United States General Accounting Office

GAO Report to Congressional Requesters

February 1997 U.S.-JAPAN FIGHTER

AIRCRAFT

Agreement on F-2

Production

GAO/NSIAD-97-76

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-272541 

February 11, 1997

The Honorable Strom Thurmond

President Pro Tempore

United States Senate

The Honorable Newt Gingrich

Speaker of the House of Representatives

The Honorable Richard Gephardt

Minority Leader

House of Representatives

The FS-X fighter aircraft program, now the F-2,1

 is the first U.S.-Japan joint

development and production of a weapon system, marking a significant

departure from previous licensed production agreements between the

United States and Japan. The early stages of the program were

characterized by strong congressional concerns regarding the terms of the

codevelopment agreements. In particular, Congress was concerned about

the enhancement of Japan’s aerospace industry through the transfers of

U.S. technology to Japan, and the value of Japanese technologies to be

transferred to the United States.

This is an unclassified version of our 1997 classified report. This report

examines the status of the F-2 fighter aircraft program as development

nears completion and provides information on the agreements signed on

July 30, 1996, by the two countries for the production phase of the

program. Specifically, we address the following issues: (1) the proportion

of production work that will be done in the United States and how the U.S.

workshare will be calculated and monitored, (2) the status of technology

transfers from Japan to the United States and whether these technologies

are of interest to the U.S. government and industry, and (3) the program’s

potential contributions to Japan’s future aerospace plans.

This report responds to a requirement that we periodically review the F-2

program. This requirement is part of the conference report for the fiscal

year 1990 appropriations act for the Departments of Commerce, Justice,

and State; the Judiciary; and related agencies. It also responds to a request

from the House Minority Leader that we examine aspects of the

production phase agreements signed by the two countries.

1

The production phase agreements renamed the FS-X program to the F-2 program. For clarity and

consistency, we refer to the program as the F-2 throughout the report, regardless of which program

phase is discussed.

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Background In the mid-1980s, Japan was interested in developing an indigenous fighter

aircraft to replace its aging F-1 fighter. On the other hand, the United

States preferred that Japan purchase an off-the-shelf U.S. fighter. As a

compromise, in November 1988, the United States and Japan agreed to

cooperatively develop a fighter aircraft, with all funding to be provided by

the government of Japan. The development phase,2

 which began in 1989

and will end in the year 2000, included the development and manufacture

of six prototype aircraft incorporating major Japanese modifications to the

F-16C/D Block 40.3

 According to Department of Defense (DOD) officials,

the F-2 program was expected to enhance the bilateral security

relationship with Japan. In addition, the United States was to receive free

and automatic flowback of improvements to F-16 technologies and have

access to Japanese indigenous technologies developed for this program.

Also, U.S. industry was to receive 40 percent of the development work.

The F-2 is a multi-role, single engine, fighter aircraft based on the F-16C/D

Block 40 and tailored to Japan’s requirements. (See fig. 1.) The F-16 and

the F-2 are both multi-role fighters with air-to-air and air-to-surface

capability, but the F-2 places more emphasis on the air-to-surface

capability because its primary mission is sea-lane protection. Since one of

the F-2’s operational requirements included extended range and shorter

take-off and landing capability, Japan selected the co-cured composite

wing to maximize strength while minimizing weight. The F-2 wings are

about 25 percent larger than the F-16’s, increasing fuel capacity and

allowing for more weapon stores stations—11 as compared to 9 on the

F-16. Also, the F-2’s fuselage has been stretched to increase fuel capacity

and accommodate the larger wings.

2

The development program has been implemented almost exclusively through commercial contracts.

Mitsubishi Heavy Industries was the prime contractor; other Japanese contractors included Fuji Heavy

Industries, Kawasaki Heavy Industries, and Ishikawajima-Harima Heavy Industries. Lockheed Martin

and General Electric were the principal U.S subcontractors.

3

The block number refers to a specific stage of the F-16’s development.

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Figure 1: The F-2 Prototype

Shortly after the codevelopment agreements were signed, Congress

became concerned about the merits of the agreements, especially the

transfers of U.S. aerospace technology to Japan and the contributions this

would make to the development of Japan’s aerospace industry. Congress

was also concerned about U.S. access to and the potential value of

Japanese-developed technologies. As a result, we were tasked to

periodically review the status of the program. Since November 1989, we

have issued a number of reports dealing with the F-2 program.4

 In general,

these reports concluded that during the development stage:

• the United States was adequately controlling the release of F-16 related

technical data to Japan, but U.S. government agencies were not adequately

sharing licensing information;

• the value of technology transfers from Japan to the United States was

uncertain; and

• the program had helped to enhance Japan’s aerospace industry.

4

See the list of our related products at the end of this report.

