the JSF program and 

estimates that these companies have capabilities spanning 412 “industrial activities” 

that may serve one or more JSF requirement. Besides identifying these companies, 

JSF Canada has met with 36 of them to specifically discuss JSF bidding opportunities 

and to market Canadian capabilities. The JSF 

Canada team emphasizes the importance of this 

proactive approach: while Lockheed Martin and the 

JPO oversee the JSF program, the sheer size of the 

potential supplier base makes it difficult for these two 

organizations to accurately keep track of all sub-tier 

contracting opportunities. Additionally, Canada 

understood that Lockheed Martin was likely to be 

preoccupied with higher-level system projects and contracts, limiting the potential for 

JSF CANADA ORGANIZATIONAL STRUCTURE

Source: ODUSD (Industrial Policy) 
C ANADA

48 

JSF’s best value sourcing has allowed

smaller companies with

transformational technologies to

showcase their capabilities and bid for

work. A twelve-employee, semiconductor company from British

Columbia recently won a JSF

contract... and almost immediately

grew 25% (to fifteen employees) to

fulfill their SDD requirements 

many direct contracting relationships with a country like Canada whose aerospace 

industry specializes in niche technologies, sub-systems, and smaller components. 

JSF Canada’s active matching of Canadian capabilities to JSF requirements has 

become an effective mechanism through which contractors can solicit RFPs in Canada. 

By identifying potential bidders, JSF Canada effectively acts as a one-stop point of 

contact for all Canadian companies and reduces the time required to review bids and 

select winners. JSF Canada uses their detailed survey of Canadian capabilities to limit 

bidders to those companies who best fulfill specific contract requirements. This ensures 

consistent, high-quality bids. 

International Partnerships 

Beyond the scope of JSF Canada’s original credo, the team has recently begun 

conversations with other JSF partner nations in order to explore international 

partnerships. Canada’s interest in international partnerships has two purposes: first, 

they would like to leverage existing R&D work by capitalizing on potential operating 

synergies between Canadian and other partner countries’ industries; and second, they 

would like to promote the best value sourcing concept in other countries in order to 

maintain a level playing field. Many Canadian companies hope that international 

teaming may help them break into certain international markets as well. 

CONCERNS

“Strategic Sourcing” 

In addition to promoting the best value approach 

to other international JSF partners, DND officials 

continue to express concerns over Lockheed 

Martin’s recent decision to introduce directed 

workshare into the JSF program. Early in the 

JSF program, Canada recognized that the best 

value sourcing model signaled a significant 

paradigm shift for international defense 

industries, and considered itself to be in an 

advantageous position compared to other 

international partners. This is due in part to the legislation that considers Canada to be 

part of the national domestic defense industrial base6

 which has resulted in a high level 

of Canadian understanding of and experience in competing for US defense contracts. 

Not surprisingly, Canadian officials favored and embraced the new best value concept 

from the beginning and are concerned that the definition of best value may be changed 

to include an element of offset. 

 

6

 US Code Title 10, Section 2500. 
C ANADA

49 

Future Considerations: 

Export control issues must be resolved in

the very early stages of future

international programs. JSF has not

allowed free flow of information among

partner countries, often requiring foreign

companies to bid on contracts without all

of the required information. This has

particularly hindered foreign participation

in high value-added engineering and

development competitions. 

“We thought the ITAR exemption would

give Canada a leg up, but it

hasn’t...every company has (export

control) issues to resolve.” 

- a Canadian DND official

DND fears that such changes could compromise both the affordability and performance 

of the JSF program. Some aerospace pundits have stated similar views and mentioned 

the Eurofighter Typhoon as an example of this problem. While the Typhoon is 

considered to be a very capable aircraft, schedule delays due to an inherently inefficient 

workshare scheme have resulted in an aircraft with some obsolete technology and an 

escalating price. 

Additionally, DND sees the best value program as a way for smaller companies with 

transformational technologies to become involved in the JSF program. Under previous 

Canadian workshare programs like the CF-18, prime contractors traditionally dealt with 

only a few large Canadian subcontractors in order to minimize administrative efforts 

while fulfilling the workshare requirements. Under JSF’s best value sourcing, however, 

smaller players with niche technologies can bid for work on a level playing field with the 

much larger conglomerates. This was an important and attractive feature of JSF during 

Canada’s parliamentary deliberations regarding SDD participation, and JSF Canada 

hopes that strategic sourcing will not harm the political credibility of future best value 

programs such as the Multi-Mission Maritime Aircraft (MMA). 

Export Controls – ITAR 

To the surprise of Canadian officials, export controls have proven to be a particular 

concern even though Canada has been exempt from some ITAR regulations for over 18 

months. DND believed that these ITAR 

exemptions would ease Canadian SDD 

participation by eliminating the need for TAAs 

prior to sharing of unclassified RFP 

information. To date, however, this has not 

turned out to be true, as JSF contractors have 

seemed reluctant to employ the Canadian exemption afforded by ITAR. Some JSF 

contracts fell through in the early stages of Canadian SDD involvement solely because 

TAAs were not in place. 

In this concern, Canada echoes the voices of 

all other partner countries who complain that 

non-US companies have not had access to all 

information required to make thorough and 

competitive bids in response to JSF RFPs. 

This lack of communication has been the single 

biggest inhibitor to the level playing field 

promised by the best value sourcing model. 

Canada strongly suggests that export controls 

be discussed with all potential partner nations 

in the very early stages of future international 

programs. 
C ANADA

50 

FINANCIAL IMPACT 

Since Canada signed the SDD MOU, Canadian 

companies have bid (or are preparing bids) on at least 

ninety-nine opportunities for JSF-related contracts. 

Sixty-one of these competitions have been completed 

and contracted; eighteen Canadian companies, 

representing a variety of technical disciplines and 

competencies, have won forty-one of these – a 67% 

success rate – amounting to approximately $150-160 

million through SDD. The insert shows the extraordinary momentum with which 

Canada is bidding on JSF contracts, likely far surpassing the bid rate of all other partner 

countries. 

Considering RFPs currently in competition, future bidding or second sourcing 

opportunities, and unit production total through FRP, JSF Canada estimates a potential 

for $4.4 billion to 6.3 billion of revenues for Canadian industry over the life of the JSF 

program; our estimate is $3.9 billion. The chart below details these revenue estimates 

and potential JSF-related earnings impact. 

Canada’s financial commitment to the program consists of $100 million of direct funding 

to be paid to the US government through 2010, plus up to $75 million of additional loans 

through TPC for Canadian industrial use. The Canadian economy will undoubtedly earn 

a significant return on this investment over the course of the JSF program. Although the 

majority of direct JSF revenues will be realized many years from now during FRP, the 

sheer magnitude of the revenues combined with a relatively low level of SDD and TPC 

investment is expected to translate into returns of approximately 4117% - a nominal 

CONTRACTING SUMMARY - 

CANADA

Canada

Contracting Summary

Total Opportunities: 99

Contracts Awarded: 41

Competitions Completed: 61

RFPs Outstanding: 38

ESTIMATED POTENTIAL FINANCIAL IMPACT OF JSF

2002-2011 2012-2026 2002-2011 2012-2026

CaseBank Technologies $10.2 $266.8 $2.5 $66.7 25.0%

GasTOPS Ltd 5.8 15.9 0.7 1.9 12.0%

Héroux-Devtek 76.8 255.2 5.0 16.4 6.4%

Magellan Aerospace 93.4 319.6 9.7 33.1 10.4%

Pratt & Whitney Canada 50.6 70.6 6.0 8.4 11.8%

Others3 857.0 1,888.9 86.3 257.5 12.5%

Total Country Estimate3 $1,093.8 $2,817.0 $110.2 $384.0 12.6%

(US$M) 

Canada

Revenues1 EBIT2 EBIT Margin 

Assumption2

Sources: ODUSD (Industrial Policy) and First Equity 

Footnotes and methodology discussion on A-7 and Appendix A, respectively 

Company case studies at Appendix E 
C ANADA

51 

payback of over $41.00 per $1.00 invested into the program. As shown below, this 

translates to an annual compounded rate of return of nearly 67%. 

Of the eighteen companies involved in the JSF program, we have completed discrete 

case studies on five of them. These case studies are located in Appendix E. 

ESTIMATED POTENTIAL COUNTRY-LEVEL RETURN ON JSF INVESTMENT

SDD - FRP 

Revenues1

Partnership 

Investment4

Nominal 

Return5

Annually 

Compounded 

Rate of Return6

2002-2026 2002-2026 2002-2026 2002-2026

Total Country Estimate3 $3,910.8 $95.0 4116.6% 66.7%

(US$M) 

Canada

Sources: ODUSD (Industrial Policy) and First Equity 

Footnotes and methodology discussion on A-7 and Appendix A, respectively 
C ANADA

52 

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53 

T HE WAY AHEAD

NORWAY

DENMARK

AUSTRALIA

TURKEY
54 

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N ORWAY 

55

Key Features of Government Approach:

 Potential industrial benefits spurred initial involvement in CDP; potential operational

requirement surfaced later 

 Government/industry group formed to look at overall industrial implications of

defense programs 

 Norwegian government not organized to assist industry in winning JSF work 

 Norway is forming international partnership with Canada and Denmark 

Concerns:

 Lack of “level playing field” – Lockheed Martin and their first tier subs tend to favor

pre-existing supplier relationships 

 Lockheed Martin’s new “Strategic Sourcing” plan is not the answer 

KEY FEATURES OF GOVERNMENT APPROACH

Motives behind JSF Systems Design and Development Participation 

Similar to their F-16 cooperation, Norway, Denmark, and the Netherlands discussed a 

JSF collaboration beginning in 1995-1996 during the CDP phase. All three countries 

were primarily motivated by the potential industrial benefits that were expected to be 

available to JSF partner nations. While this former F-16/JSF collaboration never 

materialized, Norway and Denmark formed a JSF program partnership. Each country, 

including Norway, continues to support JSF participation for industrial and economic 

reasons. 

In the meantime, the Norwegian Air Force decided that their F-16 fleet would be 

replaced between 2012-2015 by approximately 50 next-generation fighters. An official 

purchase decision is expected in 2007-2008. This potential operational requirement in 

fact reinforced the industrial motivation for JSF participation. Indeed, considering 

Norway’s small defense budget (approximately one percent that of the United States), a 

purchase of 50 aircraft represents a sizable financial commitment. As such, it was well 

known to the Norwegian MoD that a high level of industrial participation in the 

replacement fighter program would be necessary in order for such a purchase to be 

approved. Interestingly, a Norwegian government study prepared in February 2002 

concluded that Eurofighter presented greater industrial potential for Norway, but it was 

decided in summer 2002 to participate in JSF SDD anyway in order to maximize the 

Norwegian content in the latter program – anticipating greater sales of JSF due to its 

lower cost relative to Eurofighter. 

While the JSF partnership decision was discussed with Parliament, a formal vote was 

never taken. However, with a minority party in charge, government officials must now 

be more attuned to Parliament’s concerns. Hence, there has been increasing emphasis 

on realizing an industrial return on the JSF program. The Parliamentary Defense 

Committee scheduled a formal review of the JSF program status for June 17, 2003, and 
N ORWAY 

56

will use this opportunity to determine if Norway will remain in the SDD phase or cancel 

participation. 

In determining an acceptable level of industrial participation to maintain partnership 

status in the JSF program, Norway has not specified a dollar threshold that defines 

success. Success will be based on a feeling of satisfaction based on a significant 

industrial project or several smaller projects of special interest for their technical 

content. Their main objective is to protect and sustain the small Norwegian defense 

industrial base. 

Industrial Implications Group Formed 

Admittedly, Norway has very little experience in the aerospace sector relative to other 

partner countries. Their offset work from the F-16 program was strictly build-to-print. 

Historically, Norwegian industry has excelled in sensitive areas such as sensors and 

sensor fusion, electronic warfare, and cryptography. The industry is primarily small 

companies with little experience delivering products to DoD. 

In recognition of these factors, Norway formed an industrial oversight board to look at 

overall industrial implications of defense programs. The group is chaired by the MoD 

and consists of representatives from the MoD, the Chief of Defense, the Ministry of 

Trade & Industry, and the industry suppliers association. This group meets every four 

to six weeks and reports to a strategic project review team. Paradoxically, a year ago, it 

was this board that issued the aforementioned report concluding that Eurofighter 

presented the best opportunity for Norwegian industry. 

NORWAY – JSF PROGRAM SUMMARY

Norway

JSF Program Participation Summary

Partnership Level: III

SDD MOU signing date: 20 June 2002

Value of CDP funding: US$10 million

Value of SDD funding: US$125 million

Primary Reasons for Participation

1. To facilitate Norwegian industrial participation in JSF program

2. To evaluate JSF as a potential Norwegian Air Force purchase

Current Tactical Fighter Fleet

Type: F-16A/B

Prime Contractor: Lockheed Martin

Procurement Dates: 1980 - 1987

Number in Fleet: 58

Typical Deployment: Multirole (Conventional)

Planned Retirement: 2012 - 2015
N ORWAY 

57

“Norwegian government was not as well

prepared to support industry as the

Netherlands and Canada.. we realized this

too late.” 

- Christian Tybring-Gjedde, Assistant

Director General, Ministry of Defense

“We are not giving up! We will continue

to look for future JSF opportunities.” 

- Tore Sannes, Executive Vice

President, Kongsberg 

The government’s summer 2002 decision to participate in SDD finessed the industrial 

oversight board’s previous pro-Eurofighter bias. However, the mileage that Eurofighter 

has achieved with the early placement of Eurofighter offset business in Norway, even 

prior to a procurement decision, may be hard to overcome. The MoD and the Royal 

Norwegian Air Force still recognize the advantages of JSF over Eurofighter; however, it 

is clear that ongoing competitions and industrial base issues will figure prominently in 

Parliament’s final decision. 

Government Not Organized to Assist Industry 

The Norwegian government admits that they 

are not well prepared to help industry find 

opportunities for JSF work despite their 

industrial oversight organization. In short, they 

do not have an integrated strategic plan. They 

credit both Canada and the Netherlands with 

doing a good job in this area. Five to six years prior to competitions, both of these 

countries identified technical capabilities required to compete and were able to help 

their companies prepare. 

Small Norwegian companies were generally unprepared to spend significant resources 

for proposal development efforts. Government officials would like to be able to help 

them cover such upfront bidding costs but are not yet organized to effectively do so. 

Compounding the problem is the fact that the Norwegian Parliament feels like they’ve 

already “bought” their way onto the JSF program through their SDD participation fee 

and are not inclined to provide any additional funding to Norwegian industry to increase 

their competitiveness. Even if they were to do so, they believe it would be difficult to 

determine which government agency should fund this investment, much less how to 

fairly and equitably distribute this funding. 

International Partnerships Being Formed 

Norway continues to discuss an MOU with Canada and Denmark that would combine 

their forces in approaching the JSF program. They feel that teaming with 

complementary Canadian industry to find a way to benefit from Canada’s ITAR 

exemption may help them get into the program and, in turn, Canada would gain access 

to Norwegian and Danish technologies they do not currently have. They also hope that 

Lockheed Martin will recognize and favor the opportunity to award work to three 

countries in one contract award. This partnership plan to collaborate in logistics, 

training, and other long-term opportunities could provide contracts and corresponding 

revenues beginning in the latter stages of the 

JSF program. 

Larger companies like Kongsberg state they are 

aggressively pursuing JSF business. They are 
N ORWAY 

58

“’Best value’ is not ‘best value’... it’s

targeted...Lockheed Martin tells Kongsberg

‘you will compete for this and that’... We feel

that Lockheed Martin pre-deciding who gets

RFPs is not a ‘best value’ approach.’” 

- Christian Tybring-Gjedde, 

Assistant Director General, 

Ministry of Defense

“The ‘best value’ concept is good in theory, but

has failed miserably in implementation.” 

- Tom Gerhardsen, President 

Kongsberg Defense & Aerospace

trying to team with other European industries to win work and are seeking guidance 

from Lockheed Martin and their subcontractors. We have not, however, seen any 

evidence that they have embraced the system-of-systems prime contractor role that, 

say, the Dutch company Stork has. The assumption of such a subcontractor role might 

provide Kongsberg the processes to contract JSF components where it has no 

specialty. 

CONCERNS

It appears that Norwegian industry views JSF opportunities as too small and too difficult 

to win. Like a handful of other partner countries, Norway complains that they are 

competing with US industry on an uneven playing field primarily due to technical data 

transfer limitations and access to US industry. Notably however, Norway has chosen 

not to bid on some opportunities where their prospects were viewed as substantial. 

Lack of a “Level Playing Field” 

Kongsberg Defense and Aerospace has 

worked with Lockheed Martin and Lockheed 

Martin’s subcontractors, but claims they 

have no visibility into either what bids will be 

competed or when. Even when “invited” to 

submit a proposal, they feel that there is no 

insight into which specifications are most 

important or what is considered acceptable 

risk, for example. There appears to be insufficient insight into the RFP process. 

Obtaining relatively sensitive data has also been very difficult for Norwegian industry. 

Norwegian companies have approached Lockheed Martin about their capabilities and 

interest in work on the JSF program but indicate that they have received no feedback. 

They feel that the level of US supplier involvement has been predetermined – even 

before Lockheed Martin was chosen as the prime. Now that there has been a 

downselect, Norwegian industry feels that there has been an even bigger shift in 

attitude to make JSF a US-only program. 

Norway believes that Lockheed Martin and 

their first tier suppliers use established US 

providers because there is no incentive to 

take a risk and bring international suppliers 

on-board. Volvo had an established US 

supplier relationship in their role as a direct supplier for Pratt & Whitney prior to the JSF 

program that may have enabled them easier entry onto the program. However, even 

though Kongsberg had several established US supplier relationships with Raytheon for 
N ORWAY 

59

air defense and with Boeing for command and control, these have not translated into 

JSF work. 

“Strategic Sourcing” is not the Answer 

Kongsberg was contacted by Lockheed to bid on the CV arresting gear and pylons 

through their strategic sourcing plan. Kongsberg, however, felt that this “mechanical” 

work does not capitalize on their core mission systems competencies of software 

design/development or weapons interface design/integration. Christian Tybring-Gjedde, 

Assistant Director-General in the Norwegian MoD points to this “gap between where 

Lockheed Martin thinks Kongsberg can compete, and where Kongsberg believes it can 

most effectively compete” as evidence that Lockheed Martin is not adhering to the 

“best-value” sourcing model. 

Ironically, strategic sourcing was created to help countries lacking in industrial 

participation such as Norway. Norway would get no argument from Canada or the 

Netherlands in voicing serious objections to the new sourcing plan. Case in point: a 

handful of Dutch and Canadian companies have expressed interest in both the CV and 

CTOL arresting gear SDD contracts on a competitive basis. By contrast, it was only 

after some of these components were offered to Norway on a strategic value basis that 

one Norwegian company in question became less ambivalent about the work. 

FINANCIAL IMPACT

Slow to Materialize 

Norway has won a handful of relatively small SDD contracts thus far. Lockheed Martin 

recently awarded a software contract for $275,000 to Metronor. While this is a very 

small contract, it indicates that Norwegian industry has products and technologies with 

real potential for the JSF program. In addition, Pratt & Whitney has placed a contract 

with Volvo Aero Norge for approximately ~$1 million for SDD, and Corena Denmark, 

which has a Norwegian subsidiary, has also won a contract that will be split between 

firms in each country. 

Fourteen Norwegian companies participated in a weeklong program during the summer 

of 2002 in order to demonstrate their capabilities to JSF contractors. The Norwegians 

considered this a “good start” to their participation in JSF, but complain that not much 

has come from that opportunity. In truth, however, Christian Tybring-Gjedde laments 

that “maybe that was [Norwegian] industry’s fault.” 

Nevertheless, with such large production quantities, the few existing JSF contracts 

should create a nominal return on Norway’s Level III commitment of US$122 million 

greater than 100%. Volvo Aero Norge, alone, claims that three or four single source 

engine parts production contracts would pay for Norway’s procurement of JSF from 

Volvo Aero Norge’s revenues. 
N ORWAY 

60

Discrete case studies highlighting the impact of JSF have been prepared for Kongsberg 

and Volvo Aero Norge. These case studies can be found in Appendix E. 
DENMARK

61 

KEY FEATURES OF GOVERNMENT APPROACH

The defense industry in Denmark has historically had a long-standing, successful 

relationship with JSF’s prime contractor, Lockheed Martin. Along with Norway, the 

Netherlands, and Belgium, Denmark teamed with the US Air Force and Lockheed on 

the F-16 fighter aircraft. Furthermore, most of the aircraft flown in the Danish Air Force 

were produced by Lockheed, and Danish forces recently ordered three additional C130J transport aircraft. Consequently, Denmark and its defense industry have been 

eager to leverage their relationship with Lockheed Martin in order to play a significant 

role in the Joint Strike Fighter program. 

Since joining the program during the Concept Demonstration Phase (CDP) in 

September 1997, Denmark feels that JSF partner-level participation offers a number of 

significant benefits. First and foremost, Denmark understands the value to its Air Force 

of acquiring a fighter aircraft that will meet its future manned aircraft warfighting needs 

and replace its aging fleet of F-16s. However, a certain political faction within 

Denmark’s government feel that Denmark should not participate in the program and 

rather it should wait until its aircraft fleet needs to be replaced and then acquire a 

platform that meets the country’s needs. In response, Danish industry lobbied its 

politicians, highlighting the monetary, strategic, technological, and other advantages the 

program would provide to Danish defense firms. In fact, to demonstrate their 

commitment to the program, representatives from the military supplier base agreed to 

partially fund SDD. Additionally, Denmark feels that JSF involvement will provide 

valuable knowledge and capabilities development. The Danish Air Force and defense 

industry expect to gain a better understanding of the aircraft, leading to lucrative 

aftermarket opportunities and technological spin-offs. 

Key Features of Government Approach:

 Denmark is hoping to leverage its relationship with Lockheed Martin and its prior F16 program experience to win JSF contracts 

 Strong industrial support including co-funding of SDD investment 

 Denmark believes that the primary benefit to program participation is in acquiring a

replacement platform for its current F-16 fleet 

 Political opposition has forced Danish defense suppliers to lobby for JSF program

participation 

 Danish industry and government officials have worked diligently to organize

marketing opportunities for Danish defense companies and capabilities 

Concern:

 In the “best value” contracting process, larger companies often absorb upfront

development costs in order to under-price and eliminate competition, allowing them 

to capture windfall profits during production phases 
DENMARK

62 

Since entering the SDD process, Denmark has been proactive in involving its defense 

suppliers and government agencies in the JSF program. The country has used a 

number of different strategies to realize the benefits of JSF program participation. 

First, Denmark teamed with Norway for program partnership. Both countries 

participated in the F-16 program. The funding and technology sharing afforded by the 

F-16 partnership proved to be of significant value. Additionally, the Danish defense 

industry has been especially active in presenting its capabilities to the top-tier 

contractors. One Danish firm, Systematic has stationed several engineers on-site at 

Lockheed Martin to demonstrate their expertise and improve the likelihood of winning 

future contracts. 

During the CDP phase, a consultant hired by MoD worked with the Danish National 

Deputy in the JSF Program Office to arrange marketing opportunities for Danish 

defense companies. Currently, a representative from Danish industry, supported by 

funding from Danish military suppliers, is continuing these efforts. Furthermore, the 

Danish representative in the JPO forwards Lockheed’s monthly status reports, which 

detail current and upcoming JSF opportunities relevant to Denmark’s military supplier 

base in order to help firms identify and fulfill JSF requirements. 

Denmark has also set up the JSF Coordination Team as a part of their efforts to involve 

Industry in the program. This team acts as a liaison between Lockheed Martin and 

Danish Industry. One of their main missions is to identify bidding opportunities and try 

to match them up with Danish industries. 

 

DENMARK – JSF PROGRAM SUMMARY

Denmark

JSF Program Participation Summary

Partnership Level: III

SDD MOU signing date: 28 May 2002

Value of CDP funding: US$10M

Value of SDD funding: US$125M

Primary Reasons for Participation

1. To replace current F-16 fleet with F-35 aircraft

2. To support the Danish defense industry

3. To gain understanding of the F-35 platform and program

Current Tactical Fighter Fleet

Type: F-16

Prime Contractor: Lockheed Martin

Number in Fleet: 57

Typical Deployment: Multirole (Conventional)

Planned Retirement: 2013 - 2015 
DENMARK

63 

CONCERN

Denmark believes that, in the “best value” contracting process, large subcontractors 

have an unfair advantage over smaller contractors if they use their scale to absorb 

significant upfront development costs. The worry is that, in doing so, large 

subcontractors price smaller competitors out of the market and control the significant 

production revenue stream in the out years. However, Denmark feels that this issue 

has been mitigated to a degree with “strategic sourcing” contracts issued by Lockheed 

which direct subcontracting opportunities to certain countries if their industries can 

produce technologies that meet the price, technological, and operational requirements 

set for the fighter jet. 
DENMARK

64 

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A USTRALIA 

65 

Key Features of Government Approach:

 Australia is taking a combined government-industry approach to maximize 

opportunities for Australian industry within the best value model 

 A JSF program office has been formed to coordinate both industry and capability

aspects of the project 

 A JSF industry team has been formed to help maximize opportunities for Australian

industry 

 Australia is looking to team with US companies and companies from other partner

countries where of mutual advantage 

Concerns:

 Australia has been unable to bid on some JSF contracts due to the lengthy TAA

execution process 

 Australian companies sometimes have difficulty competing against larger US and

Canadian companies that may subsidize their JSF programs in the SDD phase -

Australia believes that strategic sourcing contracts will help overcome this

somewhat but Australia is still very much in favor of the best value arrangements

KEY FEATURES OF GOVERNMENT APPROACH

In October of 2002, Australia signed an MOU becoming a Level III partner in the Joint 

Strike Fighter (JSF) program, with a financial contribution of $150 million. Although a 

latecomer to the program, the Australians had considered entering into the JSF program 

for some time. The Australian armed forces had been looking into JSF since 2001 as 

part of Project Air 6000, a project that will replace the aging F-18 and F-111 fleets, 

scheduled to be retired progressively between 2012 and 2020. The Australians wanted 

a replacement capability that would give the Royal Australian Air Force a strike and air 

dominance capability, and became impressed with the F-35’s combination of 

performance and affordability. 

The Australian Government also recognized that industry opportunities were another 

major benefit of participation in the JSF program. In the past, Australian industry’s 

military program participation was limited to involvement in support of the aircraft that 

they purchased. However, the JSF program is set up differently, and Australian industry 

realized that it would have the opportunity to win long-term production contracts for all 

JSF production units and to become part of the global supply and support chains. 

