international competitive intelligence report (boeing, raytheon, general dynamics, northrop grumman)

1

Boeing International StrategyBuilds strong international relationships prior to critical competitions, referred

to as “One Boeing Approach”

• Partners with in-country companies/suppliers to boost local jobs and industry

• Includes technology/knowledge transfer in bids, not necessarily from Boeing

Defense, Space and Security (BDS) division

• Establishes Research & Technology centers in regions/countries with long-term

significant market potential –Europe, Australia, India, China, Russia, and Brazil

• Maintains 11 consortia, 14 joint research centers, and more than 50 international

research centers in approximately 35 nations for research in areas such as

biofuels, manufacturing processes, and aerostructures

• “We have been increasingly active in the communities in which we live and work.

In 2012, Boeing—along with its employees, retirees and charitable trust—

invested $179 million in communities around the world.”- “2013 Address to

Shareholders”, Jim McNerney, Chairman, President and CEO of Boeing, April 29,

2013

Utilizes strength, size, and goodwill associated with Boeing Commercial

Airlines

• Boeing leverages Commercial Airplane division’s huge financial backlog in order

to offer more competitive pricing for BDS contracts than the rest of the Big 5

A&D companies are able to

• Leading US exporter for over a decadeSource: Boeing website

2

Boeing General Facts

• $81.7B in revenue (up $12.963B, or 19% from 2011)

• $44.1B in International revenue, 54% of total revenue

(Commercial + Defense, up 4% from 2011)

• $7.8B in International BDS revenue, 24% of total BDS

revenue (up 7% from 2011)

• $390B total backlog (Commercial + Defense, up $34.8B, or

10% from 2011)

• $71B total BDS backlog (up $11B, or 18% from 2011)

• 42% of BDS division’s backlog from International customers

• $70B in new orders for Commercial Airlines, $44B in new

orders for BDS (combined, 36% of total backlog)

• 70% of Boeing Commercial Airplanes division’s total

backlog from International customers

• $3.9B in net income (down $.12B, or 3% from 2011)

Source: Boeing website

3

Boeing Sales by Division (2012)

$49,127 60% $16,384

20%

$7,5849%

$8,639 11%

Boeing Defense,

Space and Security

Total Sales$81.7B

Commercial Airplanes

Boeing Military Aircraft

Network & Space Systems

Global Services & Support

$32,607

40%

“2013 BDS priorities are:

extend and grow our core

business by bringing improved

capability and affordability to

our customers; expand global

sales and operations;

successfully execute our

development programs,

including the KC-46A Tanker;

and use our market-based

affordability efforts to fund

investment in tomorrow’s

capabilities and programs”

Source: Boeing Annual Report 2012, Website

Sales (in Millions)

4

Boeing Global Footprint

Canada

U.S.

UK

FranceItaly

Hungary

Saudi

ArabiaQatar

UAE India

Singapore

Australia

ChinaJapan

Korea

RussiaCountries with the Largest

Boeing Presence

Commercial + Defense – 174,400

employees in 70 Countries

Defense – 59,000 employees

• 28,000 suppliers and partners worldwide (Commercial + Defense)

• Customers in 150 countries (Commercial + Defense)