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Our August 1995 report5 noted that program officials believed that the

United States and Japan should clearly define U.S. workshare in the

production agreement and include a specific list of items to be

manufactured by U.S. industry.

During the development phase, the United States provided the F-16

technical data package on which the F-2 design was based and U.S.

industry received about 40 percent of development phase work

(approximately $1.2 billion).

In 1995, Japan conducted the initial flight of the first prototype aircraft and

the Japanese cabinet approved the production of 130 F-2 aircraft over the

next 15 years at an average estimated procurement cost of about

$80 million per aircraft.6

 Mitsubishi officially turned the first prototype

over to the Japan Defense Agency in March 1996 to begin government

testing. In May 1996, the Japanese parliament approved about $1.3 billion

for production of 11 aircraft commencing in fiscal year 1996.7

 Finally, on

July 30, 1996, the United States and Japan signed a memorandum of

understanding to produce 130 F-2 aircraft for Japan’s Air Self Defense

Force.

Results in Brief Under the F-2 production agreements, U.S. industry is expected to receive

approximately 40-percent workshare, currently estimated at $4.1 billion if

the Japanese fully implement the planned production of 130 aircraft. The

agreements specify the items to be procured by Japan from U.S. industry,

which provide for a 40-percent workshare based on estimates of the

production costs at the time the agreements were signed. A constant

exchange rate of 110 yen to the dollar was used to estimate the value of

the U.S. workshare and this rate will remain constant throughout the life

of the program.

5

U.S.-Japan Cooperative Development: Progress on the FS-X Program Enhances Japanese Aerospace

Capabilities (GAO/NSIAD-95-145, Aug. 11, 1995).

6

The $80 million per aircraft average is in constant 1996 dollars at 110 yen per dollar. Japan Defense

Agency budgets will be slightly higher as they will include Japanese taxes and will reflect adjustments

for inflation. Japan is funding the entire F-2 program at a cost of about $14 billion, including both

development and production phases.

7

Japan’s fiscal year 1996 began on April 1, 1996.

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The U.S. Air Force plans to verify that contracts for the items identified in

the production agreements are awarded to U.S. companies.8

 The value of

payment amounts will not be tracked and a workshare percentage will no

longer be recalculated based on actual payment amounts as had occurred

during the development phase. As a result, the Air Force will not have the

means to determine whether this approach in fact enabled U.S. companies

to receive approximately 40 percent of the production work over the

course of the program.

Technology transfers from Japan to the United States have generally been

in accordance with the development phase agreements, but some issues

remain unresolved. In 1993, Japan requested that 12 items be recategorized

as Japanese indigenous technologies (i.e., not essentially derived from

F-16 technical data). The United States is to receive free and automatic

flowback of F-2 technologies that are derived from U.S. technical data

while access to non-derived or indigenous technologies is more limited. In

1994, the United States agreed to reclassify 4 of the 12 items as

non-derived or Japanese indigenous technologies. However, at the time of

this review, the United States and Japan had not resolved the classification

issue. As we reported in August 1995, while this issue is unresolved, the

United States is not receiving free and automatic access to these

technologies.

The United States conducted several visits to explore the potential

benefits of F-2 technologies. Two technologies that were initially of

interest to the U.S. Air Force and to DOD contractors—the co-cured

composite wing and the active phased array radar—are now generally

considered too costly to produce. However, Lockheed officials indicated

that tooling techniques from the F-2 program are being applied to the Joint

Advanced Strike Technology program.

The F-2 program enhances Japan’s military aircraft industry by improving

its overall systems integration capability, according to experts. However,

Japan’s exports of military technology and equipment continue to be

constrained by the country’s policy prohibiting exports of weapon systems

or exclusively military technology.

8

The agreements include the Memorandum of Understanding, the Implementing Arrangement to the

Memorandum of Understanding, the Exchange of Notes, and the Memorandum of Implementation for

the Transfer of Japanese Military Technologies.

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U.S. Workshare Is

Expected to Be

Approximately 40

Percent

The F-2 production agreements specify that U.S. industry is to receive

approximately 40-percent workshare. If the Japanese fully implement the

program,9

 the U.S. workshare will be an estimated $4.1 billion over the life

of the program. The agreements identify the contents of U.S. workshare

and provide for a 40-percent workshare based on estimates of production

costs at the time the agreements were signed.

A constant exchange rate of 110 yen to the dollar was used to avoid the

effect of exchange rate fluctuations on the respective workshares.

According to DOD officials, unlike during the development phase, U.S.

workshare will not be recalculated throughout the program. These new

provisions will change the method of verifying U.S. workshare from

checking payments to U.S. companies to checking that U.S. companies

have received contracts for the items that constitute U.S. workshare. The

value of contracts and actual payments to U.S. companies will not be

tracked.