Because of this opportunity, the Australian government is working with Australian 

industry to promote its capabilities. 

Australia has also established a JSF program office within the Australian DoD to 

advance the JSF partnership. The office is structured into teams that comprise all 

aspects of the JSF program: operational requirements, commercial support, project 

management and acquisitions, science and technology, and the JSF industry team. 
A USTRALIA 

66 

The JSF industry team is an integral part of the project office. The team has worked 

with Australian industry to group companies into Integrated Capability Teams (ICTs) 

that aim to mirror the IPTs established by Lockheed Martin and other top tier 

contractors. Their ICTs have been in close contact with their IPT counterparts in order 

to become aware of bidding opportunities and to market their unique capabilities 

accordingly. 

Additionally, Australia has been proactive in attempting to increase the value of its 

participation in the JSF program. Australia would like to work with companies from 

other partner nations. 

CONCERNS

Like many other partners in the JSF program, the Australians have been displeased 

with the difficulties surrounding use of the GPA. Consequently, TAAs and 

Manufacturing License Agreements (MLAs) have been required by many of the prime 

contractors, which have slowed down the process. Australia believes that many of its 

industries have not had the opportunity to reply to RFPs due to the lengthy process 

required to acquire the necessary export license. Also, some restrictions placed on 

these licensing arrangements have also impeded industry involvement. 

Finally, Australia has faced difficulty breaking into the US market. Some large US 

defense firms have been internally financing non-recurring costs when submitting bids 

AUSTRALIA – JSF PROGRAM SUMMARY

Australia

JSF Program Participation Summary

Partnership Level: III

SDD MOU signing date: 31 Oct 2002

Value of SDD funding: US$150M

Primary Reasons for Participation

1. To facilitate Australian industrial participation in JSF

2. To evaluate JSF as a potential platform for Australian forces

Current Tactical Fighter Fleet

Type: F-18

Prime Contractor: McDonnell Douglas

Number in Fleet: 71

Typical Deployment: Multirole (Conventional)

Planned Retirement: 2012 - 2015

Type: F-111

Prime Contractor: General Dynamics

Number in Fleet: 36

Typical Deployment: Strike and Reconnaissance

Planned Retirement: 2015 - 2020
A USTRALIA 

67 

on JSF projects, effectively pricing smaller Australian companies out of the competition. 

Nonetheless, Australia is optimistic that the “strategic sourcing” program recently 

introduced by Lockheed Martin will help even out the playing field for its firms and 

Australia’s “best value” industry will continue to win contracts on merit. 
A USTRALIA 

68 

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T URKEY

69 

KEY FEATURES OF GOVERNMENT APPROACH

The Turkish MoD is planning to replace its fleets of F-4, F-5, and the Block 30 F-16 

aircraft after 2012 with the JSF. To ensure a seamless and timely transition, Turkey has 

decided to join the JSF program as a Level III partner. Specifically, Turkish officials 

chose the F-35 program because they felt that the aircraft provided the most value at 

the lowest cost. Partnership status was desired for the expected positive impact on the 

Turkish military industrial base. This impact was expected to manifest itself in various 

ways, including increased revenues, job creation, capability development, and 

technological spin-offs. 

Turkey is currently taking steps to help its companies identify, bid for, and win contracts. 

The Turkish MoD established an internal group of approximately seven individuals 

tasked with bridging the divide between JSF top-tier contractors and Turkish industry. 

This group coordinates and connects the respective points of contact within both groups 

so that Turkish companies have the opportunity to present their capabilities and 

expertise to decision makers. Through this group, the MoD is trying to ensure that 

Turkish companies receive consideration on contracts where they possess the 

capabilities necessary to deliver the requisite technologies. Furthermore, through 

funding supplied by the Under Secretariat for Defense Industries, the Turkish 

government intends to financially support its defense suppliers by providing funding for 

various phases of JSF development contracts. 

CONCERN

In spite of these efforts, many Turkish officials believe that the country’s partnership 

status has not yet provided many of the benefits initially projected. In fact, to date only 

one Turkish company, TEI, has secured a contract, which is worth only $92,000. The 

recently implemented “strategic sourcing” contracting methodology, according to 

Key Features of Government Approach:

 The Turkish MoD chose to become a partner in the JSF program in order to

support its defense industry and eventually replace its fleets of F-4s, F-5s, and F16s 

 The MoD is working to bring together respective points of contact in the Turkish

defense industry and JSF contractors 

 The Turkish government provides development funds to financially support

companies that secure JSF opportunities 

Concern:

 Until a recent meeting with senior Lockheed Martin and DoD officials, Turkey

believed that it was not informed of the complete universe of available JSF

contracts. As communication has since improved, Turkey believes that it is now

better positioned to capitalize on its position as a JSF partner-level participant 
T URKEY

70 

Turkish National Deputy, Major Arif Pazarlioglu, should help Turkey win JSF contracts in 

the future. However, it has yet to lead to a Turkish company securing a substantial JSF 

contract. 

According to Major Pazarlioglu, until recently, Turkey was only informed of the few JSF 

opportunities that Lockheed Martin or other top-tier contractors believed could be 

carried out by one of the thirteen companies listed on Turkey’s signed GPA. However, 

Major Pazarlioglu contends, many other Turkish companies could have bid on and won 

JSF contracts if only they or the Turkish officials were more informed. Pazarlioglu 

asserts that this has been one of the most important reasons why Turkey has not been 

as successful as it had hoped. 

During an April 2003 meeting with top Pentagon and Lockheed Martin officials, Turkish 

representatives voiced these concerns. According to Major Pazarlioglu, conveying their 

issues directly to these senior defense leaders significantly improved Turkish 

government and industry communication with Lockheed and other contractors. 

Lockheed is doing a better job informing countries of all available opportunities, and the 

Turkish MoD and industry can now “see the roadmap” of the JSF opportunities. As 

TURKEY – JSF PROGRAM SUMMARY

Turkey

JSF Program Participation Summary

Partnership Level: III

SDD MOU signing date: 11 Jul 2002

Value of CDP funding: US$6.2M

Value of SDD funding: US$175M

Primary Reasons for Participation

2. The upcoming need to replace existing fighter aircraft

Current Tactical Fighter Fleet

Type: F-4

Prime Contractor: Boeing (McDonnel Douglas)

Number in Fleet: 163

Typical Deployment: Intercept and Attack

Planned Retirement: 2005 - 2010

Type: F-5

Prime Contractor: Northrop Grumman

Number in Fleet: 209

Typical Deployment: Attack

Planned Retirement: 2005 - 2010

Type: F-16

Prime Contractor: Lockheed Martin

Number in Fleet: 166

Typical Deployment: Conventional

Planned Retirement: 2005 - 2010

1. Positive effect on industry in terms of increased revenues, jobs, and 

 technological expertise
T URKEY

71 

such, Turkish companies, including those not yet listed on the country’s GPA, are now 

better positioned to identify, bid for, and secure JSF contracting opportunities and 

realize the benefits of partner-level participation in the JSF program. 
T URKEY

72 

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73 

C ONCLUSIONS
C ONCLUSIONS

74 

The JSF international acquisition strategy is unprecedented in the program investment it 

was able to attract from partner countries (and companies in the case of Denmark!) and 

in the opportunity it presents for partner companies to participate in the global industrial 

base supporting a state-of-the-art, cost-effective, and well-funded platform. This 

program provides the opportunity for participating companies to produce components of 

JSF not only for their own or consortia operational requirements (the F-16 model) but 

also, near term, for the much larger United States and United Kingdom JSF inventories 

– with the promise of content on all worldwide JSF inventories produced well into the 

first half of this century. 

While a bold departure from previous models of international participation on U.S. 

military platforms, the JSF international strategy extends the foundation built over 

decades with friends and allies on co-production and consortia programs, as well as 

through key international industrial agreements and statutes. By statute, Canada is 

considered part of the national defense industrial base – an important cornerstone for 

the security of our shared North American continent. Declaration of Principles 

agreements with allies and friends such as the United Kingdom and Australia, and then 

the Netherlands, Spain, Sweden, and Norway in this Administration, built on Defense 

Equipment Cooperation Agreements signed in the 1990s. These Declaration of 

Principles agreements address key areas of interest such as the harmonization of 

military requirements, security of supply, export procedures, security, foreign ownership 

and corporate governance, research and development, and promoting defense trade. 

In recognition of the importance of security of supply, DoD has signed a bilateral 

security of supply arrangement with the United Kingdom, and is negotiating similar 

arrangements with Sweden, the Netherlands, Norway, Italy, and Spain. Individually and 

collectively, these arrangements encourage allies to acquire defense goods from US 

suppliers, promote interoperability, and provide increased assurance that the 

Department’s non-US suppliers will be in a position to provide timely deliveries to DoD 

during peacetime, crisis, emergency, or armed conflict. 

Our assessment of the impact of the JSF program on the partner countries and 

companies has made clear some of the challenges associated with its revolutionary 

international acquisition strategy. However, some of the strategies used by partner 

countries and companies in their approaches to JSF indicate that those strategies are 

no less revolutionary. The Netherlands identified the JSF program as one of two pillars 

on which it expects to build a world-class aerospace industry. Danish industry was so 

impressed with the opportunities the program affords that it invested in the SDD phase 

alongside the Danish government. Canada provides prized quality and business 

certifications to JSF contractors, and Canadian company bids on program opportunities 

will surpass 100 in its first year or so as a SDD partner. Major Italian companies are 

sending about 100 of their engineers to be part of six Lockheed IPTs in Dallas-Fort 

Worth and El Segundo. The Danish firm Systematic has stationed several of its 

engineers at Lockheed to demonstrate their expertise. 
C ONCLUSIONS

75 

JSF Canada surveyed the US JSF industrial base, visiting the primes as well as 

second- and third-tier suppliers. The UK Department of Trade and Industry surveyed its 

own potential supplier base early in the program, as did Australia’s JSF Industry 

Advisory Council. In addition, Australia established Integrated Capability Teams to 

parallel Lockheed’s IPTs for maximum program connectivity. To oversee industrial 

participation in the program, the United Kingdom, Canada, and the Netherlands 

established JSF organizations in their countries. Many partner countries have also 

sponsored or co-sponsored “JSF Industry Days” for their suppliers. 

Lockheed Martin and Pratt & Whitney have also been worthy quarterbacks to their 

global partners. Industrial surveys were conducted in all partner countries to assess 

competitive opportunities and better understand industrial capabilities. In tribute to the 

English motto that it is the exception that makes the rule, the best value acquisition 

strategy yielded to commitment to international industrial participation, as in the cases of 

the early award to Alenia of its wing contract, Lockheed’s Letters of Intent and 

Memorandum of Understanding with the Italian government and industries, and the 

strategic sourcing approach. 

While the jury is still out on the effectiveness of the GPA, delays in the TAA approval 

process must be addressed. This is not a new complaint, but is critical in allowing equal 

access to all competitors. Regardless of the reason for delays, it seems apparent that 

the program would have benefited from more foresight in terms of future information 

access needs of foreign industry. It would also appear that the bid and proposal 

exemption obtained by the JPO would help tremendously in alleviating the need for 

TAAs, but needs greater promotion by the US government and industry. 

All the same, the massive financial return potential to partner companies and countries 

from the program is already apparent. Surely, a time traveler to 2030 would report back 

to present government and corporate decision makers their successors’ disbelief that 

the opportunities from the JSF program were not clearly seen early in the program’s 

history. We also believe that some of the JSF program’s most important disciples will 

be other US program managers who refine their international acquisition strategies 

based on these early lessons learned – and gain even greater access to innovation 

from the global defense industrial base. Important lessons for JSF partner companies 

and companies seeking positions in other major US defense acquisition programs can 

also be gleaned from our case studies. 

Evidence already abounds that the program is reshaping the global defense industrial 

base. UK industry is undoubtedly already reaping benefits from the substantive role 

they had in some of the most challenging aspects of the JSF development. Countries 

that chose to fund and focus discretionary R&D investments on the program and have 

done well speak volumes about the importance of R&D investment for innovation and 

competitiveness. Transnational links are already being forged among the partner 

countries and their companies which will yield untold international defense industrial 

alliances, market access, and technology spin-offs. Finally, the program will 
C ONCLUSIONS

76 

dramatically increase the scale of many small and mid-size companies in the global 

defense industrial base. A Canadian specialty semiconductor chip manufacturer grew 

from 12 to 15 employees because of its position on the JSF program. Another 40-

employee company, which develops decision support software, is forecast to source 

average annual JSF revenues in SDD/LRIP in line with its average total corporate 

revenues in the 2001-2002 timeframe. In FRP, this company’s revenues from JSF 

could average over ten times 2002 revenue. At these growth rates, some of the 

smallest JSF suppliers could find themselves shoulder-to-shoulder with the blue chip 

giants of the industry as a result of being part of this program! 

Above all, however, it is imperative to remember the promise and importance of the JSF 

program to the American, British, and other partner country war fighters. If we stay the 

course with minor rudder adjustments, JSF will provide great benefits to the US and 

global defense industrial base and war fighters alike. Not to do so would undermine US 

credibility in the global market place and among our important friends and allies. 
77 

S OURCES
S OURCES

78 

Alta, Dick, Frans Friedeman, and Rob ter Steeg. Urenco Aerospace. Personal interview. May 14, 2003 

Baumgardner, Neil. “Hudson: Funding Cuts to Delay JSF Engine Competition Two Years.” Defense 

Daily March 14, 2003 

Book, Elizabeth G. “Joint Strike Fighter Partners Hope for Industrial Windfall.” National Defense 

Magazine January 2003 

Bourgon, Paul. Heroux Devtek. Personal interview. April 29, 2003. 

Brown, David. “Closing Ranks - U.S. Navy, Marines Modify Aircraft Mix.” Defense News March 10, 2003 

Brusa, Riccardo. FiatAvio. Personal interview. May 9, 2003 

Casolini, Enzo and Franco Sella. Alenia Aeronautica. Personal interview. May 7, 2003 

Chambers, Andrew. Commerzbank Securities. Personal interview. February 7, 2002 

Chuter, Andrew. “New JSF Weapon? Norway’s Kongsberg Defence Developing Naval Strike Missile.” 

Defense News March 24, 2003 

Chuter, Andrew. “Norway Wavers on JSF Participation.” Defense News January 27, 2003 

Chuter, Andrew. “JSF Partners May Gang Up on Lockheed.” Defense News March 17, 2003 

Chuter, Andrew. Interview with Major General Tomas Archer, Chief of Staff, Royal Norwegian Air Force, 

Defense News April 7, 2003 

Cordova, Erman Rey, Major, Michael Dorman, and Denise Hanley. JSF Joint Program Office. Personal 

interview. March 25, 2003 

de Wit, Rob, Jeroen Botden, Be Noordman, Dr. Bronsgeest. Philips. Personal interview. May 13, 2003 

“DPA Chief has JSF Concerns.” Defense News May 26, 2003 

Furber, Ken, Gavin Maw, and David Gordon. Britain Ministry of Defense and JSF Joint Program Office 

(Britain). Telephone interview. May 28, 2003 

Gerhardsen, Tom, Add Kyllingmark, and Tore Sannes. Kongsberg Defence & Aerospace. Personal 

interview. May 15, 2003 

Goldney, Dave, and Ian Hartshorn. Goodrich (TRW AS). Personal interview. February 5, 2002 

Goos, M.J.M. (Rini), G.D. (Gideon) van der Staaij, Reineke van der Kolk-Timmermans, and Lieutenant 

Colonel Lou Hermens. The Netherlands Ministry of Economic Affairs. Personal interview. May 

12, 2003 

Hammet, Andy, Paul Benson, and Alison Todd. Ultra Electronics. Personal interview. February 7, 2002 

Hansen, Poul Skjold, Colonel. JSF Joint Program Office (Denmark). Personal interview. May 28, 2003 

Hart, Jim, Captain. US Department of Defense. Personal interview. April 23, 2003 

Haskell, Bob. Lockheed Martin. Telephone interview. April 2003 
S OURCES

79 

Hastings, Bob. Casebank Technologies. Personal interview, April 30, 2003. 

Hayward, Keith, Yvette Brock, and Tom Garner. The Society of British Aerospace Companies. Personal 

interview. February 8, 2002 

Hendrikse, Harald. Credit Suisse First Boston. Personal interview. February 6, 2002 

Institute for Defense Analyses. JSF cost data. January 2002 

Joe, Randy, and James Lemenchick. Magellan Aerospace- Haley Industries. Personal interview. May 1, 

2003. 

Johnson, Stuart, Donald McIntosh, Hany Moustapha, and Tina Romano. Pratt and Whitney Canada. 

Personal interview, April 29, 2003. 

“Joint Strike Fighter Team – Building the 21st Century Multirole Fighter.” Aviation Week & Space 

Technology Market Supplement, December 17, 2001 

“JSF Promise.” Defense Daily April 21, 2003 

Kane, Ron, and Smith, Peter. Aerospace Industries Association of Canada. Personal interview. April 28, 

2003. 

Kaufman, Gail. “Officials Sort Weapon Arrays for JSF.” Defense News March 10, 2003 

Kaufman, Gail. “Extra Weight May Threaten Vertical-Lift JSF.” Defense News March 17, 2003 

Keen, Tom. Britain Office of Defense Cooperation. Personal interview. February 4, 2002 

Kenlon, Frank. US Department of Defense. Personal interview. March 25, 2003 

Klaver, Leen, J.C.F. (Jan) Van Rijn, and Jauk Wiedeman. Thales. Personal interview. May 14, 2003 

Kington, Tom. “Speculation Swirls on Planned FiatAvio Sale.” Defense News March 10, 2003 

“Lockheed Martin Selects Two International Vendors for JSF Training System.” Aerotech News and 

Review May 23, 2003 

“Magellan Aerospace Announces Second F-35 Joint Strike Fighter (JSF) Win.” Magellan Aerospace. 

May 7, 2003 

“Marconi Selenia to Supply JSF Backup Radio.” www.e4engineering.com May 7, 2003 

Matthews, William, and James Butyniec. Magellan Aerospace. Personal interview. May 1, 2003. 

“Maximising the benefits of defence equipment co-operation.” National Audit Office, UK Ministry of 

Defence. March 16, 2001 

McIsaac, Bernard, Nancy Lawless, and John Grooves. GasTOPS. Personal interview. April 30, 2003. 

McKinney, Harold, Lieutenant Colonel and Major Leigh Bandy. Norway Office of Defense Cooperation. 

Personal interview. May 16, 2003 
S OURCES

80 

Minutes from meeting between US General Accounting Office and UK Ministry of Defence. October 21, 

2002 

Moneti, Gaetano. Multiconsult. Personal interview. May 5, 2003 

Mouser, Doug, Capt. JSF Canada. Telephone interview. June 5, 2003. 

O’Donnell, Ed. Pratt & Whitney. Telephone interview. April 22, 2003 

Palmer, Peggy, Lieutenant Colonel. Italy Office of Defense Cooperation. Personal interview. May 5, 

2003 

Paolicchi, Paolo, and Robrto Mannu. Aerotech Italiana S.R.L. Personal interview. May 6, 2003 

Pazarlioglu, Arif, Major. JSF Joint Program Office (Turkey). Personal interview. May 28, 2003 

Pearson, Pam. Personal interview. May 16, 2003 

Picciocchi, Italo and Furio Bozzola. Galileo Avionica. Personal interview. May 6, 2003 

Pierce, Dana, Michael Demetz, and Royce Caplinger. Lockheed Martin. Personal interview. March 25, 

2003 

Plessas, Dennys. Lockheed Martin (International). Personal interview. May 5, 2003 

Porzi, Marco, Mario Damiani, Graziano Forzieri, Salvatore Melillo, Luca Cattaneo, and Gabriele Pieralli. 

Marconi Selenia. Personal interview. May 8, 2003 

Salvestroni, Colonel. Italy Ministry of Defense. Personal interview. May 5, 2003 

Sherman, Jason. “U.S. Navy Adopts JSF Plan Model.” Defense News May 19, 2003 

Slack, Michael, Leslie Goodwin, Paul Cachia, and Doug Mouser. JSF Canada. Personal interview. April 

28, 2003 and May 2, 2003. 

Spragg, Peter, and Michael Burke. BAE Systems. Personal interview. February 11, 2002 

Staassen, Ton, Tjaard Sijpkes, Paul Schwarte, Kier Vis, and Arie Tielemans. SP Aerospace and Vehicle 

Systems. Personal interview. May 13, 2003 

Svitak, Amy. “Norway Wants More High-Tech JSF Work.” Defense News April 14, 2003 

Tarr, Nicholas, Andrew Hirst, and John McCoy Whatley. Rolls Royce. Personal interview. February 12, 

2002 

Torrisi, Alessandro, and Salvatore Spina. ASE S.p.A. Personal interview. May 8, 2003 

Tusa, J.H.A. (Sash). Goldman Sachs International. Personal interview. February 7, 2002 

Tybring-Gjedde. Norway Ministry of Defense. Personal interview. May 16, 2003 

Vinje, Oistein. FFI – Norway Defense Research Group. Personal interview. May 16, 2003 
S OURCES

81 

Vink, H.J. Erick, Stephen Hands, Rob Hermans, Nico Stegeman, Jan P.D.M. Lagasse, and Ron Racke. 

Stork Fokker and Fokker Elmo. Personal interview. May 12, 2003 

Waldrop, Jon. Lockheed Martin. Red team. June 3, 2003 

Walsh, Brian “BJ,” Wing Commander. JSF Joint Program Office (Australia). Personal interview. May 28, 

2003 

White, Jonathan, Mike Waters, and Jean Scarborough. Smiths. Personal interview. February 8, 2002 

Wolnewitz, Bob. Pratt & Whitney. Red team. June 3, 2003 

Young, Joseph (Jay), James Cooke, Gerald Buhrer, and Mark Bouchard. Pratt & Whitney. Personal 

interview. January 24, 2002 
82 

JUNE 2003 
A PPENDICES

APPENDIX A – FINANCIAL ANALYSIS METHODOLOGY & ASSUMPTIONS

APPENDIX B – UNITED KINGDOM: COMPANY CASE STUDIES & COMPENDIUM

 BAE 

 GOODRICH

 ROLLS ROYCE

 SMITHS

 ULTRA

 GPA COMPANY COMPENDIUM

APPENDIX C – ITALY: COMPANY CASE STUDIES & COMPENDIUM

 ASE 

 FIATAVIO

 FINMECCANICA (INCLUDES ALENIA AERONAUTICA, GALILEO AVIONICA, AND MARCONI 

SELENIA) 

 GPA COMPANY COMPENDIUM 

APPENDIX D – THE NETHERLANDS: COMPANY CASE STUDIES & COMPENDIUM

 PHILIPS

 SP AEROSPACE

 STORK AEROSPACE (INCLUDES STORK FOKKER AND FOKKER ELMO) 

 THALES

 URENCO

 GPA COMPANY COMPENDIUM

APPENDIX E – CANADA: COMPANY CASE STUDIES & COMPENDIUM

 CASEBANK

 GASTOPS

 HEROUX-DEVTEK

 MAGELLAN

 PRATT & WHITNEY

 GPA COMPANY COMPENDIUM

APPENDIX F – NORWAY: COMPANY CASE STUDIES & COMPENDIUM

 KONGSBERG DEFENCE & AEROSPACE

 VOLVO AERO NORGE

 GPA COMPANY COMPENDIUM

APPENDIX G – DENMARK: GPA COMPANY COMPENDIUM

APPENDIX H – AUSTRALIA: GPA COMPANY COMPENDIUM

APPENDIX I – TURKEY: GPA COMPANY COMPENDIUM

A – 1 

APPENDIX A 

FINANCIAL ANALYSIS METHODOLOGY & 

ASSUMPTIONS
A – 2 

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A – 3 

All estimates of company specific and country level JSF-related revenues, earnings, 

value, and financial impact are derived from ODUSD (Industrial Policy) and First Equity 

analysis. The methodology behind the ODUSD (Industrial Policy) and First Equity 

analysis is discussed in this Appendix. The data used to arrive at the ODUSD 

(Industrial Policy) and First Equity estimates contained in this report were provided by a 

variety of sources, including non-proprietary information from companies, national 

aerospace industry associations, government and military officials of the partner 

countries, the US Department of Defense, and Lockheed Martin; however, the 

estimates of JSF-related revenues, earnings, value, and financial impact should not be 

considered the official position of any of these sources.

COMPANY CASE STUDY FINANCIAL IMPACT ANALYSIS

Estimating JSF-Related Revenues and Earnings 

There exists a wide variety of metrics that can be used to assess the financial impact of 

the JSF program on a partner firm. Most broadly, the revenues (turnover) from JSF 

SDD and production contracts provide a measure of the magnitude of JSF-related 

business activity vis-à-vis the rest of a firm's business base. 

One of the objectives of this report, however, is to show the estimated impact of JSF on 

the earnings and value of a company (on a per share basis, where applicable). To avoid 

comparative variations in the capital structures and tax liabilities of firms across partner 

countries, earnings before interest and taxes (EBIT) is used instead of net earnings. 

EBIT is important because it represents returns available for distribution to all capital 

owners – be they bondholders, preferred equity owners, or common shareholders – 

before taxes, and is a common basis for measuring value. With regard to potential 

impact on company value, the analysis has used a multiple of the company’s enterprise 

value1

 to EBIT as a basis upon which the potential value of JSF business is estimated. 

For simplicity, and to show no bias for the future performance of one company over 

another, a comparison to FY2002 financial results is used to assess the relative impact 

of potential JSF business. 

Financial Impact Analysis Methodology Assumptions 

Revenues – JSF-specific revenues for each company are derived from companyprovided data, or when such data was not provided, from ODUSD(IP) estimates. These 

data include all contracts that have been awarded to the specific company and future 

contracts that the company hopes to win. In the analysis, SDD contracts are expected 

to translate into LRIP and FRP contracts, although single-source production contracts 

are not necessarily assumed in the overall program acquisition strategy. LRIP and FRP 

revenues assume the current US/UK procurement baseline of 2,593 aircraft through 

2026 and, as such, neither include potential revenues derived from training, 

maintenance, repair, and overhaul activities, nor potential export sales. The time 

periods shown depict combined SDD plus LRIP expected revenues (2002-2011) and 

expected FRP revenues (2012-2026). 

 

1

 Enterprise value = Market value of equity + Book value of debt – Cash 
A – 4 

EBIT (Earnings Before Interest and Taxes) – JSF-specific EBIT is derived as follows. 

