Local partnerships: a must-have for international bids

The international military equipment market is sizzling, with rearmament phases occurring in many countries, and constant increases in technological capacities. But military potential is not limited to industrial capacity to build equipment, as industries also need to develop their capacity to sell their products. Local partnerships, so far, seem the best way to guarantee the successful outcome of an armament bid.

The persistent failure to organize

For a long time, the European armament market was simultaneously rich and extremely fragmented. Europe has a long tradition of arms design and building, and almost every country on the continent harbours some form of military production potential, in one form or another. France and Germany have specialized in tanks, France is now the leading European submarine builder, while Belgium and Austria are known for their small arms capacities. But because every player on the field was keeping its cards close to the chest, Europe for many years failed to match its foreign competition, which had integrated into a heavy weapon-building machine. By mapping out all the available resources in Europe, companies were then able to resort quickly and simply to small and local partners and integrate their solutions. As a result, long-standing and reliable partnerships could be set up and solutions could be developed far more quickly.

One R&D program benefits all

Additionally, integrating local production capacities and R&D developments has a double advantage for the customer. If one development program produces a successful design, it makes little sense to have another firm copycat it, thus doubling the expense – yet Europe did this, for many years.  Competing developments between France and Germany in the 1990s produced two very similar high-quality main battle tanks, but which were systematically outpriced by competition, because of their high development costs. Local partnerships therefore enable customers to share the development costs with surrounding customers and increase competitive pricing. Additionally, the high cost of most military equipment purchases is such that the decision amounts to a difficult choice, most of the time, and can be seen as an additional burden on the taxpayer. In many cases, the decision to sell the design but have actual units produced (partially or entirely) in the client country means that direct economic benefits can be expected by the customer. For each deal, hundreds or thousands of jobs can be created in local factories. In this case, not only does the purchasing government reduce the overall cost of the program, but it also keeps its supplying factories safe within its borders.

The Danish example

Denmark has recently provided a telling example of how tailored partnerships can make the difference between a successful and a doomed program. Copenhagen expressed the need to reinforce its artillery capacity, namely after recent operations in Afghanistan and Iraq placed long-range tubes at the centre of the strategic chessboard. French company Nexter Group was eventually chosen as winning bidder and supplied Denmark with its new Caesar artillery truck. Because the vehicle’s entire point is to combine pinpoint accurate firepower while maintaining high mobility, Nexter chose to partner up with Czech industrial firm Tatra, to provide the high-strength chassis on which the artillery system is mounted, in order to fulfil customer’s requirements. The Czech partner reported: “The latest version of the CAESAR 8×8 howitzer is built on a four-axle TATRA FORCE chassis and in its basic configuration uses the entire drive train made by the truck maker from Kopřivnice. Specifically, the original eight-cylinder direct air-cooled Tatra engine, Tatra main transmission equipped with the semiautomatic TATRA-NORGREN gear-shifting system and auxiliary transmission (drop box), also Tatra-branded.” Nexter’s reasoning was that its value was in the artillery system, and that an automobile specialist would be better suited to answer the specific needs of the mobility aspect of the program. Through the joint venture, France was able to offer Denmark the best of both worlds.

The Nexter method: local partnerships to ensure product relevance

Nexter has long understood that there was no better way to make sure that products were in full adequation with the client’s needs than to work directly within the client’s business environment. As a result, the French group favors local partnerships, which are then integrated into the general program, as it did with a recent agreement in Qatar. “This MoU represents a major step in the strategic partnership between Qatar and France. It will allow cooperation between Nexter, the French leader in land defense, and Barzan, a Qatari strategic industrial player. Together they will work to finalize the Qatari VBCI program. Other common projects are under consideration to propose complementary solutions to the Qatari forces”, quotes Army recognition. This approach, moreover, redistributes part of the contract’s proceedings within the client’s country, thus securing political support around the program.

Thales’s bridgehead

Thales also used local partnerships to establish its foothold in the Pacific Asia region, in which it sells products ranging from military equipment to strategic infrastructures. As reported by Straits Times John Gilbert: “Thales’ Malaysia unit, Thales Malaysia Sdn Bhd, has been present in the country since 1980, with a local workforce of over 250 people, including personnel from its joint venture Sapura Thales Electronics (STE) in the field of communication systems. Thales Malaysia also has strong partnerships with local industry players and has played an essential role in the country by sharing its technologies and expertise in the aerospace, defence, security and transportation sectors.” Thanks to this policy of linking the supplier and the customer, Thales considers its chances to be selected for the upcoming High-Speed Rail project to be high.

The Eurodrone: has Europe finally learned?

In an attempt both to reinvigorate the notion of overall European defense and cooperation, and to equip European countries with drone capacities, the EU has launched the Eurodrone program, which taps into the industrial potentials of many different actors, across the continent. Security expert Matthias Monroy writes: “At the instigation of the German government, the „Eurodrohne“ was incorporated into the „Permanent Structured Cooperation“ (PESCO) as a joint EU armaments project. In this way, its subsequent operation will receive ten percent support from the European Defence Fund. In this way, governments are encouraged to launch a programme of armed drones. In addition to the four developing nations, the Czech Republic was the first government to announce its intention to join the PESCO project.” The first full-swing interactions of European defense partnerships, with big and small firms, should therefore be seen shortly.

Large deals, such as armament or infrastructure, cannot be considered as regular purchases, where products and money change hands. They are a heavily politicized choice and an economic commitment which will have decade-long ramifications. Beyond the product itself, the customer is in fact seeking increased sovereignty, and game-changing effects on its soil. A local partnership will bring immense value to both the supplier and the customer – and can certainly tip a project towards success.

 

 

 

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