Production Cost Estimates

Provide Basis for U.S.

Workshare

The production agreements provide that U.S. industry will receive

approximately 40 percent of the total value of production over the life of

the F-2 program. The total value of production for 130 aircraft consists of

the flyaway aircraft costs plus initial spares, less certain agreed to

deductions. The Japan Defense Agency estimates the total value of

production will be about $10.3 billion. This total does not include the

purchase of follow-on spare parts, which Japan is expected to purchase

from U.S. industry.

Actual program costs and U.S. revenue are likely to vary from current

estimates. The 40-percent U.S. workshare is based on the Japan Defense

Agency’s estimates of total production costs, adjusted for inflation. The

Japan Defense Agency obtained inputs from prime contractor Mitsubishi

and other Japanese companies when developing its estimated production

budget. These companies’ estimates were based on the development phase

experience and incorporated cost estimates from U.S. companies,

according to DOD officials. U.S. Air Force officials estimated U.S.

workshare by obtaining data from U.S. companies and extrapolating from

experience with the F-16 program.

9

In constant 1996 dollars converted at an exchange rate of 110 yen to the dollar.

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Production Phase

Workshare Calculation

Methodology Differs From

the Development Phase

During the development phase, U.S. workshare was vulnerable to

exchange rate fluctuations. If the yen appreciated against the dollar, thus

requiring fewer yen to pay for each dollar, more work would be required

for U.S. companies to achieve a 40-percent workshare.10 Conversely, if the

yen depreciated against the dollar, work would have to shift from U.S. to

Japanese companies to maintain the 40/60 workshare split because more

yen would be required to meet payments to U.S. companies.

The semi-annual workshare recalculations showed changes in the

percentage of U.S. workshare as the development phase progressed. For

example, in 1994, U.S. workshare was calculated to be 42.4 percent; 1 year

later, U.S. workshare decreased to 40.7 percent as companies were paid at

a lower yen/dollar rate. U.S. and Japanese officials attribute this change

primarily to exchange rate fluctuations, which were significant during the

development phase. From 1988 to 1995, the average annual exchange rate

ranged between 145 yen to the dollar and 88 yen to the dollar.

During government-to-government negotiations for the production phase,

workshare calculation methodology was a major issue. A constant

exchange rate of 110 yen to the dollar was used to estimate the value of

U.S. workshare. The constant exchange rate for the production phase will

be useful not only in establishing U.S. workshare at the beginning of the

program, but also in the event of changes during the course of the

program. For example, if U.S. workshare were to be adjusted in response

to changes in F-2 configuration items, the 110 yen to the dollar exchange

rate would be used to factor in these adjustments to U.S. workshare.

The production phase negotiations also resulted in identification of the

items that will constitute U.S. workshare. Our August 1995 report noted

that U.S. program officials favored defining the elements that comprise

production phase workshare to avoid delays, confusion, and subsequent

disagreements.

In conjunction with the constant 110 yen to the dollar exchange rate,

identification of the items to be produced by U.S. suppliers helps stabilize

U.S. workshare for the life of the program. This will avoid the risk of

shifting work from U.S. to Japanese companies, according to the DOD

officials. Shifting work is not practical because of its potential impact on

cost and schedule.

10For example, a $100,000 contract would equal 13 million yen at an exchange of 130 yen to the dollar,

whereas it would equal 11 million yen at an exchange rate of 110 yen to the dollar.

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B-272541 

Production Workshare

Monitoring Procedures

Also Changed From the

Development Phase

The removal of the effects of exchange rate fluctuations on workshare and

identification of specific work to be performed by U.S. companies have

resulted in changes to the methodology for verifying U.S. workshare from

that used during the development phase. During development, U.S.

workshare was recalculated and reported to the Technical Steering

Committee twice each year by the Japan Defense Agency. The U.S. Air

Force then verified the workshare data by contacting U.S. companies to

determine the value of F-2 contract payments. According to one Air Force

official, verifying U.S. workshare was time consuming and company

reporting of Japanese payments for the purpose of verifying workshare is

voluntary.

For the production phase, U.S. workshare will be monitored through

verifying that Japan has awarded contracts to U.S. companies for the items

agreed to in the production agreements, rather than through verifying

actual payments. Monitoring implementation of the workshare agreement

will be the responsibility of a joint production coordination group, the

successor to the Technical Steering Committee. However, the exact

responsibilities of this committee have yet to be determined.

DOD intends to ensure that agreed parts and items are indeed purchased

from U.S. companies. The Air Force will periodically contact U.S.

companies to verify that the contracts they receive for F-2 production are

in fact consistent with the production agreements. However, the value of

the contracts will not be tracked and a workshare percentage will not be

calculated based on actual payments. As a result, the Air Force will not

have the means to determine whether this approach in fact enabled U.S.

companies to receive approximately 40 percent of the production work

over the course of the program.