Where supplied by an individual company, a JSF-specific target EBIT margin has been 

applied to estimated potential JSF-specific revenues. In all other cases, a historical proforma EBIT margin, calculated as the company’s average EBIT margin over the last four 

fiscal years, less any non-recurring or extraordinary income or expenses, has been 

applied. 

Estimated Value of Average Annual JSF EBIT Contribution & Estimated Incremental 

Steady-State Value of JSF Program – The value of JSF-related earnings is computed 

by multiplying estimated JSF-related EBIT by the company’s current pro-forma 

Enterprise Value / EBIT (EV/EBIT) multiple. This value is then compared to the current 

value of a company as a percentage of current company market value (on a per share 

basis, where applicable) to arrive at a measure of the relative financial impact of the 

JSF program to the equity shareholders of a partner company. In a few instances, 

company EV/EBIT multiples (calculated using publicly available data) were assumed to 

be skewed due to extraneous circumstances affecting the trading of related shares. In 

these cases, and in cases of privately held companies, EV/EBIT multiples were 

estimated using general market data for comparable companies. Where applicable, 

enterprise value has been estimated on a per share basis. 

The following assumptions have been employed to achieve a comparative baseline: 

− The period from 2002 through 2011 includes System Development & 

Demonstration (SDD) and Low Rate Initial Production (LRIP) 

− The period from 2012 through 2026 generally represents Full Rate 

Production (FRP) for the US/UK baseline procurement of 2,593 aircraft 

− Company-specific investment and capitalization costs are not estimated 

− Estimates contain no company proprietary information as yet unreleased 

to the public or unapproved for use by the company 

− Local currencies have been converted to US dollars at the closing 

exchange rate on 31 December 2002: 

o British Pounds Sterling: ₤1.00 = $1.6095 

o Euros: €1.00 = $1.0429 

o Canadian Dollars: C$1.00 = $0.6329 

− Department of Navy (USN/USMC) procurement is as yet undefined (CV 

vs. STOVL quantities); analysis assumes a near even split (356 CV/324 

STOVL) 

− UK baseline procurement is assumed to be the STOVL variant 

− Average engine unit recurring flyaway cost is estimated to be $8.95M 

(FY02); Source: Institute for Defense Analyses (IDA) 
A – 5 

COUNTRY-LEVEL FINANCIAL IMPACT ANALYSIS

Estimating JSF-Related Revenues and Earnings 

Revenues – same as company-level financial impact methodology 

EBIT (Earnings Before Interest and Taxes) – same as company-level financial impact 

methodology 

Others and Total Country Estimate – Total Country Estimate shows the expected 

potential country-level financial impact of JSF’s SDD through FRP phases at the current 

baseline US/UK production total of 2,593 aircraft. Country-level revenues have been 

calculated via aggregated company-level data, as well as estimates for companies’ and 

other earnings not captured in our case studies. This data has been provided by 

respective governments or industry associations. Where necessary, these data have 

been adjusted by ODUSD(IP) to reflect the new baseline US/UK procurement of 2,593 

aircraft. In addition, the adjusted aggregate estimate has been split into two time 

periods (2002-2011 and 2012-2026) in proportion to the total JSF program budget over 

the specific time periods. “Others” refers to the rest of the companies in the country’s 

aerospace industry that are or may become involved in the JSF program and are not 

specifically studied in this report. 

Return on Investment Analysis 

The financial analyses focus on the quantitative returns, although numerous qualitative 

returns are sighted throughout the body of the report and appendices. Quantitative 

return focuses on signed contracts and any discussion of return on investment 

invariably begs a number. In corporate finance, calculation of ROI is a rudimentary 

exercise, often calculated as a ratio of the dollars generated by a particular investment 

over the dollars therein invested (“nominal” return on investment). Others consider 

annually compounded rate of return to be a more accurate measure of return on 

investment as this calculation gives the “real” annual rate of return of a given 

investment, considering the value of the timing of net returns in addition to the value of 

straight “dollars in” versus “dollars out.” In this report, annually compounded rate of 

return is calculated as the internal rate of return of a given net return profile. In any 

such return analysis, deriving the net return profile is the most difficult step, and is 

especially complicated in this analysis of the JSF program by several factors such as 

the large number of contracts still in competition and as yet not awarded, and the lack of 

guaranteed low- and full-rate production contracts. Further, such an exercise of 

reducing the cost/benefit calculus to a single parameter largely ignores qualitative 

returns, which are often equally, if not more, compelling. Other quantifiable returns , not 

estimated for the purpose of this analysis include, but are not limited to: 

− price savings during aircraft procurement; 

− collection of a portion of levees collected on sales to non-partner countries 

− secondary economic effects of program-related expenditures; 

− opportunity for maintenance, repair and overhaul business after JSF 

enters service; 

− spin-off contracts resulting from JSF-specific work; and 
A – 6 

− R&D efficiencies attained via co-investment. 

For simplicity, each country’s return on investment for the JSF program is calculated in 

two ways: 

1. Nominal Return – the ratio of Total Country Estimate revenues to the 

country’s JSF partnership investment shown as a percentage. 

Simply, nominal return represents the ratio of “dollars in” over “dollars out.” 

A ratio greater than 100% indicates that a country is forecast to receive 

more money from the program than it has actually invested into the 

program. For example, a 100% nominal return signifies a return of exactly 

one dollar per every one dollar invested, while a 2000% nominal return 

signifies twenty dollars of return for every one dollar invested. 

2. Annually Compounded Rate of Return – the internal rate of return (IRR) of 

the expected potential annual net revenues of the JSF program. 

As briefly described above, IRR captures the “real” return of a cash flow 

profile by capturing the value of time in addition to the value of every dollar 

in and out, and in doing so, the calculation of IRR values short-term net 

revenue more heavily than those that occur far off in the future. This is 

particularly relevant to the JSF program as much of the potential revenue 

is a decade away during FRP. Additionally, this rate of return has been 

calculated on an annual basis – that is, this number shows the average 

rate of return on investment expected to be generated each year. Such a 

calculation is analogous to the common practice of measuring stock 

market returns in terms of an annual rate (i.e., “the Dow Jones Industrial 

Average gained [returned] 10% this year”). 

In order to calculate this return on an annual basis, Total Country Estimate 

revenues were distributed over the years 2002 through 2026 in proportion 

to the JSF program budget. These annual inflows were then netted 

against known annual partnership payments to JPO to form the net 

revenue basis of the IRR calculation. 

In both calculations of return, “Partnership Investment” is the direct financial investment 

made by each country in order to be a partner in the SDD phase of the JSF program. 

This investment does not consider funds for potential aircraft procurement to be an 

investment nor are any assumptions made for potential rebates for future JSF sales to 

non-partner countries or recoupment of investment via procurement price reduction. 

Therefore, potential aircraft procurement has no effect on the calculation of return on 

investment. The reasons for this are twofold: 

1. no SDD partner country will be forced to buy aircraft in order for their 

industry to participate during LRIP and FRP, and 

2. if a partner country does decide to procure aircraft, the cost of such 

procurement is offset exactly by the value of the aircraft received, and as 
A – 7 

such, has no net effect on the real return to a partner country. 

Factors not explicitly considered that could reduce the return estimates include potential 

direct investment in full rate production and other industry or government co-investment 

in development or production activities. Other procurement or corporate expenses 

associated with preparing for program opportunities are also not included in the 

investment. 

Factors not explicitly considered that could increase the return estimates include 

revenues from other military or commercial applications of JSF-derived technology, 

GDP multiplier effect of program-specific economic activity, procurement cost savings 

associated with partnership, and the guaranteed royalty payment on 3rd country JSF 

sales that the larger program partners will receive. 

Footnotes to Country-Level Financial Impact Section Tables 

1

Revenues – JSF-specific revenues for each company are derived from companyprovided data, or when such data was not supplied, from ODUSD(IP) estimates. These 

data include all contracts that have been awarded to the specific company and future 

contracts the company hopes to win. In the analysis, SDD contracts are expected to 

translate into LRIP and FRP contracts, although single-source contracts are not 

necessarily assumed. LRIP and FRP revenues assume the current US/UK 

procurement baseline of 2,593 aircraft through 2026 and, as such, neither include 

potential revenues derived from training, maintenance, repair, and overhaul activities, 

nor additional domestic or potential export sales. The time periods shown depict 

combined SDD plus LRIP expected revenues (2002-2011) and expected FRP revenues 

(2012-2026), or all three phases combined (2002-2026). 

2

EBIT (Earnings Before Interest and Taxes) – JSF-specific EBIT is derived as follows. 

Where supplied by an individual company, a JSF-specific target EBIT margin has been 

used. In all other cases, a historical pro-forma EBIT margin, calculated as the 

company’s average EBIT margin over the last four fiscal years, less any non-recurring 

or extraordinary income or expenses, has been applied. Please see Appendices B 

through F for a more detailed analysis of the relative impact and importance of JSF 

business to individual firms profiled. 

3

Others and Total Country Estimate – Total Country Estimate shows the expected 

potential country-level financial impact of JSF’s SDD through FRP phases at the current 

baseline US/UK production total of 2,593 aircraft. Country-level revenues have been 

calculated via aggregated company-level data, as well as estimates for companies’ and 

other earnings not captured in our case studies. This data has been provided by 

respective governments or industry associations. Where necessary, these data have 

been adjusted downward by ODUSD(IP) to reflect the new baseline US/UK 

procurement of 2,593 aircraft. In addition, the adjusted aggregate estimate has been 

split into two time periods (2002-2011 and 2012-2026) in proportion to the total JSF 

program budget over the specific time periods. “Others” refers to the rest of the 

companies in the country’s aerospace industry that are or may become involved in the 

JSF program and are not specifically studied in this report. 

4

Partnership Investment – Partnership investment is the direct financial investment 

made by each country in order to be a partner in the SDD phase of the JSF program. 
A – 8 

This investment does not consider funds for potential aircraft procurement to be an 

investment nor are any assumption made for potential rebates for future JSF sales. 

5

Nominal Return – “Nominal Return” shows the ratio of total country-level expected JSF 

revenues to partnership investment. In simple terms, the nominal return represents the 

ratio of “dollars in” over “dollars out.” A ratio greater than 100% indicates that a country 

is forecast to receive more money from the program than it has actually invested into 

the program. 

6

Annually Compounded Rate of Return – Annually compounded rate of return is the 

internal rate of return (IRR) generated by expected SDD-FRP annual revenues net of all 

partnership investment payments to JPO. 
B – 1 

APPENDIX B 

UNITED KINGDOM: COMPANY CASE STUDIES AND 

COMPENDIUM
B – 2 

(This page intentionally left blank.)
B – 3 

– Major Businesses: Prime contractor in defense and aerospace industries; air, sea, and C4ISR 

systems

– Key Technological Capabilities: avionics; flight control systems; electronic warfare; C4ISR; 

command & control systems 

– Major Military Platforms: Eurofighter Typhoon; Nimrod; F-35 (JSF); BAe Hawk Trainer; Astuteclass submarine; Type 45 destroyer; CVF

BAE SYSTEMS PRODUCTS

– Major Programmes (Prime Contracts) – 

Eurofighter (37% stake); Nimord; JSF (prime 

partner with Lockheed Martin and Northrop 

Grumman); BAe Hawk; Astute-class 

submarine; Type 45 destroyer; CVF 

– Avionics – sensor systems technology; 

electronic warfare systems; advanced 

avionics; flight control systems 

– International Programs – joint ventures: 

Airbus Industrie, SAAB, MBDA, Gripen 

International, STN Atlas, and others 

– BAE Systems North America – HUDs, 

FMSs, GPS/INS systems; flight and engine 

controls; RF / IR / acoustic countermeasures, 

radar / laser / missile warning systems; mine 

countermeasures, IR imaging, electronic ID 

systems, camouflage and signature 

management systems; strategic warfare 

planning and mission management; 

reconnaissance and surveillance systems; 

communication/data link systems; space 

electronics; support & services 

BAE SYSTEMS – C OMPANY OVERVIEW

BAE Systems plc 

London Stock Exchange – Ticker: BA 

Headquarters: London, UNITED KINGDOM 

Employees: 100,000 (including Joint Ventures) 

BAE Systems, the UK’s largest defense conglomerate, has extensive prime contracting experience and 

capability. BAE’s business offerings are focused around major aircraft, marine, and C4ISR programs, with 

additional organizational structure focused on customer support and the North American market. 

 

BAE SYSTEMS – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $11,336 $15,525 $14,551 $12,998

Sales growth: 0% 37% (6%) (11%)

Reported EBIT: 789 435 398 (660)

EBIT margin: 7% 3% 3% (5%)

Pro-forma EBITDA: 1,568 2,126 2,445 1,954

EBITDA margin: 14% 14% 17% 15%

Pro-forma EBIT: $1,127 $1,028 $1,231 $623

EBIT margin: 10% 7% 8% 5%

Revenue per employee: $193,140 (Estimated - includes Joint Ventures)

Stock price: $2.08 (as of 5/30/2003)

52 week high: $2.25

52 week low: $1.64

Shares outstanding: 3,060.0 million

Market capitalization: $6,378

Net Debt: $2,075

Enterprise Value: $8,453

EV/EBIT multiple*: 13.6x (*Pro-forma)

$0

$5,000

$10,000

$15,000

$20,000

'99 '00 '01 '02

0%

5%

10%

15%

20%

Sales

Pro-forma

EBITDA Margin

Pro-forma EBIT

Margin

Segment Revenue Breakdown

25% 12%

30%

5% 4% 24%

Programmes

Solutions & Support

Avionics

North America

Comm. Aerospace

Other

Results are converted from British Pounds Sterling to US Dollars using the exchange rate as of December 31, 2002 (£ 1.00 = US$ 1.6095)

Eurofighter 

Typhoon Nimrod 

BAe Hawk 

Trainer 

Astute-class 

Submarine 

Type 45 

Destroyer CVF 
B – 4 

JSF CONTENT & 

CONTRACT HISTORY

BAE SYSTEMS – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – BAE SYSTEMS

(Year 2002 US$M, except per share) 

(GBP1.00 = US$1.6095)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $4,269.6 $9,708.9 

Average Annual Revenue: $427.0 $647.3 

% of Reported 2002 Revenue: 3.3% 5.0%

Estimated Average Annual EBIT 

Contribution: $31.8 $48.2

FY 2002 Reported Revenue: $12,998.3 

FY 2002 Pro-Forma EBIT: $622.9 

Enterprise Value/EBIT Multiple: 13.6x

Estimated Value of Potential JSF 

EBIT Contribution: $431.9 $654.7 

Estimated Value per Share: $0.14 $0.21

Current Share Price (5/30/03): $2.08

Estimated Impact of JSF EBIT 

Contribution on Company Value: 6.8% 10.3%

Financial Impact

− BAE will likely collect revenues of $3 

million per aircraft 

o At current FRP schedule (2,593 total 

units), JSF will comprise nearly 4% of 

BAE Systems revenues

− Significant EBIT contribution could 

contribute to over 10% of company value 

during FRP 

o Large (~7%) value contribution during 

SDD/LRIP due to partnership with 

Lockheed Martin and Northrop 

Grumman

Geographic Workshare

− United Kingdom

(90%)

o Company UK 

locations

− United States (10%)

o BAE Systems 

North America

Lessons Learned

− Early partnership with Lockheed Martin and Northrop Grumman 

helped secure a substantial position in the program 

− BAE Systems is concerned that export control regulations may 

prevent BAE Systems and the United Kingdom from ever having 

completely autonomous capability to update and operate the aircaft 

Electronic Warfare Systems 

(Countermeasures systems) 

Avionics & Flight Controls

(communications and 

navigation equipment; 

throttle quadrant) 

ElectroOptical 

Targeting Laser

BAE Systems is a Primary Teaming Partner with Lockheed Martin and Northrop 

Grumman Corporation on the F-35 Joint Strike Fighter program

Aft Fuselage CV Wingfold

Structures

January 2001 – UK Government signs Level I Partnership MOU; 

orders 150 F-35B (STOVL) for the Royal Navy and Royal Air Force

1996 – BAE partners with Lockheed Martin and Northrop Grumman during CDP

2000 2001 2002 2003 System Design & Development 2012

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A 
B – 5 

– Major Businesses (former TRW AS): Actuation systems; engine control systems; power 

management systems; aircraft cargo systems

– Key Technological Capabilities (former TRW AS): Flight control actuation; specialized 

actuation systems; engine control software & hardware; starter/generators; cargo handling 

systems; rescue hoists & winches 

– Major Military Platforms (former TRW AS): V-22, C-130J, Eurofighter Typhoon, F-35 (JSF), 

Gripen, Rafale, Mirage

GOODRICH (TRW AS) PRODUCTS

– Actuation Systems – primary and secondary 

flight control and fly-by-wire systems

(actuation and electronics) for fixed- and 

rotary-wing aircraft; engine and nacelle 

actuation; specialized actuation systems 

including missile actuation and control 

systems

– Cargo Systems – cargo handling systems 

(rollers, tracks, rail guides, PDUs) 

– Engine Control Systems – fuel metering 

controls, fuel pumping systems, and electronic 

controls (FADEC software and hardware); 

variable geometry actuation controls; engine 

health and usage monitoring systems (HUMS) 

– Power Systems – AC and DC generating 

systems; starter/generators; hoists & wenches 

GOODRICH (TRW AS) – C OMPANY OVERVIEW

Goodrich Corporation 

New York Stock Exchange – Ticker: GR 

Headquarters: Charlotte, NC, UNITED STATES 

Employees: 22,900 

In 2002, Goodrich Corporation acquired the business units formerly known as TRW Aeronautical 

Systems (“TRW AS” – previously Lucas Aerospace) from TRW immediately prior to the merger with 

Northrop Grumman. The former TRW AS is now spread across several Goodrich business units. 

 

GOODRICH – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $3,646 $3,701 $4,185 $3,910

Sales growth: 4% 1% 13% (7%)

Reported EBIT: 274 490 385 361

EBIT margin: 8% 13% 9% 9%

Pro-forma EBITDA: 640 699 666 586

EBITDA margin: 18% 19% 16% 15%

Pro-forma EBIT: $502 $534 $492 $403

EBIT margin: 14% 14% 12% 10%

Revenue per employee: $170,751

Stock price: $18.27 (as of 5/30/2003)

52 week high: $34.20

52 week low: $13.10

Shares outstanding: 117.5 million

Market capitalization: $2,147

Net Debt: $2,358

Enterpise Value: $4,505

EV/EBIT multiple*: 11.2x (*Pro-forma)

$3,200

$3,400

$3,600

$3,800

$4,000

$4,200

$4,400

'99 '00 '01 '02

0%

5%

10%

15%

20%

Sales

Pro-forma

EBITDA Margin

Pro-forma EBIT

Margin

Segment Revenue Breakdown

22%

13%

18%

22% 25%

Aerostructures/ATS

Landing Systems

Engine/Safety

Electronic Systems

TRW AS

Engine 

Control 

Missile 

Actuation 

Flap / Slat 

Actuation 

Starter / 

Generator

Thrust Reverser

Actuation 

Aircraft Cargo 

Systems 

Fuel Metering 

Units 
B – 6 

JSF CONTENT & 

CONTRACT HISTORY

GOODRICH (TRW AS) – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – GOODRICH (FORMER TRW AS BUSINESSES ONLY)

(Year 2002 US$M, except per share) 

(GBP1.00 = US$1.6095)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $159.0 $614.2 

Average Annual Revenue: $15.9 $40.9 

% of Reported 2002 Revenue: 0.4% 1.0%

Estimated Average Annual EBIT 

Contribution: $2.0 $5.1

FY 2002 Reported Revenue: $3,910.2 

FY 2002 Pro-Forma EBIT: $402.6 

Enterprise Value/EBIT Multiple: 11.2x

Estimated Value of Potential JSF 

EBIT Contribution: $22.4 $57.6 

Estimated Value per Share: $0.19 $0.49

Current Share Price (5/30/03): $18.27

Estimated Impact of JSF EBIT 

Contribution on Company 1.0% 2.7%

Financial Impact

− Impact of TRW AS JSF contract revenues 

on Goodrich Corporation will be minor 

o Expected WBDDS revenues during FRP 

equate to over 3% of former TRW AS 

revenues 

o JSF will help diversify the former TRW 

AS’s historical focus on civil market 

− Value of EBIT contribution could equate to 

almost 3% of Goodrich market value 

o Potentially significant valuation impact 

relative to size of contract

Geographic Workshare

United Kingdom (>70%) 

− Wolverhampton – 

WBDDS 

United States (<15%) 

− Rome, NY – LiftFan 

driveshaft components 

Rest of World (<15%) 

− Various Components

Lessons Learned

− Goodrich’s capability in Europe for sophisticated actuation 

systems is a strong rival for traditional US military sources; the 

best-value sourcing model has allowed Goodrich/TRW AS to 

earn a significant position in the JSF program 

2 October 2002 – Goodrich completes acquisition of TRW 

Aeronautical Systems 

1 March 2002 – Northrop Grumman contracts TRW 

Aeronautical Systems to provide WBDD system for JSF

2004 – 1st

 Delivery of WBDDS 

to Northrop Grumman

“[Goodrich] is deploying its full range of state-of-the-art manufacturing capabilities 

to ensure the weight, reliability, and above all, affordability demands of the F-35 

are met.” – Dave Goldney, Goodrich Corporation 

Weapons Bay Door Drive System (WBDDS) 

(Power drive units, actuators, & other drive system components) 

Other Contracts: 

• LiftFan Components 

• Utility Actuators 

2000 2001 2002 2003 System Design & Development 2012

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A 
B – 7 

– Major Businesses: Gas turbine design, manufacture, and MRO services; marine equipment

– Key Technological Capabilities: Gas turbine design and integration 

– Major Military Platforms: V-22, C-130, P-3, E-2C, AV-8B, T-45, JSF, Eurofighter Typhoon, 

Global Hawk, RAH-66 Comanche (through LHTEC JV), various European helicopter programs

ROLLS ROYCE PRODUCTS

– Civil Aerospace – turbine engines; major 

platforms include: B747/757/767 (RB211), 

A340-500&600/A330/A380/B777 (Trent), A320 

(IAE V2500), B717 (BR715), and a variety of 

general aviation and regional rotary- and fixedwing aircraft (A250, BR710, Tay, AE3007, 

Williams-Rolls FJ33 and FJ44) 

– Power Generation – gas turbine and diesel 

engine power generation systems (RR 

leverages aerospace turbine engine 

technology into power gen market) 

– Defense – specialized turbine engines 

(turboshafts, turboprops, turbojets, and 

turbofans) 

– Marine – marine gas turbine propulsion 

systems; thrusters; propellers; waterjets; ship 

stabilization and motion control systems 

– Aftermarket Services – gas turbine 

maintenance, repair, and overhaul; accounts 

for 44% of Rolls Royce plc revenues 

R OLLS R OYCE PLC – C OMPANY OVERVIEW

Rolls Royce plc 

London Stock Exchange – Ticker: RR 

Headquarters: London, UNITED KINGDOM 

Employees: 39,200 

Rolls Royce is one of the world’s leading manufacturers of gas turbine engines, serving the aircraft, 

marine, and power generation markets with facilities in the US, UK, and Europe. Rolls Royce also 

supplies a wide range of marine propulsion products, including thrusters, propellers, and waterjets. 

 

ROLLS ROYCE PLC – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $7,458 $9,438 $10,185 $9,316

Sales growth: 4% 27% 8% (9%)

Reported EBIT: 665 465 501 377

EBIT margin: 9% 5% 5% 4%

Pro-forma EBITDA: 824 1,109 1,197 996

EBITDA margin: 11% 12% 12% 11%

Pro-forma EBIT: $655 $822 $879 $497

EBIT margin: 9% 9% 9% 5%

Revenue per employee: $237,648

Stock price: $1.99 (as of 5/30/2003)

52 week high: $3.00

52 week low: $1.03

Shares outstanding: 1,601.0 million

Market capitalization: $3,189

Net Debt: $1,093

Enterprise Value: $4,282

EV/EBIT multiple*: 8.6x (*Pro-forma)

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

'99 '00 '01 '02

0%

2%

4%

6%

8%

10%

12%

14%

Sales

Pro-forma

EBITDA Margin

Pro-forma EBIT

Margin

Segment Revenue Breakdown

24%

17%

11% 1%

47%

Civil Aerospace

Defense Aerospace

Marine

Energy

Financial

Results are converted from British Pounds Sterling to US Dollars using the exchange rate as of December 31, 2002 (£ 1.00 = US$ 1.6095)

Trent series RB211 BR715 Tay EJ200 AE3007 T-56 
B – 8 

JSF CONTENT & 

CONTRACT HISTORY

R OLLS R OYCE PLC – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – ROLLS ROYCE PLC

(Year 2002 US$M, except per share) 

(GBP1.00 = US$1.6095)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $2,130.7 $5,404.3 

Average Annual Revenue: $213.1 $360.3 

% of Reported 2002 Revenue: 2.3% 3.9%

Estimated Average Annual EBIT 

Contribution: $16.8 $28.3

FY 2002 Reported Revenue: $9,315.8 

FY 2002 Pro-Forma EBIT: $497.3 

Enterprise Value/EBIT Multiple: 8.6x

Estimated Value of Potential JSF 

EBIT Contribution: $144.3 $244.0 

Estimated Value per Share: $0.09 $0.15

Current Share Price (5/30/03): $1.99

Estimated Impact of JSF EBIT 

Contribution on Company 4.5% 7.7%

Financial Impact

− Approximately half of Rolls Royce JSFrelated revenues will come from sales of 

STOVL aircraft 

o STOVL aircraft deliveries are “frontloaded” (proportionally high during LRIP, 

and complete by 2021), giving Rolls 

Royce a relatively high revenue and 

earnings impact in early years 

compared to other partner companies 

o 40% share of F136 engine will help 

diversify the Rolls Royce JSF portfolio 

− High potential for value contribution 

o $6 billion potential during FRP could 

significantly contribute to the bottom line

Geographic Workshare

United Kingdom (50%) 

− Bristol – roll posts and 

swivel duct 

United States (50%) 

− Indianapolis, IN – LiftFan 

and components

− 40% F136 workshare 

with (GEAE)

Lessons Learned

− F135 (PW) vs F136 (GE/RR) data separation – Training 

needed to mitigate contractual and liability issues related to 

being a member of both engine teams (PW STOVL & GE/RR 

F136) 

− The success of this program is a building block for future US/UK 

defense co-operation; experience during CDP underlined the 

importance of fully integrated design definition supported by 

digital data exchange and leading edge program management 

skills and processes

STOVL Propulsion Systems 

(LiftFan, 3 Bearing Swivel 

Module, Roll Post Ducts) 

19 December 2001 – Pratt & Whitney and Rolls Royce 

sign contract covering STOVL systems during SDD 

1996 – RR partners with Lockheed Martin and Pratt & Whitney during CDP

“[JSF] preserved Rolls-Royce position at the forefront of STOVL 

propulsion...Participation in STOVL JSF and F136 is vital to Rolls-Royce 

future propulsion strategy and position in the market place.” 