• Outside the US, Australia is Boeing’s largest operational footprint, with

more than 3,000 employees; operates seven wholly owned subsidiaries

under Boeing Australia Holdings Pty Ltd


5

Boeing International Leadership

President, Boeing

International

Senior Vice President, BD

Shepard W. “Shep” Hill

President, Boeing Australia &

South Pacific

Ian Thomas

President, Boeing Brazil

Donna Hrinak

General Manager, Boeing

Canada Operations

Kevin Bartelson

President, Boeing United

Kingdom

Sir Roger Bone

President, Boeing Central &

Eastern Europe

Henryka Bochniarz

President, Boeing China

Bertrand-Marc Allen

President, Boeing EU &

NATO

Antonio De Palmas

President, Boeing France

Yves Galland

President, Boeing Germany

& Northern Europe

Matthew Ganz

President, Boeing India

Pratyush Kumar

President, Boeing Israel

David Ivry

President, Boeing Italy

Rinaldo Petrignani

President, Boeing Japan

George Maffeo

President, Boeing Korea

Patrick W. Gaines

President, Boeing

Southeast Asia

Ralph (Skip) Boyce

President, Boeing Middle

East

Jeff Johnson

President, Boeing Saudi

Arabia

Ahmed Jazzar

President, Boeing Turkey

Bernard Dunn

President, Boeing Russia/CIS

Sergey Kravchenko

Boeing Consultant, Latin

America

Alexander F. WatsonSource: Boeing Website

6

• Boeing International is composed of country and regional executives in 20 offices worldwide,

whose focus is to:

– “Provide strategic council on political, economic, and industrial developments around the

world”

– “Collaborate with Government Operations to create an integrated view of domestic and global

government issues and developments”

– “Ensure good corporate citizenship around the globe by developing policies and procedures

that comply with the diverse laws, customs, and business”

• Looking to international business to compensate for declines in DoD spending, ultimate goal is

30% by the end of 2013, 35% by 2021

• Especially looking toward the Asia-Pacific region, specifically South Korea, India, and Japan; they

expect this region to account for 50% of International BDS revenue in the next 10 years

“I shared that our goal was to reach a sustained level of 30% of Boeing’s defense revenues coming

from international sales over the next several years. Progress in this area is evident in that Boeing

reported 24% international revenues in 2012 and an increase to 28% in the first quarter of 2013. This

is up from 7% just five years ago. Perhaps most significant is the fact that 42% of Boeing's defense

backlog of $70 billion is outside the U.S. One of the most important drivers behind our progress has

been a true One-Boeing global approach, and we shared many real examples of how this is a unique

advantage for us.” –Dennis Muilenburg, President and CEO Boeing Defense, Space & Security/ June

14, 2013

“Leveraging the international strengths of our company has been a high priority for several years,

and the return on that investment in our people and resources has improved our results and

expanded future opportunities… we are aggressively pursuing–and expanding–our share of growing

international markets.” –Jim McNerney, Chairman, President and CEO of Boeing, April 29, 2013

Boeing International


7

Australia

In 2007, Boeing opened the Office of Australian Industry Capability (OAIC) in Seattle, WA “to match Australian-developed technology

with global partners, leading to sales and collaboration opportunities. In order to identify where these opportunities lay, the OAIC

along with Boeing Research and Technology have conducted technology assessments in Australia visiting a wide range of companies,

universities, and government facilities.” Furthermore, Boeing Defense Australia (BDA) is an entirely separate BDS division focusing

entirely on Australia, is now the country’s leading defense aerospace enterprise, with 1,300 employees in 16 locations throughout

Australia.

India

In February 2009, Boeing opened the Boeing Analysis & Experimentation Center (A&E Centre) in partnership with Bharat Electronics

Unlimited. In March 2009, Boeing opened its Boeing Research & Technology-India center, which is the focal point for all Boeing

technology initiatives in the country, collaborating with Indian R&D organizations, government agencies, private defense agencies, and

universities.

South Korea

Boeing currently has a strong working relationship with KAI Ltd., the Republic of Korea’s national aerospace company and sole source

for all of the government’s military logistics and aerospace projects. KAI builds wings and forward fuselages for the F-15K program,

and two years ago, KAI signed an agreement to develop a weapons bay for the Silent Eagle. Perhaps most importantly, however, is the

significant goodwill they have established through partnerships with other Korean Commercial Airplane companies, such as Korean

Air, a key supplier of composite structures and components for 787 and 747-8 airplane programs. In September 2012, Boeing opened

its Avionics Maintenance, Repair, and Overhaul Center in Korea… Boeing works with ~20 companies in Korea, spending more than

$250M annually. “Over the past half century of working in partnership with the Republic of Korea, Boeing has come to know Korea’s

strong infrastructure and the excellent knowledge and talent base of the its people and industry. We can tap into that as we expand

our presence locally and grow our operations while supporting Korea’s development objectives.” – Joe Song, VP of IBD for Asia-

Pacific region of BDS.