U.S. Industry Expects

Revenue of About 

$4.1 Billion

U.S. workshare, currently expected to be about $4.1 billion over the life of

the program,11 is represented by the flow of revenue to U.S. companies,

rather than the percentage of actual work performed. Thus, U.S.

workshare will include parts and components manufactured in the United

States as well as royalties and licensing fees paid by Japan to U.S.

companies. Royalties and licensing fees account for about 5.2 percent of

the $4.1 billion U.S. workshare. Figure 2 shows the major components of

U.S. workshare.

11In constant 1996 dollars converted at an exchange rate of 110 yen to the dollar.

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B-272541 

Figure 2: Major Components of U.S. Workshare

Aft Fuselage


Structure

Leading Edge


Flap

Leading Edge Flap

Left-Hand


Wing Box**

Upper Skin

 

Engine*

Notes: * Phased-in licensing arrangement

** 8 of every 10 left-hand wings

Source: Defense Security Assistance Agency.

Lockheed Martin Tactical Aircraft Systems and General Electric Aircraft

Engines are expected to receive about 70 percent of the U.S. workshare

Page 9 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
B-272541 

(excluding initial spare parts the two companies will produce). About 200

other U.S. companies will also receive F-2 contracts directly from Japan,

as specified in the production agreements. Lockheed Martin will produce

80 percent of the left-hand wings, as well as the aft fuselage, leading edge

flaps, avionics support equipment, and stores management set.12 The

percentage of left-hand wings Lockheed Martin will produce is an increase

over the 57 percent produced during the development phase.

General Electric is entering into a licensed production arrangement with

Japanese engine manufacturer Ishikawajima-Harima Heavy Industries.

General Electric will allow Ishikawajima-Harima to produce up to

76 percent of the engine under license in a phased arrangement. Over the

life of the program, Ishikawajima-Harima’s licensed production of the

engine will average 60 percent. However, in accordance with U.S.

restrictions on transfers of leading edge technologies, critical engine

technologies are not being licensed to Japan as part of this program.13

Workshare will be accounted for by contracts awarded to the major

subcontractors, such as Lockheed Martin and General Electric, and to the

200 or so smaller U.S. companies that will contract directly with Japan. We

have identified several parts and components that will be procured from

third countries; however, these parts account for less than 1 percent of

U.S. workshare. For example, Lockheed will buy airframe harnesses from

Mexico at an estimated total cost of $6 million, or about 0.15 percent of

U.S. workshare. Similarly, General Electric will purchase certain parts

from its subcontractors in Canada, the Netherlands, and Turkey at an

estimated total cost of about $19 million, or about 0.5 percent of U.S.

workshare. These are parts that U.S. contractors typically buy from third

countries to build these engines for the U.S. Air Force.

Transfers of

Technology From

Japan Improve but

Some Unresolved

Issues Remain

Transfers of technology from Japan to the United States have been in

accordance with the development agreements but some issues remain

unresolved. In 1993, Japan requested that 12 items be recategorized as

Japanese indigenous technologies. The United States is to receive free and

automatic flowback of F-2 technologies that are derived from U.S.

technical data. In 1994, the United States agreed to reclassify 4 of the 

12 items as non-derived or Japanese indigenous technologies. However, as

12The stores management set is a computer system that contains weapon delivery software. This

system interacts and communicates with all weapon systems on the aircraft.

13The engine licensed production rate for the Japanese side is approximately 60 percent on average

through the F-2 production period, and reaching up to 76 percent at the end of the F-2 production

period.

Page 10 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
B-272541 

our August 1995 report indicated, while this issue is unresolved, the United

States is not receiving free and automatic access to these technologies.14

We also stated in our August 1995 report that the U.S. Department of

Commerce wanted to develop opportunities for U.S. companies interested

in Japanese FS-X technology by organizing industry visits to Japan to

examine non-derived technologies. Since then, the Commerce Department

and DOD have sponsored 17 U.S. government and industry visits. Industry

participants reported that they generally benefited from learning about

Japanese methods and also from making contacts with Japanese

companies; however, DOD officials and industry participants indicate that

there is limited interest in those technologies.

Japan Limits U.S. Access

to Certain Technologies

Pending Resolution of

Reclassification Request

The F-2 development phase agreements provide for flowback of

technologies to the United States that are essentially developed from U.S.

technical data. These so-called “derived” technologies are those based in

whole or in part upon U.S. technical data provided to Japan as part of this

agreement. The provision entitles the United States to receive all the

technical data and know-how required to replicate the item on a free and

automatic basis.