– Rolls Royce

GE/RR F136 

Interchangeable Engine

(40% Share) 

2000 2001 2002 2003 System Design & Development 2012

January 2001 – UK Government signs Level I Partnership MOU; 

orders 150 F-35B (STOVL) for the Royal Navy and Royal Air Force

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A 
B – 9 

– Major Businesses (Aerospace): Electronic systems; actuation systems; detection and aviation 

security systems; precision components; Kelvin Hughes marine systems

– Key Technological Capabilities (Aerospace): Specialized engineering and manufacturing; 

electronic and actuation systems and components; precision component manufacturing 

– Major Military Platforms (Aerospace): V-22, C-130J, F/A-18E/F, F-16, Eurofighter Typhoon, 

AH-64D Apache, F-35 (JSF), F-22, AV-8B, T-45, JPATS

SMITHS AEROSPACE PRODUCTS

– Electronic Systems – flight management 

systems; voice, video, data recording, and 

analysis systems; stores management 

systems; crew information and mission 

planning systems; power generation and 

distribution systems; fuel gauging and 

management systems; environmental 

conditioning 

– Actuation Systems – flight controls; thrust 

reversers; landing gear; hydraulics; propellers 

(Dowty) 

– Precision Components – complex engine 

components; rigid tubular and flexible hose 

assemblies; aircraft structures 

– Detection and Aviation Security Systems – 

trace detection equipment for chemical & 

biological agents, explosives, and narcotics 

(Smiths Detection); x-ray security systems 

(Smiths Heimann) 

– Marine Systems (Kelvin Hughes) – radar; 

navigation systems; tactical displays 

S MITHS AEROSPACE – C OMPANY OVERVIEW

Smiths Group plc 

London Stock Exchange – Ticker: SMIN 

Headquarters: London, UNITED KINGDOM 

Employees: 33,000 

Smiths Aerospace, one of four business units of UK engineering conglomerate Smiths Group plc, 

focuses on specialized integrated systems for aircraft platforms. Smiths is a key supplier to both Boeing 

(737 & 777) and Airbus (A340) in the commercial airliner market, and a variety of military platforms. 

 

SMITHS GROUP PLC – FINANCIAL SUMMARY

(US$M) Year ended 31 Jul 1999 2000 2001 2002

Sales: # $6,070 $7,489 $7,980 $5,188

Sales growth: 20% 23% 7% (35%)

Reported EBIT: 821 909 6 553

EBIT margin: 14% 12% 0% 11%

Pro-forma EBITDA: 908 1,024 1,272 891

EBITDA margin: 15% 14% 16% 17%

Pro-forma EBIT: $845 $945 $970 $662

EBIT margin: 14% 13% 12% 13%

Revenue per employee: $157,219

Stock price: $10.74 (as of 5/30/2003)

52 week high: $14.13

52 week low: $8.40

Shares outstanding: 558.5 million

Market capitalization: $5,996

Net Debt: $1,167

Enterprise Value: $7,163

EV/EBIT multiple*: 10.8x (*Pro-forma)

3000

4000

5000

6000

7000

'99 '00 '01

0

0.1

0.2

0.3

0.4

0.5

Sales

GP Margin

EBITDA Margin

EBIT Margin

£0

£2,000

£4,000

£6,000

£8,000

'98 '99 '00 '01

0%

10%

20%

30%

40%

Sales

GP Margin

EBITDA Margin

EBIT Margin

$0

$2,000

$4,000

$6,000

$8,000

$10,000

'99 '00 '01 '02

5%

7%

9%

11%

13%

15%

17%

19%

Sales

EBITDA Margin

EBIT Margin

Segment Revenue Breakdown

16%

27%

14% 43% Aerospace

Medical

Sealing Solutions

Industrial

Results are converted from British Pounds Sterling to US Dollars using the exchange rate as of December 31, 2002 (£ 1.00 = US$ 1.6095)

Flight 

Management 

Power 

Systems 

Actuation & 

Control Systems

Engine 

Components

Tubular 

Assemblies 

Bio Agent 

Detection 

Marine 

Radar
B – 10

JSF CONTENT & 

CONTRACT HISTORY

S MITHS AEROSPACE – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – SMITHS AEROSPACE

(Year 2002 US$M, except per share) 

(GBP1.00 = US$1.6095)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $579.7 $2,877.5 

Average Annual Revenue: $58.0 $191.8 

% of Reported 2002 Revenue: 1.1% 3.7%

Estimated Average Annual EBIT 

Contribution: $7.5 $24.7

FY 2002 Reported Revenue: $5,188.2 

FY 2002 Pro-Forma EBIT: $662.5 

Enterprise Value/EBIT Multiple: 10.8x

Estimated Value of Potential JSF 

EBIT Contribution: $80.7 $266.9 

Estimated Value per Share: $0.14 $0.48

Current Share Price (5/30/03): $10.74

Estimated Impact of JSF EBIT 

Contribution on Company 1.3% 4.5%

Financial Impact

− Potential revenues of over $1 million per 

aircraft will have a significant impact on 

Smiths Aerospace, especially if JSF is 

produced in large quantities 

o At current FRP schedule (2,593 total 

units), JSF will comprise nearly 4% of 

Smiths Group revenues 

o ~9% of Smiths Aerospace revenues 

− Significant EBIT contribution could 

contribute to over 4% of company value 

during FRP 

o Relatively large (>1%) value contribution 

during SDD/LRIP

Geographic Workshare

United Kingdom (~50%) 

− Various UK facilities –

power management; 

I/O units; standby flight 

display; actuation; 

debris monitors 

United States (~50%) 

− Various US facilities – 

SMS; tubes & hoses

Lessons Learned

− Cross-functional Integrated Product Teams with membership 

by all involved parties leads to a culture with no surprises 

− Performance Based Specifications and the shift to suppliers 

having total system performance responsibility has allowed 

optimization of designs for long-term affordabilty 

− International participation early in the development program is 

both challenging and rewarding 

− The aggressive schedule to first flight creates a highly 

focused, highly motivated program 

Actuation Systems 

(3 bearing nozzle actuation) 

(LiftFan actuation) 

(BRU power module) 

Canopy Structure

“[JSF] is clearly the biggest business opportunity ever for Smiths Aerospace, a 

reward for the advanced technologies we have developed.” 

- Keith Butler-Wheelhouse, Smiths Group CEO

Components 

(engine, LiftFan 

tubular system, 

debris monitors)

December 2002 – Smiths is selected to 

produce the rigid and flexible tubing and 

1999 – Lockheed Martin selects Smiths Aerospace to 

provide electrical power management for JSF 

2004 – 1st

 Deliveries of several 

contracted components

2000 2001 2002 2003 System Design & Development 2012

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A 

Electronic Systems 

(Power management 

system, remote I/Os, 

tactical data equipment, 

standby flight display, 

stores management) 
B – 11

– Major Businesses: Electrical and electromechanical components; sonobuoys; software/IT

– Key Technological Capabilities: Sonobuoys, sonar, and related ASW technologies; HiPPAG; 

aircraft noise and vibration suppression; C4ISR systems; airport IT systems 

– Major Military Platforms: F/A-18E/F, Eurofighter Typhoon, P-3 Orion, BAe Hawk, F-35 (JSF), 

and various submarines, ships, and armored vehicles

ULTRA ELECTRONICS PRODUCTS

– Air & Land Systems – ASW systems: active 

and passive sonobuoys; bathythermal buoys; 

towed sonar arrays; sonobuoy telemetry 

receivers; torpedo countermeasures; Civil 

Aerospace: aircraft noise and vibration 

suppression systems; landing gear control 

computers; electric propeller controls; 

propeller de-icing; Military Aerospace: 

HiPPAG; software and systems integration; 

sidewinder missile MRO; Land Systems:

controls; flat screen displays; TACISYS 

– Information & Ship Systems – Naval 

Systems: torpedo acoustic countermeasures; 

surfice ship torpedo defense; command & 

control systems; multi-function workstations; 

C4ISR systems; signature management 

systems; electromagnetic silencing systems; 

multi-beam side-scan sonars; IT Systems:

airport IT systems 

ULTRA ELECTRONICS – C OMPANY OVERVIEW

Ultra Electronics Holdings plc 

London Stock Exchange – Ticker: ULE 

Headquarters: Greenford, UNITED KINGDOM 

Employees: 2,390 

Through acquisitions, Ultra Electronics has grown into an international group of companies providing 

electrical, electromechanical, and software design, development, and manufacturing capability to firstand second-tier suppliers in the aerospace and defense industries. 

 

ULTRA ELECTRONICS HOLDINGS PLC – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $311 $365 $386 $419

Sales growth: 22% 18% 6% 9%

Reported EBIT: 37 44 45 48

EBIT margin: 12% 12% 12% 11%

Pro-forma EBITDA: 45 56 58 60

EBITDA margin: 14% 15% 15% 14%

Pro-forma EBIT: $37 $44 $45 $48

EBIT margin: 12% 12% 12% 11%

Revenue per employee: $175,329

Stock price: $8.02 (as of 5/30/2003)

52 week high: $8.21

52 week low: $6.43

Shares outstanding: 66.0 million

Market capitalization: $529

Net Debt: $63

Enterpise Value: $592

EV/EBIT multiple*: 12.4x (*Pro-forma)

$0

$100

$200

$300

$400

$500

'99 '00 '01 '02

0%

5%

10%

15%

20%

Sales

Pro-forma

EBITDA Margin

Pro-forma EBIT

Margin

Segment Revenue Breakdown

32%

68%

Air & Land Systems

Information & Sea

Systems

Results are converted from British Pounds Sterling to US Dollars using the exchange rate as of December 31, 2002 (£ 1.00 = US$ 1.6095)

Active Noise 

Cancellation FIDS 

Tactical 

Displays 

HiPPAG 

Systems 

Sonobuoy 

Systems 

Flight Control 

Units 
B – 12

JSF CONTENT & 

CONTRACT HISTORY

ULTRA ELECTRONICS – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – ULTRA ELECTRONICS

(Year 2002 US$M, except per share) 

(GBP1.00 = US$1.6095)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $13.7 $61.7 

Average Annual Revenue: $1.4 $4.1 

% of Reported 2002 Revenue: 0.3% 1.0%

Estimated Average Annual EBIT 

Contribution: $0.2 $0.5

FY 2002 Reported Revenue: $419.0 

FY 2002 Pro-Forma EBIT: $47.6 

Enterprise Value/EBIT Multiple: 12.4x

Estimated Value of Potential JSF 

EBIT Contribution: $2.0 $6.0 

Estimated Value per Share: $0.03 $0.09

Current Share Price (5/30/03): $8.02

Estimated Impact of JSF EBIT 

Contribution on Company 0.4% 1.1%

Financial Impact

− Impact of JSF HiPPAG contract revenues 

on Ultra Electronics will be minor 

o Ultra’s portfolio of products and 

platforms is highly diversified 

o Precision Air Systems business is 

diversified across several platforms: 

JSF, Eurofighter, Harrier, F-15, F-16, 

F/A-18 

− JSF-related value creation will be in line 

with revenue impact (~1%)

Geographic Workshare

− United Kingdom 

(70%)

o Gloucester facility

− Rest of World (30%)

o Suppliers – 

Goodrich; Pacific 

Scientific – Artus

o US service 

centers

Lessons Learned

− Ultra continuously invests in R&D (~20% of annual revenues) to 

keep a technical edge on its competitors 

− Contract negotiation process can extend many months longer than 

expected – Ultra had previously expected to have a HiPPAG 

contract over one year ago in Q2 2002 

“This important selection emphasizes the superiority of Ultra’s innovative HiPPAG 

technology. We are delighted to be meeting this key requirement on the F-35 

program.” – Andy Hamment, Ultra Electronics 

 High Pressure Pure Air Generator (HiPPAG) 

Pneumatic Weapons Ejection System 

Q3 2003 – Ultra expects to sign a contract with EDO Corp 

to supply HiPPAG weapons ejection systems for JSF 

1998-2000 – JSF Proposals to Lockheed 

Martin; pit firing demonstrations at EDO

2000-2001 – HiPPAG systems fly on F-15, F-16, 

F/A-18, Harrier, Eurofighter, and other platforms

2000 2001 2002 2003 System Design & Development 2012

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A 
B – 13

U NITED KINGDOM : C OMPENDIUM

Company Name Est. Location Employees

Total Sales 

($ Millions) Potential Technology/Capability

Apollo Logistics Ltd. (Apollo Materials) 1999 Preston 60 63.9 Aerospace materials and logistics services

Aircraft Research Association 1952 Bedfordshire n.a. n.a. Aerodynamic research, design, and testing

BSL Ltd. (Brammer Group plc) n.a. Manchester n.a. n.a. Industrial engineering products

Cytec Engineered Materials Ltd. 

(Cytec Industries Inc.) 1993 Wrexham 240 51.4 Frequency hopping, secure, and anti-jam high frequency radio equipment

Computer Devices Corporation n.a. East Sussex n.a. n.a. Avionics and other electronic systems

EMF Ltd. 1991 Cambridge n.a. n.a. High purity organometallics for III/V epitaxy

FHL (Claverham Group) 1960 Bristol 360 72.0 Electro-hydraulic, electro-mechanical, electropneumatic and hybrid technologies

Flight Refueling (Cobham plc) n.a. Dorset n.a. n.a. Air to air refueling systems

Honeywell Normalair-Garrett Ltd. 

(Honeywell) 1946 Somerset 1,381 173.9 A/C, oxygen, hydruaulic, and control equipment

Lucas Aerospace Ltd. (TRW) n.a. Wolverhampton n.a. n.a. Flight controls, engine controls, electrical power 

Martin Baker Aircraft Co. Ltd. (Martin 

Baker Engineering Ltd.) 1966 Uxbridge 750 122.7 Ejection seats

MBDA n.a. London 10,000 2,000.0 Airframes, engines, and systems

Messier-Dowty Ltd. (Snecma) 1932 Gloucester 880 301.3 Landing gear systems

Oxley Group plc 1969 Ulverstron 250 18.6 Avionics and electronic components and systems

Page Aerospace Ltd. (The Page 

Group Ltd.) 1942 Sunbury-on-Thame 197 30.2 Cabin power and lighting products

QinetiQ Group plc 2001 Ively Road 9,000 1,044.8 Radar, LCDs, carbon fiber, and infrared sensors

RTI International Metals Ltd. (RTI 

International Metals Inc.) n.a. Staffordshire n.a. n.a. Titanium and Nickel Alloy products 

Scantron Industrial Products Ltd. 1981 Taunton 12 n.a. Laser measuring equipment

Thales Optronics Taunton 1992 Taunton 250 30.0 Optical instrumentation and lenses

Thermion Systems Europe Ltd. 

(Thermion Systems International Inc.) n.a. Bedfordshire n.a. n.a. Aircraft deicing and material joining systems 

Thomson Training and Simulation 

(Thales) n.a. Crawley 1,200 n.a. Simulation and training systems 

All Metals Services 1974 Middlesex 135 400.0 Aerospace and related metals

Wesco U.K. (Wesco Aircraft) 1984 West Yorkshire 77 20.3 Fasteners distribution and inventory management

United Kingdom - Potential Defense Industry JSF Competitors 

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US Department of 

State. Financial information compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, MASAI reports, ICC Shareholder 

reports, securities exchange filings, the Major Companies Database, FBR Company profiles, and others.
B – 14

(This page intentionally left blank.)
C – 1

APPENDIX C 

ITALY: COMPANY CASE STUDIES AND COMPENDIUM 
C – 2

(This page intentionally left blank.)
C – 3

– Major Businesses: starter / generators, electronics, braking systems, component overhaul

– Key Technological Capabilities: electronics, electromechanical equipment, and hydraulic 

systems 

– Major Military Platforms: Aermacchi M346; Tornado; Eurofighter; EH101; Super Lynx; A129 

Mangusta; various armored vehicles

ASE PRODUCTS

− Electromechanical Equipment – AC and DC, 

and oil- and air-colled motors; starters; startergenerators; current transformers 

− Hydraulic Equipment – braking systems for 

armored vehicles 

– Electrical Equipment – generator control 

units; engine monitoring units for endothermic 

engines; transformer rectifier units; high 

energy ignition units 

ASE SP A – C OMPANY OVERVIEW

ASE S.p.A. 

Joint-stock company 

Headquarters: San Giorgio su Legano, ITALY 

Employees: 79 

ASE S.p.A. specializes in the design, development, production, and repair of electronic, 

electromechanical, and hydraulic equipment for aircraft and special ground vehicles. ASE, then known as 

Marelli Avio, was purchased from Simmel Difesa in 1998. 

 

ASE FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $12.4 $13.2 $12.1 n.a.

Sales growth: n.a. 6% (8%)

Reported EBIT: n.a. n.a. n.a. n.a.

EBIT margin:

Pro-forma EBIT: $1.5 $1.6 $1.5 

Estimated EBIT margin: 12% 12% 12%

Revenue per employee: $151,295

Privately held company

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

'99 '00 '01 '02

0%

2%

4%

6%

8%

10%

12%

14%

Sales

Pro-forma EBIT

Margin

Segment Revenue Breakdown

17%

11%

72%

Fixed Wing Aircraft

Helicopters

Ground Vehicles

D.C. Electrical Power

Hydraulic Braking System High Energy Ignition Units Generator Generating System 

Results are converted from Euros to US Dollars using the exchange rate as of December 31, 2002 (EUR 1.00 = US$ 1.0429)
C – 4

JSF CONTENT & 

CONTRACT HISTORY

ASE SP A – JSF P ARTICIPATION

(Year 2002 US$M, except per share) 

(EUR1.00 = US$1.0429)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $5.3 $14.3 

Average Annual Revenue: $0.5 $1.0 

% of Reported 2001 Revenue: 4.4% 7.9%

Estimated Average Annual EBIT 

Contribution1

: $0.1 $0.1

FY 2001 Reported Revenue: $12.1 

FY 2001 Pro-Forma EBIT: $1.5 

Enterprise Value/EBIT Multiple2: 8.0x

Estimated Value of Potential JSF 

EBIT Contribution: $0.5 $0.9 

Estimated Impact of JSF EBIT 

Contribution on Company Value: 4.4% 7.9%

Financial Impact

− Assumptions: 

o ASE is awarded contracts to design and 

produce high-energy ingitor units for the 

F135 engine

o Expected 12% EBIT margin

− HEIU contract would significantly increase 

the value of ASE by increasing profit by an 

estimated 35%-65% 

− Future contracts could further increase 

financial impact of JSF 

o Current discussions between ASE and 

Lockheed Martin may uncover further 

contract opportunities on JSF

Geographic Workshare

− Italy 

o ASE performs all 

work at its 

facilities in 

northern Italy

Lessons Learned

− Communications between foreign companies and some JSF 

contractors have been sparse. ASE received and submitted a bid 

for the F135 ignitors; however, a year prior, an ASE competitor 

distributed a press release announcing that they had won the F135 

ignitor contract. ASE has neither received feedback on its bid nor 

responses from the JSF program regarding this confusion. 

Potential Contracts: 

• High Power Igniters (Pratt & Whitney F135) 

• Permanent Magnet Alternator (Smiths Aerospace & 

Hamilton Sundstrand) 

“ASE is interested in participating in JSF Program, where the proposed equipment 

are an evolution of [ASE’s] products in line with the company capability” 

– Salvetore Spina, JSF Program Manager, ASE

2000 2001 2002 2003 System Design & Development 2012

December 2002 – HEIU RFP received from Hamilton 

Sundstrand; ASE Proposal submitted in February 2003

March 2002 - LOI signed with Lockheed Martin 

June 2001 – Proprietary information agreement signed; ASE 

begins discussions with Hamilton Sundstrand

JSF FINANCIAL IMPACT – ASE

1

Incremental JSF EBIT margin = 12% 

2

EV/EBIT multiple of 8.0x assumed for private component manufacturer 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
C – 5

– Major Businesses: aeroengine modules and components, aerospace propulsion systems, turbine 

engine MR&O

– Key Technological Capabilities: design, development, mechanical manufacturing, accessory 

and propeller gearboxes, power transmissions for, transmissions, low pressure turbines, 

afterburners, auxiliary power units, turbine engine MR&O, solid and liquid fuel propulsion systems, 

light launch vehicles 

– Major Military Platforms: F-22 (F119); Apache & Blackhawk (T700/CT7); Aermacchi M346 

(F124); Tornado (RB199); Eurofighter (EJ200); F35 (F136), C-130J (AE2100); AMX (Spey 

Mk807), A400M (TP400); Vega; Ariane

FIATAVIO PRODUCTS

− Commercial & Military Aircraft Engines – 

design, development and production of turbine 

engines, modules, and components 

− Space Propulsion – Design and production of 

solid and liquid propellant boosters 

– Marine Systems – propulsion systems for 

high-speed ships (derived from aeroengine 

technology); automation and control systems 

– Turbine Engine MR&O – maintenance, repair, 

and overhaul of aerospace and marine turbine 

engines 

FIAT A VIO – C OMPANY OVERVIEW

FiatAvio S.p.A. 

In the process of being divested from Fiat Group 

Headquarters: Turin, ITALY 

Employees: 5,243 

FiatAvio designs and produces engine modules and components for the aviation and marine industries 

and space propulsion systems, typically as a partner (with occasional risk-share) with some of the 

industry’s largest engine manufacturers. FiatAvio also maintains, repairs, and overhauls turbine aircraft 

engines, both in the military and commercial markets. 

 

FIATAVIO FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # n.a. $1,604 $1,732 $1,609

Sales growth: 8% (7%)

Reported EBIT: n.a. 239 579 220

EBIT margin: 16% 35% 14%

Pro-forma EBITDA: n.a. 322 359 325

EBITDA margin: 21% 22% 21%

Pro-forma EBIT: n.a. $228 $266 $220

EBIT margin: 15% 16% 14%

Revenue per employee: $292,631

 Fiat Avio is in the process of being divested

Enterprise Value: $1,679

EV/EBIT multiple*: 7.6x (*Pro-forma)

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

'00 '01 '02

0%

5%

10%

15%

20%

25%

Sales

Pro-forma

EBITDA Margin

Pro-forma EBIT

Margin

Segment Revenue Breakdown

20%

9%

15% 2%

54%

Commercial Engines

Military Engines

Commercial MR&O

Space

Other

Enterprise equals the acquisition price offered by The Carlyle Group; this price is reflected in the EV/EBIT multiple 

Results are converted from Euros to US Dollars using the exchange rate as of December 31, 2002 (EUR 1.00 = US$ 1.0429)
C – 6

JSF CONTENT & 

CONTRACT HISTORY

FIAT A VIO – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – FIATAVIO

(Year 2002 US$M, except per share) 

(EUR1.00 = US$1.0429)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $28.4 $343.0 

Average Annual Revenue: $2.8 $22.9 

% of Reported 2002 Revenue: 0.2% 1.4%

Estimated Average Annual EBIT 

Contribution: $0.4 $3.5

FY 2002 Reported Revenue: $1,609.5 

FY 2002 EBIT: $220.3 

Enterprise Value/EBIT Multiple1

: 7.6x

Estimated Value of Potential JSF 

EBIT Contribution: $3.3 $26.4 

Current Enterprise Value: $1,678.7

Estimated Impact of JSF EBIT 

Contribution on Company Value: 0.2% 1.6%

Financial Impact

− Assumptions: 

o FiatAvio shares 5% of F136 program 

revenues

o F136 program wins 50% of JSF engine 

business

o FiatAvio is awarded $150 million of 

engine MR&O over the course of FRP

− FiatAvio expects new relationship with 

Lockheed Martin to result in significant 

new business 

o Lockheed Martin and FiatAvio are 

currently discussing potential 

involvement in marine automation and 

space equipment

o Direct result of participation in JSF

Geographic Workshare

− Italy 

o FiatAvio facilities 

in Italy are 

expected to carry 

out all design and 

development 

work

Lessons Learned

− TAAs require substantial efforts to obtain; FiatAvio TAAs with GE 

and Rolls-Royce took a long time as FiatAvio had to show that they 

had the capability to design parts without American technology 

− Intellectual Property issues have hampered involvement in JSF; 

FiatAvio wants to retain its IP, while the engine primes want 

FiatAvio to surrender it 

− JSF will help to increase FiatAvio’s experience with the US 

government 

Memorandum of Understanding: 

• 5% risk-sharing partner in F136 engine 

(with GE and Rolls Royce) 

o Low-pressure turbine components 

o Engine-mounted accessory drive 

Other Potential Opportunies:

• APU components (Honeywell)

• F136 MR&O 

• Engine controls 

“F136 is one of our main products for the future...our company is based on 

design and development strengths.” –FiatAvio 

2000 2001 2002 2003 System Design & Development 2012

F136 production to begin (two-year lag behind F135)

FiatAvio begins discussions with General Electric and Rolls Royce in 1999

1

EV/EBIT multiple of proposed acquisition by The Carlyle Group 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
C – 7

– Major Businesses: aeronautics (fixed-wing & helicopters), defense, space, energy, 

transportation, IT services 

– Key Technological Capabilities: aircraft assembly, systems integration and design, defense 

electronics, microelectronics, mass transit systems, power generation, IT security 

– Major Military Platforms: Eurofighter, AM-X, Tornado, B767 Tanker, EH-101, NH-90, ATR42/72 

ASW/MP, JSF, A129, various tanks and armored vehicles 

FINMECCANICA BUSINESSES

– Aeronautics – Alenia Aeronautica (aircraft 

and sub-systems design, production, and 

support); Aeronavali (aircraft MR&O and 

conversions); Lockheed Martin Alenia TTS (C27J) 

– Space – Alenia Spazio and Laben 

(development and production of satellites, 

subsystems and components for space 

infrastructures; electronics) 

– Microelectronics – STMicroelectronics 

– IT Serivces – Elsag (electronic / IT security 

and reliability) 

– Energy – Ansaldo Energia (power generation 

systems) 

– Helicopters – AgustaWestland (joint venture 

with GKN) – helicopter design, development, 

production and support 

– Defense Systems – Marconi Selenia 

Communications, Galileo Avionica, Oto 

Melara, WASS, AMS (JV), and MBDA (JV); 

design and manufacturing of airborne systems, 

electro-optical systems, on-board radar, 

surface and underwater naval systems, 

armored vehicles, naval, anti-aircraft and field 

artillery, strategic communications 

– Transport – Ansaldo Breda, Ansaldo Signal, 

Ansaldo Transporti Sistemi Feroviari; design 

and production of mass transportation systems 

FINMECCANICA – C ORPORATE OVERVIEW

Finmeccanica S.p.A. 

