Boeing, Saab hanker for scale to meet Modi’s ‘make in India’ plea

Bloomberg

Boeing Co. and Saab AB, competing for $25 billion in fighter jet orders in India, said the country stands a better chance of securing local manufacturing if its air force and navy join forces.
Combining the two orders would give the makers enough scale to set up a local assembly line that Prime Minister Narendra Modi has been touting under his flagship ‘Make in India’ program which is designed to promote domestic manufacturing. India’s navy in January invited proposals for 57 jets for its aircraft carriers, while the air force is seeking at least 100 planes. Combined, it would become the world’s biggest fighter jet order in play.
“We do anticipate that at some point of time, the naval requirement and the air force requirement might coalesce into one,” Pratyush Kumar, president of Boeing Co. in India, said at an air show in Bengaluru, where the company is showcasing its F/A-18 Hornet. “We will look at it based on numbers — what level of Make in India makes sense.”
Modi, who plans to spend $250 billion in the coming years on fighter jets, guns and helmets, wants India and local companies to get a share of the deals it enters into by calling on foreign manufacturers to make products locally. Boeing, Lockheed Martin Corp. and others have said they will produce in India if they win large contracts from the world’s biggest weapons importer.
“It will boil down to whichever contractor is offering an operational plane that is suitable for the air force and navy,” said Anurag Garg, a director of aerospace and defense at Strategy&, a Pricewaterhouse consultancy. “India is looking for a contractor who will execute maximum local production. Any contractor meeting these two requirements will stand a better chance.”
Lockheed Martin, which said it will shift its entire F-16 production facility to India if it wins the deal, will leave the decision of combining the two orders to the Indian government, said Randall Howard, head of F-16 Business Development.
Meanwhile, Saab is offering the air force its single-engine Gripen fighter jet. “We’ve designed it in such a way that it will be operational irrelevant of the future,” Mats Palmberg, vice president of industrial partnerships, said in an interview at the air show.
India requires up to 400 single- and double-engine combat jets, defense minister Manohar Parrikar told reporters on Tuesday. An order for single-engine fighters will be placed this year despite difficulties with decision-making in the sector, he said.
The South Asian country began a search for new warplanes in 2007, a contest that ended with the government wanting to buy 126 Rafale jets from Dassault Aviation SA for $11 billion. With talks stalling over price and quality guarantees, the government subsequently pared the order to 36 jets.
Since then, other manufacturers have been sending proposals, saying the purchase falls short of India’s plans to modernize a predominantly Russian fleet. Boeing’s F-A/18, Lockheed Martin’s F-16 Fighting Falcon, United Aircraft Corp.’s MiG-35, Saab’s Gripen and the Eurofighter Typhoon were originally in the contest.
“The current single engine program could see about 100-plus made in India,” said Rahul Bedi, a Delhi-based analyst with Jane’s Information Services. “This program alone could be worth $15 billion, considering 36 Gripen cost $4.5 billion to be made in Brazil. The 57 naval planes program will be another project and this could cost close to $10 billion.”
India needs to order at least 100 planes for it to be viable for Boeing to build the F-18 locally, Kumar said. Saab’s Palmberg declined to say how many planes would make local manufacturing viable, noting discussions with the government are confidential. Saab CEO Hakan Buskhe expects India to order more than 100 planes, he said in an interview.
Roughly one-third of India’s 650-strong fleet is more than 40 years old and is set to be phased out over the next decade. The air force has only 25 active squadrons, compared to the 45 squadrons it estimates would be required to defend against a joint attack from Pakistan and China.
For the navy’s aircraft carriers, India initially hoped to use the Tejas — built locally by state-owned Hindustan Aeronautics Ltd. — but the chief of navy said in December that the aircraft wasn’t good enough and it will seek overseas deals.