The United States also has access to Japanese indigenous or “non-derived”

technologies. Japan is to provide technical outlines on non-derived

technologies with sufficient information to enable the United States to

determine their value and usefulness. Those in the United States who wish

to use the technology can obtain it through a licensing agreement from the

originating Japanese company.

The production phase agreements contain similar provisions regarding

flowback of derived technologies and access to non-derived technologies.

The development agreements identified four major F-2 components—the

active phased array radar, the integrated electronic warfare system, the

inertial reference/navigation system, and the mission computer—as

Japanese indigenous or non-derived technologies. There is also a provision

granting Japan the option to request a change in technology classification

from derived to non-derived, provided it can demonstrate that the

technology was developed with insignificant or no U.S. input. In 1993, the

United States agreed to reclassify radar absorbing material to non-derived

14Further details on this case have been classified by DOD and excluded from this report.

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status, increasing the number of recognized Japanese indigenous or

non-derived technologies to five.

Japan later submitted 12 items as candidates for reclassification to

non-derived status. The U.S. government evaluated the 12 to determine if

Japan developed them with minimal or insignificant U.S. input, as Japan

claimed. In 1994, the U.S. government told Japan that the United States

would agree to reclassify 4 of the 12 items. Reclassification of the

remaining eight items remains unresolved. However, as we stated in our

August 1995 report, the United States was not receiving automatic

flowback of these technologies because the Japan Defense Agency was

reluctant to transfer candidate technologies before the U.S. evaluation was

complete. Japan believes that these technologies are not essentially

developed from U.S. technology. On the other hand, U.S. officials contend

that all F-2 technology is derived until classified otherwise and that Japan

is obligated to transfer data until classification negotiations end. At the

time of this review, the United States and Japan had not resolved the

classification status of the remaining eight technologies.

According to program officials, Japan has generally complied with the

flowback provisions for derived technologies and U.S. officials told us that

about 40,000 technical documents have been transferred to date.

Generally, compliance with the memorandum of understanding’s

requirement to submit outlines of non-derived items has been satisfactory.

For example, in the February 1996 working subcommittee meeting, Japan

provided technical outlines of the four items that were recategorized from

derived to non-derived status and included updates of the original five

non-derived items.

U.S. Access to Wing

Technology Data Improves

The co-cured composite technology used by both countries to produce the

F-2 wings, including materials, process specifications, and tooling was

designed by Mitsubishi and transferred to Lockheed Martin. For the

development phase, Lockheed fabricated five left-hand wing box

assemblies using Japanese materials and processing techniques.

The F-2 wings differ from the traditional F-16 aluminum wings in several

respects, but the most significant feature is the use of co-curing

technology whereby composite parts are bonded together without

conventional metal fasteners. In terms of performance, the significantly

lighter F-2 wings are expected to be more durable, provide higher strength,

and reduce flutter problems.

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In our August 1995 report, we stated that Lockheed was not at that time

receiving all of the wing data necessary to apply the composites

technology to other programs. The U.S. contractor and DOD program

officials have recently indicated that technology transfers from Japan have

been successful and continue to be effective and that Lockheed is

generally satisfied with the transfer of Japanese technology. Lockheed

officials indicated that Lockheed now has had sufficient access to Japan’s

ground tests and that they expect to have access to the Japanese

government’s flight testing data as government-led flight testing increases.

Other DOD contractors, however, were unable to obtain access to the wing

technology until September 1995 when DOD and the Japan Defense Agency

agreed to grant DOD and DOD contractors access to the co-cured composite

wing technology.

In terms of potential application to other programs, Lockheed officials

explained that some of the F-2 tooling techniques are of interest to them.

In January 1996, for example, Lockheed Martin announced that the

company had combined technology derived from the F-2 program with its

own manufacturing processes to manufacture a composite bulkhead. The

bulkhead is to be used in demonstration tests for the Joint Advanced

Strike Technology program for potential cost-saving manufacturing

options.

Technology Visits to

Evaluate F-2 Technologies

Result in Limited U.S.

Government and Industry

Interest

Throughout the development phase of the program, DOD’s F-16 program

office, in coordination with the Commerce Department, conducted a series

of technology visits to observe and evaluate Japanese technology. As a

result of these visits, the program office prepared Technology Assessment

Reports for inclusion in Defense Technical Information Center’s (DTIC)

database. This database can be accessed by U.S. firms interested in

learning about the technologies.15

15The DTIC provides scientific technical information principally to DOD. DTIC’s resources are

intended primarily for federal government agencies and their contractors. DOD contractors who are

registered DTIC users and are interested in F-2 technical abstracts can access technical abstracts

sorted in the following categories: air vehicle, airframe, landing gear, propulsion, fuel, environmental

control, crew, flight control, hydraulic, armament, weapons delivery, avionics, electrical,

instrumentation, operational software, inertial reference/navigation system, integrated electronic

warfare system, mission computer, active phased array radar, and radar-absorbing material.