Italian Stock Exchange – Ticker: SIFI.MI (32.3% owned by Ministry of Economics and Finance) 

Headquarters: Rome, ITALY 

Employees: 97,500 

Finmeccanica is the leading Italian manufacturer of aircraft and aeronautical components, specializing in 

the production of complete combat aircraft, special mission aircraft, aerostructures and components for 

civil aircraft, as well as MR&O and conversion services. Finmeccanica is a leading provider of defense 

electronics and systems integration capabilities in Europe. Finmeccanica is also active in the 

transportation, energy, and IT sectors in Italy. 

FINMECCANICA – FINANCIAL SUMMARY

(US$ M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $6,276 $6,309 $6,945 $8,140

Sales growth: 2% 1% 10% 17%

Reported EBIT: 288 550 368 n.a.

EBIT margin: 5% 9% 5% n.a.

Pro-forma EBITDA: 742 971 1,486 734

EBITDA margin: 12% 15% 21% 9%

Pro-forma EBIT: $443 $700 $1,250 $446

EBIT margin: 7% 11% 18% 5%

Revenue per employee: $198,080

Stock price: $0.59 (as of 5/30/2003)

52 week high: $0.62

52 week low: $0.45

Shares outstanding: 8,430.4 million

Market capitalization: $4,953

Net Debt: $529

Enterprise Value: $5,482

EV/EBIT multiple*: 12.3x (*Pro-forma)

3000

4000

5000

6000

7000

'99 '00 '01

0

0.1

0.2

0.3

0.4

0.5

Sales

GP Margin

EBITDA Margin

EBIT Margin

€ 0

€ 2,000

€ 4,000

€ 6,000

€ 8,000

'98 '99 '00 '01

0%

10%

20%

30%

40%

Sales

GP Margin

EBITDA Margin

EBIT Margin

$0

$2,000

$4,000

$6,000

$8,000

$10,000

'99 '00 '01 '02

0%

5%

10%

15%

20%

25%

Sales

EBITDA Margin

EBIT Margin

Segment Revenue Breakdown

7%

18%

21%

17%

12% 6% 19%

Aeronautics

Space

Helicopters

Defense

Transportation

Energy

IT

Results are converted from Euros to US Dollars using the exchange rate as of December 31, 2002 (EUR 1.00 = US$ 1.0429)
C – 8

– Major Businesses: combat aircraft, military transport aircraft, special missions, commercial 

aircraft and aerostructures, aircraft MR&O

– Key Technological Capabilities: Mechanical machining, metal bonding, composite material 

technology development, aircraft assembly, computational fluid dynamics/electromagnetic fields, 

and system control 

– Major Military Platforms: Eurofighter; AM-X, Tornado, AV-8B Harrier II, C-27J Spartan, G222, 

ATR42/72 MP/ASW, B767 Tanker, JSF, ETAP research project

ALENIA PRODUCTS & SERVICES

– Combat Aircraft – design, production, and 

support of combat aircraft (Eurofighter, 

Tornado, AM-X, JSF, F-104, AV-8) 

– Military Transport Aircraft – designs, 

production, and support of military transport 

aircraft (G222, C-130J) 

– Special Mission Aircraft – development and 

production of special mission aircraft (ATR 

42/72 MP/ASW) 

– Aerostructures and Commercial Aircraft –

manufacture aerostructures for commercial 

and regional aircraft; design and production of 

ATR 42/72 regional turboprop 

– Aircraft MR&O – Aeronavali: commercial 

aircraft MR&O, passenger-to-freighter 

conversions, B767 Tanker conversions, B707 

AWACS MR&O 

– Major Businesses: military and commercial communications systems

– Key Technological Capabilities: circuit, packed, and cell switches, optical networks, radio relay 

and single channel systems 

– Major Military Platforms: Nimrod, Eurofighter, NH-90, C-27J, Tornado, A-129, EH-101, E-3 

AWACS, numerous C4I and naval platforms

MARCONI SELENIA PRODUCTS & TECHNOLOGIES

– Communications Equipment and Networks

– optical networks, broadband routing and 

switching, network security access platforms, 

radio links, multimedia and voice offerings, 

mobile communications, satellite products, 

integrated network management, and security 

outsourcing and consulting 

– Military Communications – switching and 

secure radio technologies

– Marconi Strategic Communications Group 

– tactical, infrastructural networks, Command 

& Control, Ground and Satellite Systems

ALENIA AERONAUTICA – C OMPANY OVERVIEW

Alenia Aeronautica S.p.A. 

Ownership: Subsidiary of Finmeccanica 

Headquarters: Rome, ITALY 

Employees: 9,352 

Alenia Aeronautica is the Italian industrial leader in aircraft design, manufacturing, and support. Alenia 

has vast experience in international aircraft programs, both military and commercial, including several 

with the United States. 

M ARCONI SELENIA – C OMPANY OVERVIEW

Marconi Selenia Communiications 

Ownership: Subsidiary of Finmeccanica 

Headquarters: Rome, ITALY 

Employees: 4,500 

Marconi Selenia Communications specializes in military and commercial communications systems. 

The strengths of Marconi Selenia, previously Marconi Communications under the previous ownership of 

GEC (prior to the acquisition of GEC by BAE Systems), lie in the areas of switching and secure radio 

technologies, with increasing capability in optical networks. 
C – 9

– Major Businesses: avionics, airborne radars, UAVs, drones, radar environment simulators, surface 

systems (electro-optics, IR, microwave), and space equipment

– Key Technological Capabilities: integrated avionics system design & development, radar, electrooptics, microwave, and IR systems, surveillance and reconnaissance UAVs, thermal imaging 

– Major Military Platforms: Eurofighter, EH101, NH90, Aermacchi M346, International Space Station

GALILEO AVIONICA PRODUCTS & TECHNOLOGIES

– Avionics Systems – avionics (mission 

computers, HUDs/HDDs, weapon control 

systems, flight control systems, stores 

management), electro-optics systems 

(targeting systems, laser range finders), 

integrated navigation/attack systems, 

surveillance systems, mission support 

systems 

– Surface Systems – fire control systems 

(armoured vehicles), thermal imaging units, 

radar sub-systems 

– Airborne Radar – maritime surveillance 

radar, ground surveillance radar, passive 

search & track IR sensors, precision approach 

radar (PAR) 

– UAVs & Simulators – surveillance and 

reconnaissance UAVs, radar environment 

training simulators, target drones 

– Space Equipment – electro-optic 

instruments, attitude sensors, RF equipment, 

solar arrays, vision cameras 

GALILEO A VIONICA – C OMPANY OVERVIEW

Galileo Avionica 

Ownership: Subsidiary of Finmeccanica 

Headquarters: Campi Bisenzio, ITALY 

Employees: 3,400 

Galileo Avionica focuses on the design, development, and production of avionics, airborne radar, 

surveillance and reconnaissance UAVs, radar environment simulators, and electro-optics, infrared, and 

microwave systems. Galileo primarily serves the defense and space industries.

 

C-27J 

(Lockheed Martin Alenia TTS)

Boeing 767 Tanker & Boeing aerostructures

(Aeronavali / Alenia) 

Eurofighter Typhoon 

(Alenia, Marconi, Galileo) 

Panavia Tornado 

(Alenia, Marconi, Galileo)

A129 

(AgustaWestland)

EH-101 / US-101 

(Alenia, Marconi, Galileo) 

Airbus aerostructures 

(Alenia) 

ATR 72

(Alenia)
C – 10

JSF CONTENT & 

CONTRACT HISTORY

FINMECCANICA – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – FINMECCANICA

(Year 2002 US$M, except per share) 

(EUR1.00 = US$1.0429)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $499.4 $2,095.0 

Average Annual Revenue: $49.9 $139.7 

% of Reported 2002 Revenue: 0.6% 1.7%

Estimated Average Annual EBIT 

Contribution: $5.2 $14.5

FY 2002 Reported Revenue: $8,139.7 

FY 2002 Pro-Forma EBIT: $445.9 

Enterprise Value/EBIT Multiple: 12.3x

Estimated Value of Potential JSF 

EBIT Contribution: $63.9 $178.7 

Estimated Value per Share: $0.01 $0.02

Current Share Price (5/30/03): $0.59

Estimated Impact of JSF EBIT 

Contribution on Company Value: 1.3% 3.6%

Financial Impact

− Assumptions: 

o Alenia, Galileo, and Marconi Selenia will 

win the remaining contracting 

opportunities outlined in their MOUs with 

Lockheed Martin and Pratt & Whitney

o Analysis eliminates all identified 

contracts that have been awarded to 

other companies

− JSF financial Impact to Finmeccanica will 

increase dramatically if Italian units are 

assembled or supported in Italy 

o Alenia expects to support and/or 

assemble the JSF fleet in Italy and other 

European countries (potential effect not 

included in financial impact analysis)

Geographic Workshare

− Italy 

o Finmeccanica 

intends to perform 

all JSF-related 

work in Italy

o Finmeccanica will 

use Italian 

suppliers for 

outsourced work

Lessons Learned

− Foreign companies can not compete with Americans for classified 

systems. Alenia was sent RFP for flying cockpit testbed “by 

mistake” – for example Alenia feels that they would have been 

potentially suited to be the best value supplier for this contract, but 

non-US companies were not allowed to bid. Future business 

opportunities are dependent on resolution of theclassified data 

exhange issue. 

− Better communication with the prime contractor is necessary for 

foreign partners to be able to compete more successfully 

Awarded Contracts: 

• Wings (2nd Source - Alenia)

• Back-up UHF Radio 

(Marconi Selenia) 

• IPT Participation 

Potential Contracts: 

• Avionics and mission systems: 

o Maintenance Interface Panel; Radar 

Altimeter Module; Cockpit Control Panel; IFF 

Mode 5; ELT; VDL; HF Data Link 

• Italian Final Assembly & MR&O 

“Finmeccanica is the leading company in the second largest JSF partner country.” 

– Enzo Casolini, Alenia Aeronautica

Alenia, Galileo, and Marconi Selenia IPT 

participation

Alenia expects to perform a large portion of JSF maintenance for the Italian Air Force 

and Navy, as well as other European operators (projected to begin after 2012) 

Alenia begins JSF wing production (LRIP – 83 units)

2000 2001 2002 2003 System Design & Development 2012

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A 
C – 11

I TALY : C OMPENDIUM

Company Name Est. Location Employees

Total Sales 

($ Millions) Potential Technology/Capability

Aerea SpA 1927 Milan 85 20.5 Aircraft and avionics

Aermacchi SpA 1913 Venegono 

Superiore 1,814 291.5 Jet trainer aircraft and systems

Datamat SpA 1971 Rome 1,564 162.3 Information and communications technologies

Elettronica Aster SpA 1945 Milan 100 15.8 Frequency hopping, secure, and anti-jam high 

frequency radio equipment

Elsag SpA 1981 Genoa 1,829 311.7 Industrial machinery and filters

Fiar SpA (Finmeccanica) 1953 Milan 500 90.7 Radars, transmitters, sonar and altimeters

Lital SpA 1961 Pomezia 240 24.1 Reference systems and navigation systems

Logic SpA 1962 Cernuso sul 

Naviglio 99 17.1 Electronic systems and components

Magnaghi Aeronatuica SpA 1923 Naples 370 43.8 Aircraft engines and components

Marconi Mobile SpA (Finmeccanica) 1906 Rome 3,700 450.0 High performance communications solutions

Marconi Sirio Panel n.a. Montevarchi 64 n.a. Electro-luminescent flight deck panels

Mecaer Meccanica Aeronautica SpA 1902 Borgomanero 154 23.5 Aircraft components and systems

Meteor - Costruzioni Aeronautiche ed 

Elettroniche SpA (Finmeccanica) 1947 Ronchi dei 

Legionari 250 38.0 UAVs, navigators, pilot controls, and systems

Microtecnica SRL (United 

Technologies) 1929 Turijn 780 83.4 Measuring, fluid flow, and control devices

OMA SpA 1949 Foligno 335 31.1 Aeronatical equipment and overhaul

Piaggio Aero Industries SpA 1963 Genoa 1,450 148.6 Piaggio aircraft

Secondo Mona SpA 1903 Somma 

Lombardo 160 16.3 Fluid and electromechanical systems

Sicamb SpA 1975 Latina 350 32.2 Aircraft and engine manufacturing

Space Software Italia (Finmeccanica) 1988 Taranto 98 8.4 Space, military, and civil software systems

Vitrociset SpA n.a. Rome 1,500 158.1 Logistics and IT support

Italy - Potential Defense Industry JSF Competitors 

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US 

Department of State. Financial information compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, MASAI 

reports, ICC Shareholder reports, securities exchange filings, the Major Companies Database, FBR Company profiles, and others.
C – 12

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D – 1

APPENDIX D 

THE NETHERLANDS: COMPANY CASE STUDIES AND 

COMPENDIUM
D – 2

(This page intentionally left blank.)
D – 3

– Major Businesses: machining, sheet metal fabrication

– Key Technological Capabilities: high speed machining of hard and soft alloys, electro chemical 

machining, forming/welding, surface treatments, NDT 

– Major Military Platforms: Rafale (M88 engine); F-16; JSF (F136 engine); Nimrod; Apache

PHILIPS AEROSPACE PRODUCTS

− Machining – high speed machining of turbine 

blades, blisks, impellers, casings, and airframe 

structures; Electro Chemical Machining 

(patented technology to be applied to turbine 

blade manufacture) 

– Sheet Metal Fabrication – sheet metal engine 

component manufacture 

– Design Activities – FEM analysis, ANSYS, 

MSC/NASTRAN, and static fatigue testing (in 

cooperation with NedTech) 

P HILIPS A EROSPACE – C OMPANY OVERVIEW

Subsidiary of Royal Philips Electronics 

New York Stock Exchange – Ticker: PHG 

Headquarters: Amsterdam, THE NETHERLANDS 

Employees: 166,000 (Aerospace : 170) 

Philips Aerospace applies the precision machining and fabrication skills developed by Philips 

Electronics to the aerospace industry. Philips Aerospace, at EUR 25 million in turnover, accounts for an 

extremely small portion of Philips revenues. 

ROYAL PHILIPS ELECTRONICS – FINANCIAL SUMMARY

(US$ M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $31,459 $37,862 $32,339 $31,820

Sales growth: 3% 20% (15%) (2%)

Reported EBIT: 1,751 4,281 (1,395) 420

EBIT margin: 6% 11% (4%) 1%

Pro-forma EBITDA: 3,649 6,842 2,168 3,119

EBITDA margin: 12% 18% 7% 10%

Pro-forma EBIT: $1,796 $4,522 ($503) $935

EBIT margin: 6% 12% (2%) 3%

Revenue per employee: $191,687

Stock price: $18.81 (as of 5/30/2003)

52 week high: $32.00

52 week low: $12.75

Shares outstanding: 1,276.5 million

Market capitalization: $24,010

Net Debt: $5,251

Enterprise Value: $29,261

EV/EBIT multiple*: 31.3x (*Pro-forma)

Segment Revenue Breakdown

7%

13%

22% 6%

7% 30%

15%

Lighting

Consumer Electronics

Appliances

Components

Semiconductors

Medical Systems

Other (incl Aero)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

'99 '00 '01 '02

 (5%)

0%

5%

10%

15%

20%

Sales

EBITDA Margin

EBIT Margin

Results are as reported in US$M in Form 20-F (United States SEC)
D – 4

JSF CONTENT & 

CONTRACT HISTORY

P HILIPS A EROSPACE – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – PHILIPS AEROSPACE

(Year 2002 US$M, except per share) 

(EUR1.00 = US$1.0429)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $123.3 $659.7 

Average Annual Revenue: $12.3 $44.0 

% of Reported 2002 Revenue: 0.0% 0.1%

Estimated Average Annual EBIT 

Contribution1

: $1.2 $4.4

FY 2002 Reported Revenue: $31,820.0 

FY 2002 Pro-Forma EBIT: $935.0 

Enterprise Value/EBIT Multiple2

: 19.3x

Estimated Value of Potential JSF 

EBIT Contribution: $23.8 $85.0 

Estimated Value per Share: $0.02 $0.07

Current Share Price (5/30/03): $18.81

Estimated Impact of JSF EBIT 

Contribution on Company Value: 0.1% 0.4%

Financial Impact

− Assumptions: 

o Philips Aerospace wins approximately 

7% of F136 engine program (~$1B)

o Philips is awarded 25% of aluminum 

high-speed machining contracts

o Philips performs approximately $200M 

of build-to-print machining for Lockheed 

Martin

− Impact on Philips Electronics is minimal – 

commercial technologies fueled the 

existance of Philips Aerospace subsidiary 

o However, JSF would account for the 

majority of Philips Aerospace revenues 

if all expected contract wins occur

Geographic Workshare

− The Netherlands 

o Phillips 

Aerospace is a 

components 

manufacturer 

performing all 

JSF-potential 

work in the 

Netherlands

Lessons Learned

− F136 delay may dramatically reduce the financial benefit of JSF as 

many air forces will need to take JSF deliveries prior to proposed 

in-service date for F136 

− SDD participation only affords partners the opportunity to receive 

RFQs – success is based upon company performance 

− Transparency in program and contract management would help 

partner companies optimize their efforts within the best-value 

sourcing model 

Awarded Contracts: 

• F136 Engine Phase III 

• Fan casing 

• Stage I & II HPC Blisks

Potential Contracts: 

• 7% Risk-Share of F136 Engine as part of a 

consortium of Dutch companies 

• F136 component machining (BTP) 

• High-speed machining (titanium and 

aluminum) 

• Assorted Build-to-Print work 

The JSF SDD program has allowed Philips Aerospace to expand its relationships 

with the large aerospace contractors, particularly those in turbine engines

2000 2001 2002 2003 System Design & Development 2012

Expected role as risk-sharing 

partner on F136 engine; F136 

production begins (2008) 

Original development of Electro Chemical Machining 

(ECM) technology for production of electrical shaver 

heads; Philips further develops ECM technology to apply 

to large scale items such as turbine blisks 

1

Incremental JSF EBIT margin = 12%; 2EV/EBIT multiple calculated via four year average EBIT margin 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
D – 5

– Major Businesses: landing gear

– Key Technological Capabilities: landing gear design, manufacturing, assembly, repair, and 

overhaul; composite landing gear component design & manufacturing 

– Major Military Platforms: NH-90, F-16, Apache AH 64, P-3, C-130

SP AEROSPACE PRODUCT AREAS

− Landing Gear – design, development, test & 

qualification of landing gear (CAD, CAE, FEM 

analysis, dynamic simulation, NDT, fatigue 

calculations, ILS, drop rig); landing gear 

component manufacturing and gear assembly 

– Manufacturing & Assembly – aerostructures, 

gearboxes, actuation systems – CNC milling, 

turning, grinding, deep hole boring and drilling; 

shotpeening 

– Repair & Overhaul – landing gear MR&O 

SP AEROSPACE – C OMPANY OVERVIEW

SP Aerospace 

Subsidiary of RDM Technology Holding BV 

Headquarters: Geldrop, THE NETHERLANDS 

Employees: 300 

SP Aerospace’s business is mainly concentrated on landing gear systems. Over the years, SP 

aerospace & vehicle systems has grown from a purely build-to-print manufacturer to a company that 

covers the entire life cycle of landing gear systems from design and development to repair and overhaul. 

SP AEROSPACE – FINANCIAL SUMMARY

Privately held company – Information not available 
D – 6

JSF CONTENT & 

CONTRACT HISTORY

SP AEROSPACE – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – SP AEROSPACE

(Year 2002 US$M, except per share) 

(EUR1.00 = US$1.0429)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $20.5 $96.6 

Average Annual Revenue: $2.0 $6.4 

% of Reported 2002 Revenue: n.a. n.a.

Estimated Average Annual EBIT 

Contribution1

: $0.2 $0.6

FY 2002 Reported Revenue: n.a.

FY 2002 Pro-Forma EBIT: n.a.

Enterprise Value/EBIT Multiple2

: 8.0x

Estimated Value of Potential JSF 

EBIT Contribution: $1.6 $5.2 

Estimated Impact of JSF EBIT 

Contribution on Company Value: n.a. n.a.

Financial Impact

− Assumptions: 

o SP Aero is awarded both arresting gear 

design, development, and production 

contracts (CTOL & CV)

o SP Aero performs build-to-print work 

during production

− SP Aero is positioned to capture 

significant landing gear MR&O revenue 

o SP Aero currently performs landing gear 

repairs and overhauls for several 

military customers, including the United 

States

− New relationships with US industry are 

expected to lead to new business 

opportunities

Geographic Workshare

− The Netherlands 

o SP Aerospace 

possesses the 

capabilities to 

perform all 

potential 

contracts inhouse

Lessons Learned

− Early (1998/1999) start to TAA process with Lockheed Martin and 

Northrop Grumman allowed the process to run smoothly and has 

avoided the headaches experienced by competitors 

Potential contracts: 

• CTOL arresting gear 

• CV arresting gear 

• Landing gear components (built to print) 

“[JSF] is important technology-wise...we need to make the next step with [our 

composites] technologies... and no other program has such quantities.”

2000 2001 2002 2003 System Design & Development 2012

Arresting Gear competitions

SP Aerospace expects to perform build-to-print 

manufacturing of JSF components during LRIP and FRP

SP Aerospace begins TAA process with potential contractors in 1998/1999

1

Incremental JSF EBIT margin = 10%; 

2

EV/EBIT multiple of 8.0x assumed for private component manufacturer 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
D – 7

– Major Businesses: electrical systems and electronics, structures, services 

– Key Technological Capabilities: material design, development, and production; automation of 

design and production processes; and knowledge of integrated technical and logistics systems 

– Major Military Platforms: F-16, NH90, JSF, C-17 

STORK BUSINESSES

– Electrical Systems and Electronics – Fokker 

Elmo (design and production of wire 

harnesses) 

– Structures – Stork Fokker (manufacture 

structural airframe components, assemblies, 

and systems of commercial and military aircraft 

and helicopters) 

– Services – Fokker Services (provide worldwide 

support to owners and operators of Fokker 

aircraft, operate as an authorized Embraer 

service station in Europe, and perform MRO 

and modification services for the family of 

Boeing 737s) 

STORK AEROSPACE – C ORPORATE OVERVIEW

Stork Aerospace 

Subsidiary of Stork NV 

Euronext Amsterdam – Ticker: VMFN 

Headquarters: Schiphol, THE NETHERLANDS 

Employees: 4,353 

Stork Aerospace develops and produces advanced components and systems for the aviation and 

aerospace industry and supplies integrated services to aircraft owners and operators. 

STORK – FINANCIAL SUMMARY

(US$ M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $2,965 $2,652 $2,305 $2,181

Sales growth: 10% (11%) (13%) (5%)

Reported EBIT: 58 94 (5) (58)

EBIT margin: 2% 4% (0%) (3%)

Pro-forma EBITDA: 168 188 129 126

EBITDA margin: 6% 7% 6% 6%

Pro-forma EBIT: $110 $129 $74 $61

EBIT margin: 4% 5% 3% 3%

Revenue per employee: $132,501

Stock price: $10.21 (as of 5/30/2003)

52 week high: $13.02

52 week low: $5.04

Shares outstanding: 33.0 million

Market capitalization: $337

Net Debt: $51

Enterprise Value: $388

EV/EBIT multiple*: 6.4x (*Pro-forma)

3000

4000

5000

6000

7000

'99 '00 '01

0

0.1

0.2

0.3

0.4

0.5

Sales

GP Margin

EBITDA Margin

EBIT Margin

€ 0

€ 2,000

€ 4,000

€ 6,000

€ 8,000

'98 '99 '00 '01

0%

10%

20%

30%

40%

Sales

GP Margin

EBITDA Margin

EBIT Margin

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

'99 '00 '01 '02

0%

1%

2%

3%

4%

5%

6%

7%

8%

Sales

EBITDA Margin

EBIT Margin

Segment Revenue Breakdown

8%

49%

8% 12%

23%

Aerospace

Prints

Poultry/Food Process

Industrial

Components

Technical Services

Results are converted from Euros to US Dollars using the exchange rate as of December 31, 2002 (EUR 1.00) = US$ 1.0429
D – 8

– Major Businesses: design, certification, and production of electrical systems for aircraft, 

associated equipment, and engine interconnection systems

– Key Technological Capabilities: design and production of wire harnesses

– Major Military Platforms: JSF, C-17

FOKKER ELMO PRODUCTS

– Interconnection Systems – manufacture 

wiring harnesses for Bombardier CRJ700 and 

CRJ900, FD 728Jet, Hawker Horizon, 

Gulfstream, Pratt & Whitney Canada, Rolls 

Royce Trent 500, Honeywell, and Airbus 

A340-500/600 

– Power Distribution Systems – manufacture 

utility control systems for Bombardier CRJ700 

and CRJ900

– Major Businesses: manufacture airframe component structures including lightweight wing, tail, 

and fuselage sections

– Key Technological Capabilities: metal bonding, sheetmetal, machining to the assembly of 

complex airframe structures 

– Major Military Platforms: NH90, C-17, JSF

FOKKER AEROSTRUCTURES PRODUCTS AND SERVICES

– Components – specialize in the design, 

manufacture and support of structural airframe 

components, assemblies, and systems of 

commercial and military aircraft and 

helicopters 

– Materials – develop thermoplastic composites 

and other materials applications including 

Glare®, a new type of laminated material 

made of aluminum sheet and glass fiber 

F OKKER ELMO – C OMPANY OVERVIEW

Fokker Elmo BV 

Subsidiary of Stork Aerospace 

Headquarters: Hoogerheide, THE NETHERLANDS 

Fokker Elmo is a dedicated specialist for electrical systems and electronics for commercial, business, 

defense, and space applications. 