Brazil

June 18, 2013/ “Embraer and Boeing sign an agreement to market Embraer’s KC-390 medium airlifter in limited international

venues…Boeing will be the lead for KC-390 sales, sustainment and training opportunities in the USA, UK, and ‘select Middle East

markets.’ ” Furthermore, in April, Boeing and Embraer signed an agreement to “cooperate in commercial airplane efficiency and

safety, research and technology, and sustainable aviation biofuels.” These factors place Boeing in a far better position than either

Dassault or Saab, especially considering the fact that Brazil is very focused on finally becoming the country of the future and

dispelling the old joke about it’s continuous but unfulfilled hopes of technological equivalence with other economic world powers

(Brazil does have the 6th largest economy in the world). Brazil insists on technology transfer for all defense agreements, and Boeing

responded indirectly to this April 3, 2012, when it opened a new Aerospace Research and Technology Center in Brazil. Finally, Boeing

selected Elbit systems on June 14, 2012, to produce the low-profile head-up display (LPHUD) that will be part of the Advanced Cockpit

System for Boeing fighter jets, presenting “additional opportunities for Elbit Systems to develop advanced cockpit avionics

capabilities at its Brazilian subsidiary, AEL Sistemas.”

Boeing International Relationships


8

Recent Boeing Contracts

(2012-2013)Saudi Arabia

• June 20, 2013/ Boeing and Sikorsky Aircraft Corp. form equal-share joint venture to compete for sustainment for

Saudi Arabia’s rotorcraft fleet

• Nov. 2, 2012/ Boeing receives $3.5B contract for 68 F-15S to F-15SA conversion kits, and 4 base stand-up kits

• Received LOA for 84 new Boeing F-15 fighters, 70 new AH-64E Apache helicopters, 36 AH-6i Apache helicopters, all

together approx. $21B in sales

India

• Mid 2012 finalized order for 10 C-17 airlifters in a $4.1B deal for Indian Air Force (Largest deal between India and

the US in history)

South Korea

• April 17, 2013/ S. Korea’s Defense Acquisition Program Administration (DAPA) announces $1.6B contract awarded

to Boeing for 36 AH-64E Apache helicopters

• Potential $7.3B program replacing South Korea’s fleet of 60 F-4 Phantoms, but in 30+ rounds of bidding by DAPA,

neither Boeing nor LM meet price requirements, same situation with $.9B program replacing 20 maritime aircraft

Australia

• 24 F/A-18E/F Super Hornets, looking to purchase more than 10 P-8 Poseidon maritime aircraft

General International Sales

• 32 C-17s to Australia, Canada, India, Qatar, UAE, UK, and the Strategic Airlift Capability initiative of NATO and

Partnership for Peace nations

• “International F/A-18 demand remains promising and management spoke of "dozens and dozens" of potential

sales (Brazil, Qatar, Malaysia cited but there are others). Management mentioned a per hour flight cost of $16,000

for the F/A-18E/F, which is substantially below that of the F-35” ($24,000/hour) – Capital Alpha Partners LLC Notes

on Boeing’s Investor Conference from DC Defense Perspective, May 2012

Source: Boeing website, IHS Jane’s, Defense Industry Daily, DoD, Capital Alpha Partners LLC

9

Raytheon International Strategy

Emphasize accessibility, diversity of employees, “mid-range, high-value solutions”

• “Raytheon has facilities, businesses and customers in nearly every corner of the globe. Day in and

day out, members of our team interact with people from an extremely diverse range of

backgrounds. Thus, diversity of talent and thought is the cornerstone of our ability to provide

solutions to the global market…We continue to strive to build a culture around recognizing,

respecting and leveraging individual and cultural differences. Yet, as the global environment

rapidly changes and becomes even more competitive, the next steps in our companywide journey

to inclusiveness will be critical.”

• Seek to employ as many people from different countries and socio-economic backgrounds as

possible, in order to better formulate (and market) their “Customer Focused” solutions to target

international markets

• Readily admit that “We compete worldwide with a number of U.S. and international companies in

[defense] markets, some of which may have more extensive or more specialized engineering,

manufacturing and marketing capabilities than we do in some areas.”