Page 13 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
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Technology visits were conducted for the five technologies reclassified to

non-derived,16 and plans are currently underway to determine whether to

review the four additional technologies recategorized to non-derived

status in December of 1994. Table 1 summarizes the technology visits

conducted and the level of participation by U.S. industry.

Table 1: Summary of Technology

Visits

Technology Date of visits

Number of U.S.

companies attending

Active phased array radar May 1991

July 1993

November 1994

14

Mission computer November 1991

May 1993

DOD only

Integrated electronic warfare

system

July 1993

September 1994

December 1995

10

Inertial reference/navigation

system

November 1994

September 1994

DOD only

Radar-absorbing materials June 1995 DOD only

Co-cured composite wing

(symposium)

March 1996 13

Key objectives of the technology visits were to allow DOD to evaluate

technologies of interest for its own potential use and to introduce U.S.

companies to the F-2 technologies. It would then be up to the individual

firms to decide whether or not to enter into contractual or licensing

arrangements with individual Japanese companies.

Active Phased Array Radar System

To evaluate the F-2’s active phased array radar system, the U.S. Air Force

acquired five transmit/receive modules to test and evaluate at its Wright

Laboratory. The radar was of interest to DOD because it incorporates new

technologies; however, some officials believe that U.S. radar technology

being developed for the F-22 is a generation ahead of Japanese technology.

Although there is limited commercial application for a fire control radar,

some of its parts could be of interest to U.S. companies and at least one

U.S. company expressed interest. In general, the U.S. industry participants

were favorably impressed with the level of access to active phased array

radar technology during the visit but found that the technology was not

16As of February 1996, the program office did not plan additional future visits for the technologies

described above, but expected that as the development phase reaches completion and test results

become available, the United States would consider additional technology visits.

Page 14 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
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quite as advanced as expected. Also, industry participants observed that

the approaches used by Japanese industry to package and seal the radar

modules are not a low-cost approach by U.S. industry standards.

Mission Computer

According to program officials, the F-2’s mission computer is very similar

in capability to the F-16’s.

Integrated Electronic Warfare System

Although the U.S. visitors found the technology visit informative, they

found that additional detailed data was required before a complete

technology assessment could be made. Some participants commented that

although details of the Japanese program were provided, there was

insufficient detail for U.S. companies to make a commercial decision.

Moreover, the overall quality of the system will be determined during the

test phase.

Inertial Reference/Navigation System

The F-2’s inertial reference/navigation system does not use any significant

advances in technology beyond those employed on the F-16. Moreover, the

F-16 is also being equipped with the global positioning system, also used

by commercial airlines. The F-2 will not use the global positioning system

and its navigation system does not provide capabilities beyond that

available in U.S. systems. Therefore, neither U.S. government nor industry

officials expressed interest in this technology.

Radar-Absorbing Materials

A small government team conducted a technology visit in June 1995 to

discuss radar-absorbing materials. The government officials found that the

visit was informative and responsive to U.S. requests for information, but

did not see the technology as advanced as U.S. technology in this area.

Nevertheless, officials indicate that more information on the electrical

performance data of the radar-absorbing material—not available at the

time of the visit—will be needed in order to determine whether the

material would be valuable for U.S. industry.

Page 15 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
B-272541 

Co-cured Composite Wing

A symposium was held in March 1996 to provide an overview to U.S.

industry participants of the wing in terms of materials, design, processes,

fabrication, and assembly. DOD and Commerce officials told us that the

participating companies have not indicated any further interest in

obtaining technical documents. The general consensus among industry

participants and U.S. Air Force officials is that it is extremely costly to

produce the wing structure by the co-curing process. Lockheed Martin,

however, has stated that the use of tooling techniques from the F-2

program has contributed to reducing the cost of manufacturing the

composite bulkhead materials for the Joint Advanced Strike Technology

program.

New Non-derived Technologies

According to program officials, of the four new non-derived

technologies—the digital flight control computer software, airborne video

tape recorder, cockpit television sensor, UHF/VHF radio—the most likely

candidate for a technology visit is the digital flight control software. The

F-2 uses a tri-redundant architecture with an analog back-up mode, while

the F-16 uses a quad-redundant architecture with a digital back-up mode.

With regard to the cockpit television sensor and the UHF/VHF radio,

program officials stated that the U.S. Air Force would not have an interest

because there is little technical innovation. The airborne video tape

recorder currently used in the Air Force’s F-16s is acquired from Japan,

obviating the need for additional evaluation of this system.