STORK F OKKER – C OMPANY OVERVIEW

Stork Fokker AESP 

Subsidiary of Stork Aerospace 

Headquarters: Papendrecht, NETHERLANDS 

Fokker Aerostructures supplies aircraft components to leading European and American aircraft builders 

in the civil, business, defense and space sectors. 
D – 9

JSF CONTENT & 

CONTRACT HISTORY

STORK JSF P ARTICIPATION

JSF FINANCIAL IMPACT – STORK

(Year 2002 US$M, except per share) 

(EUR1.00 = US$1.0429)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $474.9 $1,645.9 

Average Annual Revenue: $47.5 $109.7 

% of Reported 2002 Revenue: 2.2% 5.0%

Estimated Average Annual EBIT 

Contribution: $5.7 $13.2

FY 2002 Reported Revenue: $2,181 

FY 2002 EBIT: $61 

Enterprise Value/EBIT Multiple: 6.4x

Estimated Value of Potential JSF 

EBIT Contribution: $36.3 $83.9 

Estimated Value per Share: $1.10 $2.54

Current Share Price (5/30/03): $10.21

Estimated Impact of JSF EBIT 

Contribution on Company Value: 10.8% 24.9%

Financial Impact

− Assumptions: 

o Fokker Elmo is awarded 25% of wiring 

harness production

o Stork receives contracts for in-flight 

opening doors SDD and production as 

well as other expected and potential 

SDD and production contracts worth 

approximately $1.1B through FRP

− Although a small portion of Stork NV 

revenues, JSF production would represent 

25% of annual Stork Aerospace revenues 

if all expected contracts are won 

− Stork expects to outsource $30-50M of 

SDD work to Dutch industry 

− Logistics and supply chain are future 

areas of JSF potential 

Geographic Workshare

− The Netherlands 

o JSF work not 

performed by 

Stork is expected 

to be outsourced 

to Dutch industry 

and remain inside 

the Netherlands

Lessons Learned

− CDP participation helped avoid problems obtaining TAAs 

− Stork will outsource work to Dutch industry – Stork has appointed a 

dedicated JSF Industrial Relation Officer to help SMEs and 

Research Institutes / Universities to win JSF work either through 

Lockheed Martin & partners or Stork 

− Foreign companies feel that there needs to be someone at 

Lockheed Martin that can help foreign suppliers address small 

problems that have begun to compound on each other and create 

price discrepancies (e.g.: exchange rates; growing aircraft weight) 

“JSF is the biggest and most important program for the coming years” 

– Rob Hermans, Stork – Fokker Elmo

Awarded Contracts: 

• Aircraft Wiring Harness 

• Engine Wiring Harness 

Expected Contracts: 

• Inflight Opening Doors 

• Control Surfaces/Edges (in partnership with 

Hawker de Haviland of Australia) 

• Engine components 

• F135 Wiring Harness 

• Autolog 

2000 2001 2002 2003 System Design & Development 2012

Stork expects to have a large role in the 

remainder of the SDD phase, especially 

in the areas of wiring and aerostructures

Ongoing discussions between Lockheed Martin and 

Stork Fokker regarding In-Flight Opening Doors 

“bridge contract” covering production of the first 14 

shipsets; contract expected summer 2003

Stork F-16 production ends;

F-35 FRP begins (2012) 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
D – 10

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D – 11

– Major Businesses: communications, optronics, cryogenics, munitronics, power electronics, IT 

systems consulting

– Key Technological Capabilities: manufacture of customized power electronics, proximity fuses, 

special batteries, integrated C3 systems, thermal imaging products, stirling coolers 

– Major Military Platforms: F-16, Apache, ESSM, ASTOR, Sawari II, SAN PC, FR SIGINT Vessel

THALES NEDERLAND PRODUCTS

– Ground Based Systems – combine radar 

technology, electro-optical equipment and 

advanced weapon control equipment to 

provide capability in ground based air defense, 

surveillance, and communications, as well as 

border surveillance systems

– Naval Systems – naval systems ranging from 

radar surveillance, weapon control and combat 

management systems, to fully integrated 

combat systems 

– Services and Support – offer integrated 

logistic support, through life support, and 

industrial services 

T HALES N EDERLAND – C OMPANY OVERVIEW

Subsidiary of Thales Group 

Euronext Paris – Ticker: HO (31.8% owned by French Government) 

Headquarters: Hengelo, THE NETHERLANDS 

Employees: 2,800 

Thales Nederland creates high–tech defense solutions for air, naval, and ground-based environments in 

the fields of radar, infrared, weapon control, display technology, and communications equipment. 

THALES GROUP – FINANCIAL SUMMARY

(US$ M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $7,229 $9,002 $10,773 $11,651

Sales growth: 12% 25% 20% 8%

Reported EBIT: 270 452 494 469

EBIT margin: 4% 5% 5% 4%

Pro-forma EBITDA: 759 1,004 1,764 1,155

EBITDA margin: 10% 11% 16% 10%

Pro-forma EBIT: $409 $566 $677 $626

EBIT margin: 6% 6% 6% 5%

Revenue per employee: $179,252

Stock price: $24.55 (as of 5/30/2003)

52 week high: $44.88

52 week low: $24.91

Shares outstanding: 171.9 million

Market capitalization: $4,219

Net Debt: $1,530

Enterprise Value: $5,749

EV/EBIT multiple*: 9.2x (*Pro-forma)

Segment Revenue Breakdown

16%

22% 1%

61%

Defense

Aerospace

IT&S

Other

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

'99 '00 '01 '02

0%

5%

10%

15%

20%

Sales

EBITDA Margin

EBIT Margin

Results are converted from Euros to US Dollars using the exchange rate as of December 31, 2002 (EUR 1.00 = US$ 1.0429)
D – 12

JSF CONTENT & 

CONTRACT HISTORY

T HALES N EDERLAND – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – THALES NEDERLAND IMPACT ON THALES GROUP

(Year 2002 US$M, except per share) 

(EUR1.00 = US$1.0429)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $148.5 $549.8 

Average Annual Revenue: $14.9 $36.7 

% of Reported 2002 Revenue: 0.1% 0.3%

Estimated Average Annual EBIT 

Contribution: $0.9 $2.2

FY 2002 Reported Revenue: $11,651 

FY 2002 EBIT: $626 

Enterprise Value/EBIT Multiple: 9.2x

Estimated Value of Potential JSF 

EBIT Contribution: $8.0 $19.9 

Estimated Value per Share: $0.05 $0.12

Current Share Price (5/30/03): $24.55

Estimated Impact of JSF EBIT 

Contribution on Company Value: 0.2% 0.5%

Financial Impact

− Assumptions: 

o Thales Nederland wins development 

and production contracts in its core 

areas of technical expertise (~$200K 

per aircraft)

− Despite large parent company, JSF 

revenue and earnings would be significant 

to Thales Nederland

− JSF could serve as an entrée into other 

US military programs, boosting the benefit 

to Thales Nederland

Geographic Workshare

− The Netherlands 

o Thales Nederland 

bases programs 

at four facilities in 

the Netherlands

o Thales’s German 

facilities are also 

controlled by the 

Dutch company

Lessons Learned

− Specialty in mission systems and related technologies make it 

difficult to work in international programs; the US always requires 

TAAs for every individual technology 

− Likewise, it is difficult to communicate with potential American 

contractors as their engineers will never speak with a defense 

company such as Thales Nederland – they are too afraid of 

potentially crossing a line with regards to export controls 

“[Thales Nederland] is the largest Dutch defense company... and there are many 

areas [in the JSF program] where we have much to offer”

Potential Contract Areas: 

• Cryogenic Coolers 

• Electro-Optic Parts: Optical Module for IR System; CDD camera; 

Distributed Aperature System 

• Mission Computer Parts: Integrated Core Processor 

• Radar Receiver

2000 2001 2002 2003 System Design & Development 2012

Ongoing product & technology demonstrations 

for Raytheon, Lockheed Martin, Northrop 

Grumman, and BAE Systems; await TAAs with 

BAE Systems and Northrop Grumman

CDP projects with Raytheon and Northrop 

Grumman in the area of cryogenic cooling

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
D – 13

– Major Businesses: enrichment of uranium and other isotopes by means of centrifuge, 

manufacture of precision parts and aerospace subsystems

– Key Technological Capabilities: design, manufacture and utilization of centrifuges

– Major Military Platforms: Eurocopter Tiger; C-17; JSTARS

URENCO PRODUCT AND SERVICE AREAS

– Uranium Enrichment – develop, 

manufacture, and utilize centrifuges and 

deliver uranium enrichment services to 

nuclear power utilities around the world 

– Aerospace – manufacture air turbine 

starters, cooling turbines, and centrifugal 

compressors for APUs, composite helicopter 

drive shafts, nutation dampers, and other 

precision products 

Stable Isotopes – utilize the centrifuge to 

enrich isotopes for use in medical and nuclear 

applications; applications include the treating of 

tumors, diagnosis of brain, kidneys or 

neurological sicknesses, and the cooling of 

water at a nuclear power station to reduce 

corrosion and prevent the release of the cobalt 

U RENCO N EDERLAND – C OMPANY OVERVIEW

Urenco Nederland BV 

Subsidiary of Urenco Limited 

Headquarters: Almelo, THE NETHERLANDS 

Employees: 700 (Urenco Nederland BV) 

Urenco is a global supplier of uranium enrichment services to nuclear power utilities, delivering more than 

13% of the worldwide enrichment requirements. 

URENCO LIMITED – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $479 $688 $575 $664

Sales growth: 8% 44% (16%) 15%

Reported EBIT: 115 131 138 180

EBIT margin: 24% 19% 24% 27%

Pro-forma EBITDA: 227 255 263 303

EBITDA margin: 47% 37% 46% 46%

Pro-forma EBIT: $115 $131 $138 $180

EBIT margin: 24% 19% 24% 27%

Revenue per employee: $373,217

Net Capital Employed: $428 (as of 12/31/2002)

Net Debt: $532

Enterprise Value: $960 Segment analysis not available

EV/EBIT multiple*: 5.3x (*Pro-forma)

$0

$2,000

'99 '00 '01 '02

0%

10%

20%

30%

40%

50%

Sales

EBITDA Margin

EBIT Margin

Results are converted from Euros to US Dollars using the exchange rate as of December 31, 2002 (EUR 1.00) = US$ 1.0429
D – 14

JSF CONTENT & 

CONTRACT HISTORY

U RENCO N EDERLAND – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – URENCO AEROSPACE

(Year 2002 US$M, except per share) 

(EUR1.00 = US$1.0429)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $24.3 $85.3 

Average Annual Revenue: $2.4 $5.7 

% of Reported 2002 Revenue: 0.4% 0.9%

Estimated Average Annual EBIT 

Contribution1

: $0.3 $0.7

FY 2002 Reported Revenue: $663.6 

FY 2002 Pro-Forma EBIT: $179.9 

Enterprise Value/EBIT Multiple: 5.3x

Estimated Value of Potential JSF 

EBIT Contribution: $1.6 $3.6 

Estimated Impact of JSF EBIT 

Contribution on Company Value: 0.2% 0.4%

Financial Impact

− Assumptions: 

o Urenco supplies all production LiftFan 

driveshafts for STOVL units

o Urenco is awarded PTMS component 

contracts

− Financial impact on Urenco Ltd is small 

compared to uranium business 

− Although an extremely small portion of 

Urenco Ltd revenues, impact to Urenco 

Aerospace would be significant – likely to 

equate to over 10% of sales during FRP 

− JSF supply contract would increase 

awareness of Urenco technology for future 

aerospace programs

Geographic Workshare

− Netherlands 

o Urenco’s 

aerospace facility 

is located in 

Almelo, 

Netherlands

Lessons Learned

− US MIL-SPECs dictate required performance for engine 

driveshafts; Urenco feels that MIL-SPEC standards for driveshaft 

impact resistance have hampered the application of Urenco’s 

lightweight composite technology to JSF – Urenco’s driveshaft is 

half the weight of a comparable steel driveshaft 

− Poor JSF communications may cost Urenco millions of dollars in 

potentially wasted R&D efforts – the requirement to meet 

conventional MIL-SPEC impact resistance (virtually impossible to 

meet using composite) was never communicated to Urenco 

“[Urenco Nederland] specializes in things that spin fast.” 

– Dick Alta, Urenco Nederland

Potential Contracts: 

• LiftFan Driveshaft 

• Power & Thermal Management System (PTMS) components

2000 2001 2002 2003 System Design & Development 2012

In early/mid-1990s, Urenco develops 

lightweight composite driveshafts for Tigre 

and NH90 programs; technology applied to 

a design for JSF in preparation for SDD

Past relationships with Honeywell 

(Garrett / Allied Signal) have 

accounted for the majority of Urenco’s 

aerospace business

1

Incremental JSF EBIT margin = 12% 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
D – 15

T HE N ETHERLANDS : C OMPENDIUM

Company Name Est. Location Employees Sales ($ MM) Potential Technology / Capability

Atos Origin B.V. 1995 Eindhoven 6,140 1,518.0 E-business, m-commerce and IT solutions

BAAN Nederland B.V. (BAAN) 2000 Voorthuizen 224 n.a. Computer systems design

Dutch Space B.V. n.a Leiden 350 100.0 Spacecraft solar arrays

Fokker Defense Marketing (Stork 

Aerospace) 1996 Schiphol 2,500 500.0 Aircraft platforms and components

Futura Composites B.V. 2000 Heergugowaard 25 n.a. Fiber reinforced composite components

IFS Benelux B.V. (Industrial and 

Financial Systems) 1998 Eindhoven 50 n.a. Web and portal business technologies

Nedtech Engineering B.V. 1999 Uithoorn 35 n.a. Mechanical systems, interiors, and systems 

installation

National Aerospace Laboratory 1919 Amsterdam 900 n.a. Advanced research and development

NLR/DNW n.a Amsterdam n.a. n.a. Aeronautical wind tunnel testing and simulation

Perot Systems Nederland B.V. (Perot 

Systems Corp.) 1990 Amersfoort 75 n.a. Software and systems integration

Philips Electronics Nederland B.V. 

(Phillips Electronics N.V.) n.a Eindhoven n.a. n.a. Aviation and defense electronics

Philips HTA n.a Eindhoven n.a. n.a. Hazardous testing services

Philips Machinefabrieken (Phillips 

N.V.) n.a Eindhoven 350 n.a. Automated production equipment

Rexroth Hydraudyne B.V. (Rexroth 

Bosch Group) 1977 Boxtel 700 n.a. Drive, control systems and hydraulic cylinders

Senior Aerospace Bosman B.V. 2000 Rotterdam 106 n.a. Pressure carrying components and systems

SERGEM Engineering B.V. 1933 Leidschendam n.a. n.a. Extremely lightweight materials and systems

Eldim B.V. (Sulzer Metco) 1970 AD Loom 350 n.a. Land-based and flight gas turbine components

Sun Electric Systems B.V. 1981 Weesp 90 n.a. Aircraft hydraulics testers

Thales Nederland B.V. 1948 Hengelo 2,928 342.6 Radar, infrared, display, and IT technologies

TNO 1930 The Hague 5,500 n.a. Contract research and specialist consultancy

TNO-TPD 1941 Delft 350 n.a. Innovative technological applications

Netherlands - Potential Defense Industry JSF Competitors 

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US Department of 

State. Financial information compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, MASAI reports, ICC Shareholder 

reports, securities exchange filings, the Major Companies Database, FBR Company profiles, and others.
D – 16

(This page intentionally left blank.) 
E – 1 

APPENDIX E 

CANADA: COMPANY CASE STUDIES AND 

COMPENDIUM
E – 2 

(This page intentionally left blank.)
E – 3 

– Major Businesses: decision support software

– Key Technological Capabilities: case-based reasoning 

– Major Military Platforms: CC-130 (Canada), F-16 (demo), CP-140 (Canada), T-56 (engine – 

software in development) 

CASEBANK PRODUCTS 

– Diagnostic and Prognostic Applications – 

case-based reasoning software for high-value 

asset management and maintenance decision 

making (“SpotLight”); software contains a 

proprietary knowledgebase of diagnostic 

knowledge for a particular aircraft type 

– Case Development Suite – applications used 

for SpotLight case authoring (creating and 

editing subject matter domain models, creating 

cases, assigning attributes, and performing 

domain model customizations) 

– Learning Environments – training 

applications 

C ASE B ANK T ECHNOLOGIES – C OMPANY OVERVIEW

CaseBank Technologies, Inc. 

Privately Held Company 

Headquarters: Brampton, Ontario, CANADA 

Employees: 40 

CaseBank specializes in experience-based decision support solutions for complex equipment systems. 

Casebank develops web-based software products that can be used to assist aircraft technicians in 

diagnosing maintenance problems. Core to all of these solutions is CaseBank’s case-based reasoning 

software, SpotLight, and its suite of knowledgebase development tools. In use, past maintenance data is 

captured about a certain platform. When a new maintenance problem occurs, SpotLight takes the lead in 

asking incisive questions that guide the user to the best data available for fast and effective diagnosis. 

 

CASEBANK TECHNOLOGIES, INC. – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: $0.3 $0.6 $0.7 $1.6

Sales growth: 114% 6% 137%

Reported EBIT1

: n.a. n.a. n.a. n.a.

Reported EBITDA: n.a. n.a. n.a. n.a.

Est. Pro-Forma EBIT1

: $0.0 $0.0 $0.0 $0.0

Estimated EBIT margin: 0% 0% 0% 0%

1

EBIT not supplied by CaseBank; Pro-forma EBIT estimated to be $0 due to low revenue per employee figures

Revenue per employee: $39,699

Privately held company Revenue by segment not applicable

$0.0

$0.5

$1.0

$1.5

$2.0

'99 '00 '01 '02

0%

20%

40%

60%

80%

100%

Sales

Pro-forma EBIT

Margin

CC-130 

(Canada) 

CP-140 

(Canada) CRJ 

John Deere Products

DASH 8 

Results are converted from Canadian Dollars to US Dollars using the exchange rate as of December 31, 2002 (C$ 1.00 = US$0 .6329)
E – 4 

JSF CONTENT & 

CONTRACT HISTORY

C ASE B ANK T ECHNOLOGIES – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – CASEBANK

(Year 2002 US$M, except per share) 

(C$1.00 = US$0.6329)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $10.2 $266.8 

Average Annual Revenue: $1.0 $17.8 

% of Reported 2002 Revenue: 64.1% 1120.0%

Estimated Average Annual EBIT 

Contribution1

: $0.3 $4.4

FY 2002 Reported Revenue: $1.6 

FY 2002 Pro-Forma EBIT: $0.0 

Enterprise Value/EBIT Multiple2

: 10.0x

Estimated Value of Potential JSF 

EBIT Contribution: $2.5 $44.5 

Estimated Impact of JSF EBIT 

Contribution on Company Value: n.a. n.a.

Financial Impact

− Assumptions: 

o Summer 2003 – contract award for 

“SpotLight” licenses during flight test

o 2005 to 2007 – contract award for 

SpotLight licenses for production aircraft

− As a start-up, CaseBank views JSF 

business as the single most important 

engine for earnings 

o CaseBank’s revenues would nearly 

double (from current levels) during 

LRIP, then increase tenfold during FRP

o As a result of Spotlight evaluation for 

JSF, follow-on contracts with Lockheed 

Martin on the C-5A and F-22 APU are 

being discussed

Geographic Workshare

− Canada

o CaseBank has 

performed all 

development work 

related to its 

product offerings 

in Canada

Lessons Learned

− Opportunities to prove one’s technology in operation are 

invaluable; CaseBank was given the chance to prove concept on 

the F-16 – funded internally by CaseBank – which prompted 

Lockheed Martin to consider SpotLight for JSF 

− Operators seem more willing to consider SpotLight after a painful 

maintenance experience involving hours of unnecessary diagnostic 

time – one CRJ operator tasked CaseBank with diagnosing a door 

seal problem that plagued one of their aircraft; SpotLight did so 

immediately by using a case in the software’s knowledgebase...from the same operator on the same CRJ one year earlier 

Potential Contracts: 

• Lockheed Martin is currently evaluating CaseBank 

(SpotLight) for use during JSF flight test 

• SpotLight for production aircraft 

“The JSF program is one that we think is crucially important to us and Canada” – Bob 

Hastings, CaseBank Director of Aerospace and Defense Business Development 

2003 – Lockheed Martin evaluating use of SpotLight in 

JSF flight test program; decision expected summer 2003 

1998 – Company Founded

2001 – F-16 Demo with Lockheed 

(funded internally by CaseBank) 

2005 – Flight Test Program begins

2000 2001 2002 2003 System Design & Development 2012

1

Incremental JSF EBIT margin = 25% 

2

EV/EBIT multiple of 10.0x assumed for start-up software company 

Sources: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
E – 5 

– Major Businesses: engine condition monitoring systems, oil and filter debris analysis, engine 

control systems, engine component simulation, engineering design support

– Key Technological Capabilities: engine and component modeling and simulation, predictive 

algorithms for condition and health monitoring, engine control algorithms, engineering 

– Major Military Platforms: CF-18 (Canada); F-22 (F119 Engine); JSF (F135 Engine)

GASTOPS PRODUCTS & SERVICES

– Protection Systems – “MetalSCAN” in-line, 

full-flow metallic particle sensors for machinery 

lubrication systems (Oil Debris Monitoring) 

– Condition Monitoring – advanced systems 

for condition monitoring and condition based 

maintenance; “FilterCHECK” oil filter cleaner 

and debris analyzer; “Troubleshooter” eventbased diagnostic tool 

– Maintenance Services – electromechanical 

component repair & overhaul; software 

support for machinery control systems; 

condition assessment; training 

– Maintenance Engineering – design, 

development, and implementation of 

maintenance programs. 

– Simulation – engineering simulations to 

support the design of modern machinery 

control, condition monitoring and training 

systems; engine and component modeling 

– Controls Engineering – engineering services 

to aid in the design, development, and 

commissioning of modern machinery controls 

GA S TOPS – C OMPANY OVERVIEW

GasTOPS Ltd. 

Privately Owned 

Headquarters: Ottawa, Ontario, CANADA 

Employees: 112 

GasTOPS excels in the field of engineering services to support the design, manufacture, and 

maintenance of turbo machinery. GasTOPS core technical expertise lies in engine and component 

modeling and simulation, which GasTOPS has used to develop engine control, condition monitoring, and 

predictive maintenance systems for a variety of applications. 

GASTOPS LTD. – FINANCIAL SUMMARY

(US$M) Year ended 30 Sep 1999 2000 2001 2002

Sales: # $6.0 $5.5 $6.2 $7.1

Sales growth: n.a. (10%) 13% 15%

Reported EBIT: 0.2 0.3 0.5 0.6

EBIT margin: 3% 5% 8% 8%

Pro-forma EBITDA: (0.6) (0.5) (0.0) (0.1)

EBITDA margin: (9%) (10%) (0%) (1%)

Pro-forma EBIT: ($0.7) ($0.6) ($0.1) ($0.2)

EBIT margin: (11%) (12%) (2%) (2%)

Revenue per employee: $63,362

Privately held company

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

'99 '00 '01 '02

 (14%)

 (12%)

 (10%)

 (8%)

 (6%)

 (4%)

 (2%)

0%

Sales

Pro-forma

EBITDA Margin

Pro-forma EBIT

Margin

Segment Revenue Breakdown

8%

6%

27%

5% 54%

Oil Debris Sensors

CM Software

Simulation & Control

Industrial Engineering

Defense Services

Results are converted from Canadian Dollars to US Dollars using the exchange rate as of December 31, 2002 (C$ 1.00 = US$0 .6329)

“Troubleshooter” 

tool in use with Canadian 

Forces fleet of CF-18s MetalSCAN Oil Debris Monitor

In use on F119 engine (F-22)

FilterCHECK 

filter cleaning 

and debris 

analysis system
E – 6 

JSF CONTENT & 

CONTRACT HISTORY

GA S TOPS – JSF P ARTICIPATION

Geographic Workshare

− Canada

o GasTOPS sole 

location in Ontario 

will carry out JSF 

work

Lessons Learned

− Niche technology products must be “sold” to the end-user first 

before convincing a prime contracter / OEM to consider using an 

emerging supplier – USAF experience with F-22 MetalSCAN 

helped win JSF business from Pratt & Whitney, a contract for which 

GasTOPS competed against P&W sister company Sikorsky Aircraft 

− Breaking into aerospace business is a long, drawn-out process that 

is often delayed by corporate politics; GasTOPS decided to first 

market their technologies in other industries (e.g. power 

generation) before committing resources to the aerospace industry 

JSF FINANCIAL IMPACT – GASTOPS

(Year 2002 US$M, except per share) 

(C$1.00 = US$0.6329)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $5.8 $15.9 

Average Annual Revenue: $0.6 $1.1 

% of Reported 2002 Revenue: 8.2% 14.9%

Estimated Average Annual EBIT 

Contribution1

: $0.1 $0.1

FY 2002 Reported Revenue: $7.1 

FY 2002 Pro-Forma EBIT: ($0.2)

Enterprise Value/EBIT Multiple2: 8.0x

Estimated Value of Potential JSF 

EBIT Contribution: $0.6 $1.0 

Estimated Impact of JSF EBIT 

Contribution on Company Value: n.m.3 n.m.3

Financial Impact

− Assumptions: 

o During 2003-2006, GasTOPS wins all 

expected MetalSCAN contracts (F136, 

APU, and LiftFan)

o 12% EBIT (operating) margin on JSF 

work (GasTOPS estimate)

− As a small, R&D focused company, JSF 

revenues will contribute significantly to 

GasTOPS earnings 

o After research tax credits and TPC 

repayments, JSF will bring GasTOPS 

earnings above break-even during FRP

o JSF will boost GasTOPS’s recognition 

as an emerging defense supplier

Contract Awards: 

• Oil Debris Monitor (“MetalSCAN”) for 

F135 engine (awarded through 

Hamilton Sundstrand) 

Potential Contracts: 

• LiftFan Oil Debris Monitor

• APU Oil Debris Monitor 

• F136 Oil Debris Monitor 

2000 2001 2002 2003 System Design & Development 2012

“The JSF Program is unique and high profile. It is quite a boost to the reputation 

and credibility of a company.” – Bernard MacIsaac, President, GasTOPS Ltd. 