In addition to the systems-specific technology visits, the program office

conducted two other technical visits. First, in January 1996, an avionics

integration technology visit was conducted at Mitsubishi to review

software development and hardware integration processes. Second, a

structures test meeting was conducted at Japan’s Technology Research

and Development Institute structural test facility in April 1996. The visit

was part of an ongoing structural test dialogue between F-16 and F-2

structural engineers.

Page 16 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
B-272541 

Japanese Aerospace

Industry Gains From

F-2 Program but

Continues to Be

Constrained by

Export Restrictions

U.S. program officials and industry experts indicate that Japan will

continue to gain experience and capability from the F-2 program, although

less capability than if it had pursued indigenous development. Specifically,

DOD officials believe that the F-2 program will significantly enhance

Japan’s systems integration capability—that is, incorporating subsystems

and technologies into the airframe.

However, Japanese industry will not gain significant new capability in

engine production. Because of the terms of the engine licensed production

agreement, Japanese industry will not be modifying the General Electric

F110-129 engine for the F-2. Instead, it will produce increasingly more

parts along the course of the program. According to program officials, the

engine technology that will be released to Japan for this program is

roughly equivalent to technical data previously obtained from the United

States as part of the licensed production of the F-15J program. Moreover,

in accordance with U.S. restrictions on transfers of U.S. leading edge

technologies, critical engine technology is not being licensed to Japan.

Although the F-2 program will enhance Japan’s military aircraft capability,

exports of military technology continue to be constrained by the country’s

long-standing restrictions on exports of military weapon systems and

exclusively military technology. In 1967 Japan adopted its Three Principles

on arms exports, which, in effect, banned arms exports. These principles

were reaffirmed in 1976 and 1981. In 1983, Japan signed a bilateral

agreement with the United States to allow, on a limited basis, the transfer

of Japanese military technology to the United States. The agreement

recognized the imbalance of technology flows between the two countries

and permits the transfer of Japanese military technology to the United

States on a case-by-case basis. The agreement also reaffirmed Japan’s

policy that, in principle, dual-use technology can freely flow between the

two countries. Japanese technologies transferred to the United States for

the F-2 program are subject to this agreement.

Japan’s decreasing military procurement budget has led some industry

representatives to consider asking the Japanese government to relax its

ban on exporting military systems and components to the United States.

For example, in 1995, the defense production committee of Keidanren,

Japan’s largest industry association, released a statement alluding to a

desire to relax Japan’s restrictions on military exports to the United States.

Nonetheless, some experts believe that the long-term goal of Japan’s

defense industry is to export subcomponents to support U.S. programs

Page 17 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
B-272541 

such as the F-22 aircraft, but that public sentiment will likely prevent the

Japanese government from relaxing the ban.

Recommendation Current plans for monitoring implementation of the production

agreements do not provide a means to determine whether U.S. companies

actually receive approximately 40 percent of the F-2 production work by

the end of the program. Therefore, we recommend that the Secretary of

Defense direct the Defense Security Assistance Agency, as the lead U.S.

agency for the F-2 program, to collect sufficient data to determine the

value of production work received by U.S. companies at the end of the

program. This can be accomplished by collecting data from Lockheed

Martin, General Electric, and a selection of the smaller contractors

involved in this program. Collection of such data will allow the Defense

Security Assistance Agency to assess the soundness of the production

phase approach to workshare allocation and tracking for use in future

cooperative programs.

Agency Comments DOD and the Departments of State and Commerce provided comments on a

draft of the classified version of this report. DOD said it fully concurred

with the draft report. (See app. I.) In addition, DOD provided minor

technical comments that we have incorporated in the text as appropriate.

The Commerce Department stated that it generally agreed with the

report’s findings and conclusions. (See app. II.) The Department of State

orally concurred with the report.

Scope and

Methodology

To examine the status of the F-2 program, we reviewed documentation

and interviewed officials from the Office of the Secretary of Defense for

International Security Affairs, the Office of the Deputy Under Secretary of

the Air Force for International Affairs, the F-16 program office at

Wright-Patterson Air Force Base, the Defense Security Assistance Agency,

and the Defense Technology Security Administration. We also interviewed

officials at the Departments of Commerce and State.

To examine the terms of the U.S. workshare, we reviewed the

memorandum of understanding for the production phase and compared it

to the memorandum of understanding for the development phase. We also

compared and contrasted other development phase implementing

agreements and similar production phase documents. We sought and

obtained production phase cost estimates from General Electric and from

Page 18 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
B-272541 

Lockheed Martin. We reviewed and analyzed the methods DOD used to

calculate U.S. workshare.

To assess the status of technology flowback from Japan to the United

States and whether those technologies were of interest to the U.S.

government and industry, we reviewed minutes of Technical Steering

Committee meetings, summaries of technology visits, and summaries of

participants’ comments. We interviewed cognizant program officials to

obtain their overall impressions of the visits and of the technologies

observed. Additionally, to examine the status of Japan’s request for

recategorization, we obtained and analyzed documents describing criteria

for each reviewer’s conclusions. We also interviewed officials to confirm

our interpretation of those documents.

We conducted our review between March 1996 and December 1996 in

accordance with generally accepted government auditing standards.

We plan no further distribution of this report until 10 days from its issue

date. At that time we will send copies of the report to other interested

congressional committees and to the Secretaries of State, Commerce, and

Defense. Upon request, copies may also be made available to others.

This report was prepared under the guidance of Katherine V. Schinasi,

who can be reached at (202) 512-4841 if you or your staff have any

questions. Other major contributors to this report were

Karen S. Zuckerstein, M. Cristina Gobin, and Paula J. Haurilesko.

Henry L. Hinton, Jr.

Assistant Comptroller General

Page 19 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Contents

Letter 1

Appendix I 

Comments From the

Department of

Defense

22

Appendix II 

Comments From the

Department of

Commerce

23

Related GAO Products 27

Table Table 1: Summary of Technology Visits 14

Figures Figure 1: The F-2 Prototype 3

Figure 2: Major Components of U.S. Workshare 9

Abbreviations

DOD Department of Defense

DTIC Defense Technology Information Center

Page 20 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Page 21 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Appendix I 

Comments From the Department of Defense

Page 22 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Appendix II 

Comments From the Department of

Commerce

Page 23 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Appendix II 

Comments From the Department of

Commerce

Page 24 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Appendix II 

Comments From the Department of

Commerce

Page 25 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Appendix II 

Comments From the Department of

Commerce

Page 26 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Related GAO Products

U.S.-Japan Cooperative Development: Progress on the FS-X Program

Enhances Japanese Aerospace Capabilities (GAO/NSIAD-95-145, Aug. 11, 1995).

Asian Aeronautics: Technology Acquisition Drives Industry Development

(GAO/NSIAD-94-140, May 4, 1994).

Foreign Technology: Collection and Dissemination of Japanese

Information Can Be Improved (GAO/NSIAD-93-251, Sept. 30, 1993).

Competitiveness Issues: The Business Environment in the United States,

Japan, and Germany (GAO/GGD-93-124, Aug. 9, 1993).

High Technology Competitiveness: Trends in U.S. and Foreign

Performance (GAO/NSIAD-92-236, Sept. 16, 1992).

Technology Transfer: Japanese Firms Involved in F-15 Coproduction and

Civil Aircraft Programs (GAO/NSIAD-92-178, June 10, 1992).

Defense Technology Base: Risks of Foreign Dependencies for Military

Unique Critical Technologies (GAO/NSIAD-92-231, June 5, 1992).

U.S.-Japan Codevelopment: Update of the FS-X Program (GAO/NSIAD-92-165,

June 5, 1992).

Foreign Technology: Federal Processes for Collection and Dissemination

(GAO/NSIAD-92-101, Mar. 23, 1992).

Aerospace Plane Technology: Research and Development Efforts in Japan

and Australia (GAO/NSIAD-92-5, Oct. 4, 1991).

Commercialization of Technology by Japanese Companies

(GAO/T-NSIAD-91-32, Apr. 30, 1991).

U.S-Japan Codevelopment: Review of the FS-X Program (GAO/NSIAD-90-77BR,

Feb. 6, 1990).

Investment in Foreign Aerospace Vehicle Research and Technological

Development Efforts (GAO/T-NSIAD-89-43, Aug. 2, 1989).

U.S.-Japan FS-X Codevelopment Program (GAO/T-NSIAD-89-32, May 16, 1989).

U.S.-Japan FS-X Codevelopment Program (GAO/T-NSIAD-89-31, May 11, 1989).

Page 27 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
Related GAO Products

U.S. Military Aircraft Coproduction With Japan (GAO/T-NSIAD-89-6, Feb. 23,

1989).

Support for Development of Electronics and Materials Technologies by the

Governments of the United States, Japan, West Germany, France, and the

United Kingdom (GAO/RCED-85-63, Sept. 9, 1985).

Industrial Policy: Case Studies in the Japanese Experience (GAO/ID-83-11,

Oct. 20, 1982).

Industrial Policy: Japan’s Flexible Approach (GAO/ID-82-32, June 23, 1982).

U.S. Military Coproduction Programs Assist Japan in Developing Its Civil

Aircraft Industry (GAO/ID-82-23, Mar. 18, 1982).

(707233) Page 28 GAO/NSIAD-97-76 U.S.-Japan Fighter Aircraft
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