OCT 2002 – GasTOPS chosen by Hamilton 

Sundstrand to develop oil debris monitor for the 

Pratt & Whitney F135 engine

1

Incremental JSF EBIT margin = 12% 

2

EV/EBIT multiple of 8.0x estimated for private engineering shop 

3

Not meaningful due to historical operating losses 

Sources: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A

GasTOPS develops MetalSCAN oil debris 

monitoring technology for F119 (F-22) on contract 

with Hamilton Sundstrand / Pratt & Whitney
E – 7 

– Major Businesses: landing gear; aerostructures; gas turbine components

– Key Technological Capabilities: manufacture and maintenance of landing gear and high 

precision components; gas turbine component design and manufacture; precision manufacturing; 

logistics management 

– Major Military Platforms: C-5; C-130; P-3; KC-135; X-45B UCAV; F-16; F-35 (JSF); Global Hawk

HĒROUX-DEVTEK PRODUCTS & SERVICES

– Landing Gear – landing gear (small & 

medium sized aircraft); hydraulic actuators; 

flight critical components; design, 

manufacture, repair and overhaul services 

– Logistics (part of landing gear division) – 

AOG services; full service logistics 

management; engineering, development, and 

short-run parts and component manufacture 

(for out-of-production aircraft); component 

MR&O; assembly; test 

– Aerostructures – 5-axis milling; grinding; 

aluminum dip-brazing; vacuum brazing; epoxy 

bonded structural assemblies; complex 

components and assemblies & precision 

castings 

– Gas Turbine Components – regional jet 

engine components; titanium welded actuation 

rings; turbine and compressor wheels; 

machined assemblies; large machined hightemperature steels and alloys 

HĒ ROUX - DEVTEK – C OMPANY OVERVIEW

Hēroux-Devtek, Inc. 

Toronto Stock Exchange – Ticker: HRX 

Headquarters: Longueuil, Quebec, CANADA 

Employees: 1,200 

Héroux-Devtek Inc. specializes in the design, development, manufacture and repair of aircraft 

components and landing gear systems. Héroux-Devtek’s gas turbine component division manufactures a 

variety of gas turbine components for aircraft and industrial turbine engines. 

 

HĒROUX-DEVTEK, INC. – FINANCIAL SUMMARY

(US$M) Year ended 31 Jul 2000 2001 2002 FY2003E

Sales: # $91 $164 $200 $158

Sales growth: 17% 80% 22% (21%)

Reported EBIT: 5 16 20 (9)

EBIT margin: 5% 10% 10% (6%)

Pro-forma EBITDA: 10 22 27 9

EBITDA margin: 11% 13% 14% 6%

Pro-forma EBIT: $5 $16 $20 $2

EBIT margin: 5% 10% 10% 1%

Revenue per employee: $131,856

Stock price: $2.57 (as of 5/30/2003)

52 week high: $6.36

52 week low: $1.90

Shares outstanding: 23.5 million

Market capitalization: $60

Net Debt: $15

Enterprise Value: $75

EV/EBIT multiple*: 45.6x (*Pro-forma)

3000

4000

5000

6000

7000

'99 '00 '01

0

0.1

0.2

0.3

0.4

0.5

Sales

GP Margin

EBITDA Margin

EBIT Margin

C$ 0

C$ 2,000

C$ 4,000

C$ 6,000

C$ 8,000

'98 '99 '00 '01

0%

10%

20%

30%

40%

Sales

GP Margin

EBITDA Margin

EBIT Margin

$0

$50

$100

$150

$200

$250

'99 '00 '01 '02

5%

7%

9%

11%

13%

15%

17%

19%

Sales

EBITDA Margin

EBIT Margin

Segment Revenue Breakdown

7%

28%

9%

56%

Landing Gear

Gas Turbine

Components

Aerostructure

Logistcs & Defense

Results are converted from Canadian Dollars to US Dollars using the exchange rate as of December 31, 2002 (C$ 1.00 = US$0 .6329)

X-45 UCAV 

Landing Gear 

Bombardier 

CRJ 700 

Aerostructures 

KC-135 

Landing Gear 

Components

B-777 

Landing Gear 

Components

Global Hawk 

Landing Gear 
E – 8 

JSF CONTENT & 

CONTRACT HISTORY

HĒ ROUX - DEVTEK – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – HĒROUX-DEVTEK

(Year 2002 US$M, except per share) 

(C$1.00 = US$0.6329)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $76.8 $255.2 

Average Annual Revenue: $7.7 $17.0 

% of Reported 2002 Revenue: 4.9% 10.8%

Estimated Average Annual EBIT 

Contribution: $0.5 $1.1

FY 2002 Reported Revenue: $158.2 

FY 2002 Pro-Forma EBIT: $1.6 

Enterprise Value/EBIT Multiple1

: 8.0x

Estimated Value of Potential JSF 

EBIT Contribution: $4.0 $8.8 

Estimated Value per Share: $0.17 $0.37

Current Share Price (5/30/03): $2.57

Estimated Impact of JSF EBIT 

Contribution on Company Value: 6.6% 14.5%

 

Financial Impact

− Assumptions: 

o Héroux wins all outstanding RFQs and 

the CV arresting gear

 25% of High-speed Machining 

packages expected to be won

o Héroux wins ~$150 million of MR&O and 

spare parts business due to JSF over 

course of FRP

− Impact of JSF is expected to extend well 

beyond these specific contracts 

o JSF business will drive an expansion of 

capacity that will allow Heroux to bring 

in other business during SDD

o Marketing cachet of JSF is a key benefit

Geographic Workshare

− Canada

o Landing gear, 

components, & 

aerostructures 

based in Quebec 

and Ontario

− United States 

o Gas turbine 

components

Lessons Learned

− In Canada, pre-screening of potential bidders has likely saved time 

and effort – worldwide, 33 companies bid on the high-speed 

machining RFQ; JSF Canada recommended 3 Canadian 

companies to the contractor and only 2 qualified to bid. 

− Feedback after unsuccessful bid attempts is limited; JSF needs a 

greater communications effort between the contractors and bidders 

− Success with recent landing gear competitions (e.g. X-45) has 

made Héroux more visible – not only to JSF primes, but to 

Héroux’s largest competitors, Goodrich & Messier Dowty 

RFQs Submitted & Outstanding: 

• CTOL Arresting Gear (Northrop Grumman)

• Weapons Bay Door Uplocks (Goodrich/TRW)

• High Speed Machining (Multiple Packages 

from Lockheed-Martin) 

Expected RFQs 

• CV Arresting Gear 

• Additional Uplocks 

• Landing Gear Components 

Héroux-Devtek foresees great benefit from JSF participation. Design and

development work, in its view, assures long-term production stability.

March 2003 – Proposal for weapons bay uplocks 

submitted to Goodrich/TRW

October 2002 – Héroux-Devtek loses 

competition for Titanium machining 

package (won by Magellan)

Future Potential – Landing Gear MR&O; Turbine Engine Components 

April 2003 – Proposals for CTOL arresting gear and high-speed machining 

submitted to Northop Grumman and Lockheed Martin, respectively

2000 2001 2002 2003 System Design & Development 2012

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
E – 9 

– Major Businesses: Aircraft structures; aircraft engine components; space; specialty components; 

maintenance, repair & overhaul

– Key Technological Capabilities: Precision machining; alloys; complex geometry sand castings; 

composites; advanced materials; reciprocating engine manufacture & design; rocket systems 

– Major Military Platforms: F/A-18; F-16; M1 Abrams Tank; F-35 (JSF)

MAGELLAN AEROSPACE PRODUCTS & SERVICES

– Aerostructures – wings & wing components; 

fuselages & fuselage components; flight 

controls surfaces; fairings; landing gear; 

hydraulic systems; electromechanical 

systems; spacecraft structures 

– Aeroengines – compressor and turbine rotorstator components; combuster cases and 

liners; bearing cages; air & oil seals; casings; 

housings; afterburner components 

– Repair & Overhaul – aeroengine component 

repair & overhaul; engine MR&O; aircraft 

refurbishment; engineering support services 

– Specialty Products – advanced energy 

systems; aeroengine exhaust systems; 

industrial power packs; reciprocating engines; 

rocket weapon systems; space payloads and 

sounding rockets; spacecraft components; 

wire strike prevention systems 

M AGELLAN AEROSPACE – C OMPANY OVERVIEW

Magellan Aerospace Corporation 

Toronto Stock Exchange – Ticker: MAL 

Headquarters: Mississauga, Ontario, CANADA 

Employees: 2,360 

Magellan Aerospace, founded in the 1930s as Fleet Aerospace, has rapidly grown through acquisitions 

since restructuring in 1995. Today, the Magellan family of businesses serves as a major component 

supplier to most aerospace original equipment manufacturers (OEMs). 

 

MAGELLAN AEROSPACE CORPORATION – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $356 $396 $389 $291

Sales growth: 32% 11% (2%) (25%)

Reported EBIT: 41 50 44 (2)

EBIT margin: 12% 13% 11% (1%)

Pro-forma EBITDA: 52 62 58 31

EBITDA margin: 14% 16% 15% 11%

Pro-forma EBIT: $41 $50 $44 $17

EBIT margin: 12% 13% 11% 6%

Revenue per employee: $123,402

Stock price: $1.42 (as of 5/30/2003)

52 week high: $4.59

52 week low: $0.97

Shares outstanding: 67.3 million

Market capitalization: $96

Net Debt: $151

Enterprise Value: $246

EV/EBIT multiple*: 14.6x (*Pro-forma)

$0

$100

$200

$300

$400

$500

'99 '00 '01 '02

0%

5%

10%

15%

20%

Sales

Pro-forma

EBITDA Margin

Pro-forma EBIT

Margin

Segment Revenue Breakdown

45%

6% 8% 41% Aerostructures

Aeroengines

Rockets & Space

Specialty Products

Results are converted from Canadian Dollars to US Dollars using the exchange rate as of December 31, 2002 (C$ 1.00 = US$ 0.6329)
E – 10

JSF CONTENT & 

CONTRACT HISTORY

M AGELLAN AEROSPACE – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – MAGELLAN AEROSPACE

(Year 2002 US$M, except per share) 

(C$1.00 = US$0.6329)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $93.4 $319.6 

Average Annual Revenue: $9.3 $21.3 

% of Reported 2002 Revenue: 3.2% 7.3%

Estimated Average Annual EBIT 

Contribution: $1.0 $2.2

FY 2002 Reported Revenue: $291.2 

FY 2002 Pro-Forma EBIT: $16.9 

Enterprise Value/EBIT Multiple: 14.6x

Estimated Value of Potential JSF 

EBIT Contribution: $14.1 $32.1 

Estimated Value per Share: $0.21 $0.48

Current Share Price (5/30/03): $1.42

Estimated Impact of JSF EBIT 

Contribution on Company Value: 14.7% 33.5%

Financial Impact

− Assumptions: 

o Magellan wins follow-on LRIP contracts 

for LiftFan Frame and Oil Tank

 Current contracts cover only SDD 

units

o Magellan wins F136 and Lockheed 

Martin aluminum components contracts

 Expect to win 50% of aluminum highspeed machining packages expected

− Low stock price fosters a large JSF impact 

to market value 

− Impact of JSF is expected to extend well 

beyond these specific contracts 

o Potential technical program with GE will 

have applications in commercial market

Geographic Workshare

− Canada

o The majority of 

Magellan content 

is Canadian

− United States

o Middleton, NY 

subsidiary will 

machine LiftFan 

Frame 

Lessons Learned

− Megallan’s integrated approach to JSF RFQs has been lauded by 

contractors; Magellan’s corporate office integrates centralizes 

bidding across all Magellan subsidiaries, allowing contractors to 

manage fewer suppliers 

− Remaining SDD contracts seem to consist of “commodity items;” 

Canada may be “too late to the game for systems level work” 

− ITAR proceedures have been “very confusing” and inconsistent – 

the ease of obtaining TAAs seems to “depend on the customer, 

product line, and time of day” 

Contracts Awarded: 

• LiftFan casing assembly (From Rolls Royce): 

o Sand Casting (Haley); Machining (Middleton); 

Components (Chicopee); Integration (Bristol) 

• Titanium high-speed machining (Chicopee – from 

Lockheed Martin) 

Potential Contracts: 

• Aluminum high-speed 

machining 

• F136 components 

“Although [JSF production] is certainly extremely attractive... winning JSF 

contracts is more about the competitive position in which such technology

puts our company for the future.” - Bill Matthews, VP Marketing, Magellan 

Oct 2002 – Magellan acquires Haley Industries

Mid-1990s – First Magellan JSF involvement during CDP Phase

Magellan wins first JSF SDD contract 

2000 2001 2002 2003 System Design & Development 2012

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
E – 11

– Major Businesses: Business & general aviation engines; regional aircraft engines; helicopter 

engines; military aircraft engines; engine services

– Key Technological Capabilities: gas turbine engine design, development, manufacture, & MRO 

– Major Military Platforms: T1-A Jayhawk; T-6A Texan II (JPATS); C-12

PRATT & WHITNEY CANADA PRODUCTS & SERVICES

– Business & General Aviation – JT15D 

turbofan; PW100/300/500/600 turbofans; PT6A 

turboprop 

– Helicopter Engines – PT6T, PT6B/C, and 

PW200 turboshafts 

– Regional Aircraft Engines – PT6A and 

PW100 turboprop; PW100/300/800/900 

turbofans & PW900 APUs 

– Military Aircraft Engines – military 

applications of commercial engines 

– Service & Support – maintenance programs; 

engine leasing; spare parts; sales 

P RATT & WHITNEY C ANADA – C OMPANY OVERVIEW

Pratt & Whitney Canada (P&WC) 

Subsidiary of United Technologies Corporation (NYSE: UTX) 

P&WC Headquarters: Longueuil, Quebec, CANADA 

Employees: 8,985 

Pratt & Whitney Canada, a subsidiary of Hartford, CT-based United Technologies Corporation, 

specializes in the design, development, manufacture and repair of turbine engines for business, regional, 

and military aircraft (including rotary-wing). 

 

UNITED TECHNOLOGIES CORPORATION – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $24,127 $26,583 $27,897 $28,212

Sales growth: 6% 10% 5% 1%

Reported EBIT: 1,517 3,140 3,233 3,657

EBIT margin: 6% 12% 12% 13%

Pro-forma EBITDA: 3,178 3,999 4,486 4,384

EBITDA margin: 13% 15% 16% 16%

Pro-forma EBIT: $2,359 $3,140 $3,581 $3,657

EBIT margin: 10% 12% 13% 13%

Revenue per employee: $182,013

Stock price: $68.25 (as of 5/30/2003)

52 week high: $72.06

52 week low: $48.83

Shares outstanding: 470.4 million

Market capitalization: $32,105

Net Debt: $3,221

Enterprise Value: $35,326

EV/EBIT multiple*: 9.7x (*Pro-forma)

$22,000

$24,000

$26,000

$28,000

$30,000

'99 '00 '01 '02

0%

5%

10%

15%

20%

Sales

Pro-forma

EBITDA Margin

Pro-forma EBIT

Margin

Segment Revenue Breakdown

29%

17%

23% 31%

Otis

Carrier

Pratt & Whitney

Flight Systems

PT6A PW200 PW100 JT15D PW300 
E – 12

JSF CONTENT & 

CONTRACT HISTORY

P RATT & WHITNEY C ANADA – JSF P ARTICIPATION

JSF FINANCIAL IMPACT OF PRATT & WHITNEY CANADA ON UNITED TECHNOLOGIES CORP.

(Year 2002 US$M, except per share) 

(C$1.00 = US$0.6329)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $50.6 $70.6 

Average Annual Revenue: $5.1 $4.7 

% of Reported 2002 Revenue: 0.5% 0.4%

Estimated Average Annual EBIT 

Contribution: $0.6 $0.6

FY 2002 Revenue1

: $1,055 

FY 2002 EBIT: n.a.

Enterprise Value/EBIT Multiple: 9.7x

Estimated Value of Potential JSF 

EBIT Contribution: $5.8 $5.4 

Estimated Value per Share: $0.01 $0.01

Current Share Price (5/30/03): $68.25

Estimated Impact of JSF EBIT 

Contribution on Company Value2

: 0.0% 0.0%

Financial Impact

− Direct financial impact on UTC from Pratt 

& Whitney Canada JSF participation will 

be limited 

− True benefit of JSF will stem from the 

potential application of transfer of JSF 

technologies to commercial sector 

o PWC gas turbine engines of the future 

(e.g. PW180, PW600, and PW800 

families) could utilize technologies 

developed for JSF / F135

o PHM (MEMS sensors), “more electric 

engine,” designs to ease producibility, 

advanced materials and miniaturized 

components for lower weight

Geographic Workshare

− Canada

o Pratt & Whitney Canada 

R&D expertise based in 

Quebec

o P&WC may produce 

certain F135 

components

o P&WC will collaborate 

with other Canadian 

companies as needed

Lessons Learned

− Despite relationship with Pratt & Whitney and the Canadian ITAR 

exemption, Pratt & Whitney Canada was required to obtain 3 

TAAs and 1 MLA to cover the four areas of JSF R&D. 

− Pratt & Whitney Canada has had to compete against 3rd parties to 

obtain JSF work from Pratt & Whitney and UTC-subsidiary 

Hamilton Sundstrand. 

− Benefits of the JSF program to Pratt & Whitney Canada are 

mainly related to commercial spin-off opportunities; direct JSF 

revenues will constitute less than 1% of future Pratt & Whitney 

Canada business 

Potential Contracts: 

• IBR production (PW)

• MR&O of PWCmanufactured parts 

JSF-specific revenues are expected to be relatively small for Pratt and Whitney Canada, 

but P&WC input to the development of JSF technologies is potentially high as is the 

possibility of revenues from commercial products using JSF spin-off technology. 

JSF (F135) technology research & development

Potential SDD contracts (F135 R&D): 

• Machine & repair of Nickel & Titanium IBRs 

• 3D Dytran modeling & simulation of foreign 

object ingestion 

• Micro Electromagnetic Monitoring Systems 

(MEMS) sensors 

• Material characterization

Application of JSF technologies to future PWC engines programs, including the 

PW800 (geared turbofan), the core for the UCAV applications. JSF (F135) production

2000 2001 2002 2003 System Design & Development 2012

1

Estimated P&WC revenues; 2Impact on United Technologies Corp due to P&WC JSF earnings only 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A 
E – 13

C ANADA : C OMPENDIUM

Company Name Est. Location Employees

Total Sales 

($ Millions) Potential Technology/Capability

Acsion Industries, Inc. 1998 Pinawa, Manitoba 17 1.0 Electron beam-based products and services

Aerospace Welding (I.A.T.S.) 1980 Blainville, Quebec 120 4.7 Fabrication, repair and overhaul aircraft engine 

assembly, welding and flame spraying

Alphacasting, Inc. 1990 Saint-Laurent, Quebec 100 6.4 Precision investment castings

Atelier D'usinage Aero (Aero 

Machining, Inc.) 1963 Montreal-Nord, Quebec 70 5.9 Frequency hopping, secure, and anti-jam high 

frequency radio equipment

Atlantis Systems International 1978 Brampton, Ontario 168 8.7

Develops, manufactures, and maintains simulation 

and training systems, performance support and 

pilot selection systems

Avcorp Industries Inc. 1986 Delta, British Columbia 400 52.7 Metal, plastic, and composite aircraft structures

Axia NetMedia Corporation 1995 Calgary, Alberta 500 62.3 High-speed interactive networks and media 

services

Bristol Aerospace (Magellan 

Aerospace) Winnipeg, Manitoba 1,100 110.5 Engine components, rockets, and aircraft structural 

systems

Solectron Sherbrooke SSG 

(Solectron) 1977 Sherbrooke, Quebec n.a. n.a. Integrated supply chain services

CAE Inc. 1947 Saint-Laurent, Quebec 7,000 729.0 Flight simulators and naval ship control systems

Centra Industries Inc. 1974 Cambridge, Ontario 150 13.0 Precision machined components and assemblies

Chicopee Manufacturing Ltd. 

(Magellan Aerospace) n.a. Kitchener, Ontario 175 47.7 Aerospace components and sub-assemblies

CMC Electronics Inc. 1902 Montreal, Quebec 1,100 130.0 Electronic systems and components 

CMC Electronics Inc. n.a. Kanata, Ontario 300 n.a. Navigational electronic equipment 

Composites Atlantic (EADS) 200 Lunenburg, Nova Scotia 125 8.1 Advanced composite structures

Comtek Advanced Structures Ltd. 1994 Burlington, Ontario 114 7.6 Interior composite aircraft components

Cormer Group Industries Inc. 1988 Winnipeg, Manitoba 75 9.8 Components machining, processing, and assembly 

Donlee Precision (General Donlee 

Ltd.) 1963 Toronto, Ontario 90 15.0 Precision-machined products

DY 4 Systems Inc. (Solectron) 1979 Kanata, Ontario 300 39.9 Embedded computing solutions

Edgewater Computer Systems, Inc. 1988 Regina, Saskatchewan 21 n.a. High-performance real-time multiprocessor 

interconnect technologies

EMS Technologies Canada Ltd. 

(EMS Technologies, Inc.) 1974 Sainte-Anne-de-Bellevue, Quebec 850 118.9 Satellite based-terminals, antennas and aeronautical applications

FAG Bearings Ltd. (FAG 

Kugelfischer) 1953 Mississauga, Ontario 1,200 214.5 Aerospace bearings

Fellfab Ltd. (Fellfab Corp.) 1992 Hamilton, Ontario 130 5.1 Engineered textile products

FTG Edgelit (Firan Technology 

Group) n.a. Scarborough, Ontario 340 24.7 Illuminated panels and annunciator assemblies

FTG Precision (Firan Technology 

Group) n.a. Scarborough, Ontario n.a. n.a. Mil-spec and high-end commercial printed circuit boards

Haley Industries Ltd. (Magellan 

Aerospace) 1952 Haley Station, Ontario 550 40.0 Light alloy aerospace foundries

Heroux Devtek Inc. 1954 Longueuil, Quebec 790 205.6 Design, development, manufacture, and repair of 

aerospace and industrial products

Heroux Devtek Aerostructures Inc. n.a. Dorval, Quebec 175 15.3 Manufacture of components and sub-assemblies

Heroux Devtek Landing Gear Div. 1950 Longueuil, Quebec 700 174.5 Manufacture, repair, and overhaul of small to 

medium size landing gear

Hochelaga (Heroux Devtek Inc.) 1954 Laval, Quebec 175 4.9 Landing gear and related services

Honeywell Ltd. 1930 Mississauga, Ontario 3,000 715.0 Aircraft controls

Canada - Potential Defense Industry JSF Competitors 

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US Department of State. 

Financial information compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, MASAI reports, ICC Shareholder reports, securities 

exchange filings, the Major Companies Database, FBR Company profiles, and others.
E – 14

C ANADA : C OMPENDIUM ( C ONT ’ D )

Company Name Est. Location Employees

Total Sales 

($ Millions) Potential Technology/Capability

Honeywell Aerospatiale 1930 Slemon Park, Prince 

Edward Island 350 30.2 Engine fuel controls and repair and overhaul

Honeywell Electronic Materials n.a. Victoria, British Columbia n.a. n.a. Advanced on-chip interconnect technology

Howmet Aluminum Castings Ltd. 

(Alcoa) n.a. Laval, Quebec n.a. n.a. Aluminum investment castings

Howmet Aluminum Castings Ltd. 

(Alcoa) n.a. Georgetown, Ontario 95 n.a. High-technology castings of aluminum and copperbased alloys

i3dimensions Inc. 2000 Vancouver, British Columbia 30 1.3 Graphic arts, computer software systems analysis, 

and design

IMP Group Ltd. 1967 Dartmouth, Nova Scotia 3,500 183.1 Aircraft servicing and repairing

Instrumar Ltd. 1979 St. John's, Newfoundland 54 n.a. Engineering services and real time information 

systems

LearnStream Inc. 1993 Fredericton, New Brunswick 170 8.2 Computer software development

Litton Systems Canada n.a. Etobicoke, Ontario 700 70.3 Aircraft control systems, electronic flight control 

equipment

MBM Tool and Machine 1967 Woodbridge, Ontario 60 2.5 Structural, hydraulic, and undercarriage 

components/assemblies 

Mustang Survival Corp. 1967 Richmond, British Columbia n.a. n.a. Hazardous environment life support solutions for 

people exposed to the most . 

National Research Council 1916 Ottawa, Ontario 3,400 516.0 Business development, government relations

Noranco Manufacturing Ltd. n.a. Pickering, Ontario 90 14.1 Fabricated metal products

Northstar Aerospace Inc. (Derlan 

Aerospace Canada, Ltd.) 1989 Milton, Ontario 1,500 123.4 Aircraft assemblies, subassemblies, and parts

Northstar Aerospace Inc. (Derlan 

Aerospace Canada, Ltd.) n.a. Cambridge, Ontario 120 n.a. Aircraft assemblies, subassemblies, and parts

Northstar Aerospace Inc. (Derlan 

Windsor Gear and Drive) n.a. Emeryville, Ontario 50 n.a. Gear cutting and finishing machines

Northstar Network Ltd. (Northstar 

Electronics) n.a. St. John's, Newfoundland n.a. n.a. Design, manufacturing, and systems integration 

Nova Crystals, Ltd. 1982 Halifax, Nova Scotia n.a. n.a. Customized ceramic and glass products 

Novatronics Inc. 1955 Stratford, Ontario 130 9.8 Aircraft control systems, electronic

Pivotal Power 1980 Bedford, Nova Scotia 75 5.2 Power conversion units

PyroGenesis Inc. 1992 Montreal, Quebec 50 2.4

Design and fabrication of waste treatment systems, 

and of high performance materials related to 

thermal spraying technology

Societe Industrielle de Decolletage et 

D'outillage n.a. Granby, Quebec n.a. n.a. n.a.

Shellcast Foundries Inc. 1971 Montreal-Nord, Quebec 140 8.1 Aluminum and aluminum-based alloy castings

Simgraph Inc. 1993 Montreal, Quebec 27 1.6 Customized multimedia training solutions

Spectrum Signal Processing Inc. 1987 Burnaby, British Columbia 140 22.8 Computer software development

Strite Industries Ltd. 1964 Cambridge, Ontario 270 12.8 Engineering and prototyping services 

West Heights (Devtek Aerospace, 

Inc.) n.a. Kitchener, Ontario n.a. n.a. Landing gear and related services

Xwave (Alliant) 1980 Kanata, Ontario 2,500 260.0 Information technology services

Canada - Potential Defense Industry JSF Competitors (cont'd)

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US Department of State. 

Financial information compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, MASAI reports, ICC Shareholder reports, securities 

exchange filings, the Major Companies Database, FBR Company profiles, and others.
F – 1

APPENDIX F 

NORWAY: COMPANY CASE STUDIES AND 

COMPENDIUM
F – 2

(This page intentionally left blank.)
F – 3

– Major Businesses: missile and space, naval systems, land systems and communications, aircraft 

and air defense systems, dynamic systems

– Key Technological Capabilities: signal processing, engineering cybernetics, systems 

integration, software 

– Major Military Platforms: F-16, Sea Hawk, E-3 AWACS, AMRAAM

KONGSBERG DEFENSE & AEROSPACE PRODUCTS

– Missile and Space – developed the Penguin 

anti-ship cruise missile, the world's leading 

anti-ship missile for deployment on naval 

helicopters; currently developing a naval strike 

missile on behalf of the Royal Norwegian Navy 

– Naval Systems – design and develop surface 

ship combat systems, submarine combat 

systems, and mine countermeasures combat 

systems 

– Aircraft and Defense Systems – offer, in 

partnership with Raytheon, ground based air 

defense solutions 

– Dynamic Systems – developed and produce 

a remote controlled weapon station for 

installation on armored vehicles 

– Land Systems and Communications – key 

supplier of secure communications equipment 

to the Norwegian armed forces; products 

include a family of secure combat net radios, a 

battlefield management system, a range of 

secure encryption equipment and a command 

and control information system geared for 

more mobile, tactical Army operations 

K ONGSBERG – C OMPANY OVERVIEW

Kongsberg Defence & Aerospace AS 

Subsidiary of Kongsberg Gruppen ASA

Oslo Børs – Ticker: KOG (50.0% owned by Norwegian Government) 

Headquarters: Kongsberg, NORWAY 

Employees: 1,649 

Kongsberg Defence & Aerospace is one of Norway’s top suppliers of advanced defense systems and 

products to both the Norwegian government and international defense contractors. 

KONGSBERG GRUPPEN – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $634 $762 $888 $1,004

Sales growth: 0% 20% 17% 13%

 Reported EBIT: 31 32 47 58

EBIT margin: 5% 4% 5% 6%

Pro-forma EBITDA: 58 67 90 97

EBITDA margin: 9% 9% 10% 10%

Pro-forma EBIT: $31 $32 $52 $58

EBIT margin: 5% 4% 6% 6%

Revenue per employee: $238,511

Stock price: $11.36 (as of 5/30/2003)

52 week high: $15.82

52 week low: $10.64

Shares outstanding: 30.0 million

Market capitalization: $341

Net Debt: $114

Enterprise Value: $455

EV/EBIT multiple*: 7.8x (*Pro-forma)

Segment Revenue Breakdown

44%

4%

14% 12%

26%

Offshore/Subsea

Yachting/Fishery

Merchant Marine

Defense/Aerospace

Other

$0

$200

$400

$600

$800

$1,000

$1,200

'99 '00 '01 '02

0%

2%

4%

6%

8%

10%

12%

Sales

EBITDA Margin

EBIT Margin

Results are converted from Norwegian Kroners to US Dollars using the exchange rate as of December 31, 2002 (NOK 1.00 = US$0.1438) 
F – 4

JSF CONTENT & 

CONTRACT HISTORY

K ONGSBERG – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – KONGSBERG

(Year 2002 US$M, except per share) 

(NOK 1.00 = US$0.1438)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $44.2 $105.3 

Average Annual Revenue: $4.4 $7.0 

% of Reported 2002 Revenue: 0.4% 0.7%

Estimated Average Annual EBIT 

Contribution: $0.2 $0.4

FY 2002 Reported Revenue: $1,003.7 

FY 2002 Pro-Forma EBIT: $58.1 

Enterprise Value/EBIT Multiple: 7.8x

Estimated Value of Potential JSF 

EBIT Contribution: $1.8 $2.8 

Estimated Value per Share: $0.06 $0.09

Current Share Price (5/30/03): $11.36

Estimated Impact of JSF EBIT 

Contribution on Company Value: 0.5% 0.8%

Financial Impact

− Assumptions: 

o Kongsberg designs and manufactures 

CV arresting gear

o Kongsberg wins potential contracts 

worth approximately $115M

− Kongsberg does not expect significant 

impact from JSF (<1% of revenues) 

Geographic Workshare

− Norway 

o Kongsberg design 

and production 

facilities are 

located in Norway

Lessons Learned

− Bidding process would be more effective with improved 

communication; JSF has not afforded many opportunities to 

discuss bids with contractors in order to uncover opportunities to 

optimize the best-value model. Kongsberg applauds the 

Eurofighter sourcing team – during bid negotiations between 

Kongsberg and Eurofighter, it was discovered that Kongsberg’s bid 

was too high because of raw materials cost... Eurofighter and 

Kongsberg then worked out a way to leverage Eurofighter’s buying 

power, allowing Kongsberg to lower its bid without sacrificing return 

Though a company with diverse capabilities, Kongsberg feels their core 

competencies most relevant to JSF are in mission system design and integration 

Potential Contracts: 

• CV Arresting Gear 

• Missile Integration 

• Crew Ladder 

• Composites 

• Training 

2000 2001 2002 2003 System Design & Development 2012

Kongsberg loses a potentially 

large competition for Remote I/O 

design and development

Kongsberg grows aerospace and defense 

business partly through Boeing programs – 

Kongsberg has major system-level positions 

on the E-3 AWACS and B737 AEW&C

Potential for Kongsberg to provide 

training services in Europe 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
F – 5

– Major Businesses: produce and export mechanical jet engine components and modules

– Key Technological Capabilities: manufacturing, metal machining – chromium/nickel base alloys 

and titanium products 

– Major Military Platforms: F-15, F-16, F/A-18 C/D, F/A-18 E/F, Gripen

VOLVO AERO NORGE PRODUCTS

– Military Engines – develop and produce 

engine components for military engines 

including: RM12, F414, F404, F100, F110 

– Aeroderivitive Gas Turbines – develop and 

produce parts for aeroderivitive gas turbines 

used in industrial, power generation, and 

marine propulsion applications 

Civil Engines – develop and produce engine 

components for a variety of commercial engines 

including: CF6-80, CFM56, GE90-115B, 

GP7000, BR715, Trent 500, Trent 900, RR Tay, 

PW4000, PW2000, IAE V2500, and JT8-D 

V OLVO AERO N ORGE – C OMPANY OVERVIEW

Volvo Aero Norge AS 

Jointly owned by Volvo Aero (AB Volvo) and Pratt & Whitney (United Technologies Corp) 

Headquarters: Kongsberg, NORWAY 

Employees: 475 

Volvo Aero Norge is jointly owned by Volvo Aero (77.8%) and Pratt & Whitney (22.2%). The Company 

manufactures jet engine components for the world’s leading aircraft engine manufacturers on both civil 

and military platforms. 

 

AB VOLVO – FINANCIAL SUMMARY

(US$M) Year ended 31 Dec 1999 2000 2001 2002

Sales: # $14,302 $14,880 $21,654 $21,301

Sales growth: n.m. 4% 46% (2%)

 Reported EBIT: 3,908 763 (77) 325

EBIT margin: 27% 5% (0%) 2%

Pro-forma EBITDA: n.a 1,271 1,425 1,565

EBITDA margin: 9% 9% 7% 7%

Pro-forma EBIT: 854 555 285 325

EBIT margin: 6% 4% 1% 2%

Revenue per employee: $304,301

Stock price (ADR): $20.99 (as of 5/30/2003)

52 week high: $21.35

52 week low: $13.40

Shares outstanding: 434.6 million

Market capitalization: $9,122

Net Debt: $7,272

Enterprise Value: $16,394

EV/EBIT multiple*: 50.5x (*Pro-forma)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

'99 '00 '01 '02

0%

2%

4%

6%

8%

10%

Sales

EBITDA Margin

EBIT Margin

Segment Revenue Breakdown

4% 5% 4%

67%

8%

12%

Trucks

Buses

Construction

Equipment

Volvo Penta

Volvo Aero

Results are converted from Swedish Kroners to US Dollars using the exchange rate as of December 31, 2002 (SEK1.00 = US$0 .1144)
F – 6

JSF CONTENT & 

CONTRACT HISTORY

V OLVO AERO N ORGE – JSF P ARTICIPATION

JSF FINANCIAL IMPACT – VOLVO AERO NORGE (IMPACT ON AB VOLVO)

(Year 2002 US$M, except per share) 

(NOK 1.00 = US$0.1438)

SDD/LRIP 

(2002-2011)

FRP 

(2012-2026)

Expected JSF Program Revenue: $37.7 $203.7 

Average Annual Revenue: $3.8 $13.6 

% of Reported 2002 Revenue: 0.0% 0.1%

Estimated Average Annual EBIT 

Contribution: $0.1 $0.4

FY 2002 Reported Revenue: $21,301 

FY 2002 Pro-Forma EBIT: $325 

Enterprise Value/EBIT Multiple1

: 8.0x

Estimated Value of Potential JSF 

EBIT Contribution: $0.9 $3.4 

Estimated Value per Share: $0.00 $0.01

Current Share Price (5/30/03): $20.99

Estimated Impact of JSF EBIT 

Contribution on Company Value: 0.01% 0.04%

Financial Impact

− Assumptions: 

o Volvo Aero Norge wins SDD and 

production contracts for F135 turbine 

shaft, LPT case, fan case, compressor 

case, and intermediate case, and F136 

compressor case

− Financial impact not noticeable at AB 

Volvo level 

− Financial impact on Volvo Aero Norge will 

be significant during production years as 

F-16 and F-18 production will have ceased 

o Military program viewed as a necessary 

diversification from commercial 

aerospace

Geographic Workshare

− Norway 

o Volvo Aero Norge 

performs all 

contract work in 

its Kongsberg, 

Norway facility

Lessons Learned

− Past experience with GE and Pratt & Whitney was critical to 

winning JSF business – Volvo Aero Norge has become a proven 

supplier for both military and commercial programs 

− Although born from an offset program, Volvo Aero Norge has 

embraced its history of build-to-print contracts and focused on 

production efficiency – Volvo Aero Norge now has some input into 

shaft design to help achieve cost-effective “producability” 

“[If Volvo Aero becomes] single source for three or four [major engine components, 

Volvo Aero Norge JSF revenue] would equal size of Norwegian buy.”

Awarded Contracts: 

• F135 Turbine Shaft 

• F136 Aft Compressor Case (“preSDD”)

2000 2001 2002 2003 System Design & Development 2012

Volvo Aero Norge expects to capitalize 

on its experience on the F-15, F-16, and 

F-18 programs to gain a significant 

position on both JSF engines

Volvo Aero Norge was founded as “Kongsberg 

Vapensfabrikk” solely to fulfill F-16 offset requirements; it 

has grown since that time to become the major supplier for 

turbine shafts for Pratt & Whitney and General Electric

Potential Contracts: 

• F135 – 

o LPT Case, Fan Case, Compressor 

Case, Intermediate Case

• F136 Compressor Case (SDD)

1

EV/EBIT multiple common for component shops 

Source: ODUSD(IP) & First Equity estimates; Discussion of Methodology in Appendix A
F – 7

N ORWAY : C OMPENDIUM

Company Name Est. Location Employees

Total Sales

($ Millions) Potential Technology/Capability

3D Perception AS n.a. Asker n.a. n.a. Projection, and projection related equipment

Boxer Technologies AS (Reitan 

Invest) 1986 Kristiansand 35 n.a. Multimedia-based training programs 

Corena Norge AS (Corena Holding) 1991 Kongsberg n.a. n.a. Structured XML/SGML content, integrated software 

system solutions

Data Respons AS 1986 Hovik n.a. 22.8 Frequency hopping, secure, and anti-jam high 

frequency radio equipment

Det Norske Veritas 1864 Hovik 4,400 593.0 Maritime classification company; provides 

certification of management systems and products 

Eidsvoll Electronics AS 1979 Eidsvoll 19 4.2 Electrical equipment and supplies

EPM Technology (Jotne Group) n.a. Oslo n.a. n.a. Solutions for product data technology

Ericsson Radar AS (Ericsson AS) n.a. Halden n.a. n.a. Sensors and command systems for artillery locating 

systems

High Density Devices AS n.a. Mandal n.a. n.a. n.a.

IFS Norge AS 1991 Oslo 251 35.2 Electrical equipment and supplies

Kitron ASA 1996 Billingstad 1,745 299.0 Electronic components

Kongsberg Defense and Aerospace 

(Kongsberg Gruppen) 1814 Kongsberg 1,649 460.3 Manufactures air defense systems, missiles, command / control systems, avionics components

Kongsberg Protech AS (Kongsberg 

Gruppen) 1999 Kongsberg 220 73.4 Remote controlled weapon station, manufacturing 

services, aircraft maintenance

Luftforsvarets Hovedverksted (LHK) n.a. Kjeller n.a. n.a. n.a.

MEMSCAP AS 1997 Skoppum 33 8.6 Micro-electromechanical systems (MEMS) based 

solutions

Metronor ASA 1992 Nesbru n.a. n.a. Portable systems for geometric quality control and 

tool building

Mintra AS 1997 Oslo n.a. n.a. Interactive learning solutions

Nammo AS 1998 Raufoss 1,297 205.0 Ammunition and missile propulsion capabilities

Natech AS 1995 Narvik 80 n.a. Advanced contract manufacturing and engineering

Polydisplay ASA n.a. Sandefjord n.a. n.a. Display and visual communication for information, 

management and entertainment

Scali AS 1997 Oslo n.a. n.a. Scalable, high-performance cluster software and 

solutions

SensoNor ASA 1985 Horten 200 4.3 Sensors and devices based on silicon 

micromechanical technology (MEMS)

SINTEF 1950 Trondheim 1,829 188.0 Research based services, laboratory and workshop 

services, software, and systematic information

T&G Elektro AS 1955 Stabekk n.a. n.a. Interconnection solutions for telecommunication, 

offshore and defense industries

Teknologisk Institut 1917 Oslo 250 20.5 Architectural services

Teleplan AS 1964 Lysaker 600 23.0 Telecommunications and information technology 

consultancy

Thales Communications AS (Thales) n.a. Oslo 270 n.a. Military communications solutions 

Triad AS 1986 Lillestrom Experimental radar and sonar prototypes

VMETRO ASA 1986 Oslo 75 40.8 Integrated components for moving large amounts of 

data in real-time networks

Volvo Aero Norge 1987 Kongsberg 473 108.4 Manufactures civil and military aircraft engines ,and 

engine components

Norway - Potential Defense Industry JSF Competitors 

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US 

Department of State. Financial information compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, MASAI 

reports, ICC Shareholder reports, securities exchange filings, the Major Companies Database, FBR Company profiles, and others.
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G – 1

APPENDIX G 

DENMARK: COMPENDIUM
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G – 3

DENMARK : C OMPENDIUM

Company Name Est. Location Employees ($ Millions) Potential Technology/Capability

Aminova Consult ApS 2000 Odense n.a n.a. Software development

Bruel and Kjaer 1942 Naerum 537 103.0 Transducers, analyzers, and amplifiers

Cadpeople Holding ApS 1992 Arhus 24 n.a. Interactive 3D modeling and virtual reality

Corena Danmark AS (Corena Group) 1989 Birkerod n.a n.a. Frequency hopping, secure, and anti-jam high 

frequency radio equipment

CSC Danmark AS (CSC) 1996 Tastrup n.a n.a. IT consulting, systems integration, and 

outsourcing

Danish Stir Welding Technology / 

DanStir ApS 2000 Brondby n.a n.a. Friction stir welding 

Danish Aerotech 1999 Karup 85 9.1 Composite design, component manufacture

Danish Maritime Institute (Force 

Technology) 1959 Lyngby n.a n.a.

Specialized consultancy services and software 

products focusing upon maritime safety and 

efficiency 

DDC-I n.a. Lyngby n.a n.a. Supplier of development systems and run-time 

systems 

DELTA Dansk Elektronik, Lys and Akustik 1944 Horsholm 130 25.6 Inspection and testing services

Dezide n.a. Aalborg n.a n.a. Automation support software

Danish Technological Institute, DTI 1906 Taastrup 1,000 n.a. Assists Danish firms with incorporating modern 

technologies

E. Falck Schmidt A/S 1935 Odense 140 15.8 Hydraulic aerial work platforms, refuse 

collection and handling systems

Embedit A/S 2000 Herlev 15 n.a. Custom computer programming services

FORCE Technology 1941 Brondby 825 78.7 Technological service institute 

GateHouse A/S 1989 Norresundby 10 n.a. Custom computer programming services

GPV Industri A/S 1961 Glostrup 1 77.9 Fabricated plate work 

Hamann Electronics A/S 1926 Holbaek n.a n.a. Electronic products assembly

Hans Torsleff Management Systems AS 1987 Frederiksberg 22 n.a. Computer hardware requirements analysis

HiQ WISE A/S (HiQ International) n.a. Brondby n.a n.a. IT and management consultancy 

IFAD 1988 Odense 16 n.a. Simulation and training systems

Maersk Data Defence AS Sonderborg 2,718 515.0 Integrated communication systems

Printca A/S 1974 Analborg 85 n.a. Manufacturer of electronic components

RISO National Laboratory 1956 Roskilde 596 93.9 Research in science and technology

Systematic Software Engineering A/S 1985 Abyhoy 315 29.0 Software development, consultancy, software 

services

TERMA A/S 1944 Lystrup 950 1,017.4 Electronic and communications components

TEXIT Danmark A/S 1992 Odense 16 n.a. Industrial machinery and equipment

Tirca n.a. Kobehavn n.a n.a. n.a.

TSE n.a. Augustenborg n.a n.a. n.a.

Unigate Innovation A/S 2000 Lystrup 24 n.a. Custom computer programming services

Denmark - Potential Defense Industry JSF Competitors 

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US Department 

of State. Financial information compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, MASAI reports, ICC 

Shareholder reports, securities exchange filings, the Major Companies Database, FBR Company profiles, and others.
G – 4

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H – 1

APPENDIX H 

AUSTRAILIA: COMPENDIUM
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H – 3

A USTRAILIA : C OMPENDIUM

Company Name Est. Location Employees ($ Millions) Potential Technology/Capability

Adacel Technologies Ltd. 1987 Brighton n.a. 71.5 Simulation, and software applications and services

ADI Ltd. 1989 Garden Island 2,700 162.5 C4ISR systems

Advanced Systems Pty Ltd. (ADI Ltd.) 1994 Hindmarsh 15 n.a. Integrated data acquisition solutions

Advitech Pty Ltd. 1987 Tighes Hill Newcastle 40 n.a. Frequency hopping, secure, and anti-jam high frequency 

radio equipment

AeroStructures Technologies Pty (The Aerostructures 

Group) 1995 South Melbourne n.a. n.a. Usage monitoring and structural integrity management 

Australian Photonics Cooperative Research Centre 1991 Eveleigh 328 n.a. Interdisciplinary photonics research and development

BAE Systems Australia Ltd. 1961 Braddon 2,800 164.3 Aircraft engines and aircraft parts

Bishop Manufacturing Technology Ltd. (Bishop 

Technology Group) 1997 Villawood 100 4.8 Manufacturing solutions for highly qualified parts

Boeing Australia Ltd. (The Boeing Company) 1986 Brisbane 1,900 277.9 Systems integration, aviation services, and support

Broens Industries Pty Ltd. 1979 Ingleburn n.a. n.a. Toolmaking, automation and special purpose machines 

CEA Technologies Pty Ltd. 1983 Fyshwick 155 20.0 Radar surveillance systems

Cirrus Real Time Processing n.a. Sydney South n.a. n.a. Software and systems design and integration services

Codarra Advanced Systems 1990 Bruce 38 n.a. Data processing and preparation

Communication Design and Management Pty Ltd. 1991 Sydney n.a. n.a. Information and computing technology

Compucat Research Pty Ltd. 1981 Belconnen 70 n.a. Secure communications systems

Computer Systems Australia Pty Ltd. 1986 Lambton 60 n.a. IT products and services

Cooperative Research Centre for Advanced Composite 

Structures n.a. Fishermans Bend n.a. n.a. Civil aerospace research and development

Cooperative Research Centre for Sensor Signal 

Information Processing 1992 Mawson Lakes n.a. n.a. Advanced sensor and communications technology R&D

CSC Australia Pty Ltd. (Computer Sciences 

Corporation) n.a. St. Leonards n.a. n.a. Comprehensive e-business solutions

Daronmont Technologies Pty Ltd. 1991 Mawson Lakes 45 6.3 ISR technologies

Defense Science and Technology Organization n.a. Canberra n.a. n.a. Requirement and systems research and development

Delta Hydraulics Pty Ltd. 1987 Tasmania 75 18.5 Aircraft parts and equipment

Diamond Australia Pty Ltd. 1994 Mitcham 30 n.a. Optical instruments and lenses

Ericsson Australia 1960 Melbourne 1,300 597.2 Mobile handsets, broadband devices, and network routers

Ferra Engineering Pty Ltd. 1992 Tingalpa 100 6.0 Metal cutting machine tools

FlightStat Data-Link Pty Ltd. n.a. Surfers Paradise n.a. n.a. Next generation black box technology

G.H. Varley Pty Ltd. (Varley Group) n.a. Tornago n.a. n.a. Ship repair

GKN Engage Pty Ltd. (GKN plc) n.a. Port Mebourne n.a. n.a. Engineering design and analysis services 

Halliburton KBR Pty Ltd. Government Ops (Halliburton 

Company) n.a. Canberra 1,200 n.a. Engineering, planning and project management services

Hawker de Havilland (The Boeing Company) n.a. Port Mebourne 950 92.0 Aircraft components and engine modifications 

Hawker de Havilland Components Pty Ltd. 1991 Bayswater 74 n.a. Aircraft engines and engine parts

Honeywell Holdings Pty Ltd. (Honeywell International 

Corp.) 1951 North Ryde 1,200 160.6 Electronics, components, and systems integration

Hunter Aerospace Corporation Pty Ltd. (BAE Systems 

plc) 1996 Newcastle n.a. 7.8 Military helicopter maintenance and support

IPACS Australia Pty Ltd. n.a. Somerton Park n.a. n.a. n.a.

L-3 Communications Australia Pty Ltd. 2002 Lara n.a. n.a. ISR equipment

Levett Engineering n.a. Elizabeth West n.a. n.a. Specialized materials engineering 

Lovitt Technologies Australia n.a. Montmorency n.a. n.a. Precision engineering and toolmaking

Marand Precision Engineering Pty Ltd. 1969 Moorabbin 130 n.a. Tooling, jigs, fixtures, lay-up mandrels 

Micreo Ltd. n.a. Murarrie n.a. n.a. Ultra-high data rate, long-haul, fiber optic communication 

technologies 

Mincom Ltd. 1979 Brisbane 1,150 114.4 Computer consulting

National Forge, Ltd. 1952 West Footscray n.a. 52.8 Forged and sintered metal components

Normalair-Garrett Pty Ltd. (Honeywell International Inc.) 1951 Airport West 53 n.a. Aircraft engines and engine parts

Parametric Technology Australia Pty Ltd. (Parametric 

Technology, Inc.) 1995 North Sydney 14 n.a. Collaborative product commerce and flexible engineering 

solutions 

Production Parts Pty Ltd. 1946 Airport West 20 n.a. Aircraft and airframe structural components

Qantas Defence Services Pty Ltd. 1999 North Sydney 400 5178.7 Airport, flying fields, and services

Raytheon Australia Pty Ltd. (Raytheon Company) n.a. Canberra Airport 400 n.a. Electronics and systems integration

RLM Systems Pty Ltd. (Tenix Pty Ltd.) n.a. Burwood East n.a. n.a. Advanced electronics and sophisticated software systems

Rosebank Engineering Pty Ltd. 1977 Port Mebourne 74 n.a. Component maintenance and precision machining

Saab Systems Pty Ltd. 1988 Mawson Lakes 231 27.0 Advanced operational software intensive systems

Smiths Aerospace Australia Pty Ltd. (Smiths Group) 1955 Brisbane Airport 40 n.a. n.a.

Sydac Pty Ltd. 1988 Adelaide n.a. n.a. Innovative simulation based engineering 

Tenix Defence Pty Ltd. (Tenix Holdings International Pty 

Limited) 1987 North Sydney 1,900 242.1 Shipbuilding and repair

Thales Training and Simulation Pty Ltd. (Thales Group) 1987 Potts Point 115 n.a. Simulation and training

Trident Tooling Pty Ltd. 1993 Netley 56 n.a. Injection molded and die cast tools

TRW Aeronautical Systems Australia Ltd. (Northrop 

Grumman) 1929 Zetland 90 17.5 Flight controls, engine controls, electrical power 

VIPAC Engineers and Scientists Ltd. (Vipac 

Laboratories Pty Ltd..) 1973 Kent Town 95 n.a. Engineering systems development and consulting

VPIsystems Pty Ltd. (VPIsystems Inc.) n.a. Kew n.a. n.a. Software to design, plan, configure and deploy 

communications equipment and networks

Wedgetail TRDC Pty Ltd. 2001 Mawson Lakes n.a. n.a. Radar systems, signal processing research and 

development

Western Australian Specialty Alloys Pty Ltd. 1994 Canning Vale 50 n.a. Nickel and cobalt based superalloys 

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US Department of State. Financial information 

compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, MASAI reports, ICC Shareholder reports, securities exchange filings, the Major Companies 

Database, FBR Company profiles, and others.

Australia - Potential Defense Industry JSF Competitors
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I – 1 

APPENDIX I 

TURKEY: COMPENDIUM
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I – 3 

T URKEY : C OMPENDIUM

Company Name Est. Location Employees ($ Millions) Potential Technology/Capability

Aselsan Electronics Industries Inc. 

(Turkish Armed Forces Foundation) 1975 Ankara 2,955 105.6

Designs, develops and manufactures modern 

electronic systems for military and professional 

customers

Ayes as n.a. Ankara n.a. n.a. n.a.

Havelsan (Turkish Armed Forces 

Foundation) 1982 Ankara 617 n.a.

C4I, simulation, electronic warfare, avionics, 

management information, and information 

security systems

Marconi Kominikasyon AS 1989 Ankara n.a. n.a. Frequency hopping, secure, and anti-jam high 

frequency radio equipment

Milsoft 1998 Ankara 80 n.a. Custom computer program services

Teknoplazma 1996 Ankara n.a. n.a. Advanced technology materials 

Tusas Aerospace Industries (TAI) 1984 Ankara 2,000 122.2 Aircraft production and development

Turkey - Potential Defense Industry JSF Competitors 

Source: Potential defense industry JSF competitors sourced from the Joint Strike Fighter Global Project Authorization Annex II and the US 

Department of State. Financial information compiled from various databases and reports, including Dun and Bradstreet, Lexis Nexis, 

MASAI reports, ICC Shareholder reports, securities exchange filings, the Major Companies Database, FBR Company profiles, and others.
I – 4 

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