• Instead of trying to sell “101%” solutions, they focus on “99%” solutions, going for the lower end

of both product/service requirements and price, as a result they are quite successful

internationally with countries operating with much smaller defense budgets than the US

Utilize training services to build brand recognition internationally

• Using Raytheon Professional Services LLC, they seek to get a foot in the door with training

services for a very wide variety of industries, which are always well received, as they often are

replacing outdated second or third-world business models with highly analyzed US business

practices

• Follow up with Air Traffic Management systems, radars, sensors, surveillance & targeting

solutions, then move on to Integrated Air & Missile Defense systems, like the Patriot program

Source: Raytheon Annual Report 2012, Website

10

Raytheon General Facts

• $24.4B in revenue (down $.38B, or 2% from 2011)

• $6.2B in International revenue, 26% of total revenue, (highest in the A&D

industry, but up only 1% from 2011, 3% from 2010)

• $36.2B in total backlog (up $.9B, or 2.5% from 2011)

• $12.7B in International backlog, 35% of total backlog (down $.3B, or 2%

from 2011)

• $1.9B in net income (up $.004B, or .2% from 2011)

As of April 1, 2013: “The Raytheon Company structure will consist of four

businesses: Intelligence, Information and Services, resulting from the

combination of the Intelligence and Information Systems and Raytheon

Technical Services businesses; and the Integrated Defense Systems,

Missile Systems, and Space and Airborne Systems businesses, each of

which will be expanded by the realignment of the former Network Centric

Systems business operations.”


11

Raytheon Sales by Region and

Division (2012)

$18,182 $2,510

$2,470 $1,252

International Sales ($6.2B)

United States

Asia/Pacific

Middle East/N. Africa

Europe

$5,037 19%

$5,693 22%

$5,333 20%

$6,251 24%

$4,058 15%

Total Sales$24.4B

Integrated Defense Systems

Missile Systems

Space & Airborne Systems

Intelligence & Information Systems, Technical Services

Network Centric Systems


Sales (in Millions) Sales (in Millions)

12

Raytheon Global Footprint

Global companies established in the UK (Raytheon Systems Limited),

Australia (Raytheon Australia), France (ThalesRaytheonSystems), Germany

(Raytheon Anschütz), Spain (Raytheon Spain), and Canada (Raytheon

Canada Limited), and maintains offices in 12 other countries

Source: Raytheon Website

Close-up of

Raytheon locations

in Europe & MENA

Canada

U.S.

UK

France

Saudi ArabiaUAE

India

Australia

Spain

Germany

Oman

Key Raytheon Locations

Qatar

68,000 employees in 19 countries

Providing products and technical

services to more than 100 countries

13

Raytheon Leadership

Raytheon Chairman & CEO

William H. Swanson

Exec. VP & COO

Thomas A. Kennedy

Senior Vice President

Business Development

CEO, Raytheon International

Thomas M. Culligan


HR & Security

Keith J. Peden


General Counsel & Secretary

Jay B. Stephens


CFO

David C. Wajsgras

VP

President, Integrated

Defense Systems

Daniel Crowley

VP

President, Intelligence,

Information & Services

Lynn Dugle

VP

President, Missile

Systems

Taylor Lawrence

VP

President, Space &

Airborne Systems

Richard Yuse

VP

Gen. Manager,

Intelligence, Information

& Services

John Harris II

VP & CIO

Rebecca Rhoads

VP

Controller & CAO

Mike Wood

VP & Treasurer

Richard Goglia

VP

Engineering, Tech.&

Mission Assurance

Mark Russell

VP

Contracts & Supply

Chain

David Wilkins

VP

Corporate Affairs &

Communications

Pamela Wickham

VP

Raytheon Company

Evaluation Team

Edward Miyashiro

VP

Internal Audit

Lawrence Harrington

VP

Michael Hoeffler

Source: Raytheon Website

14

Raytheon InternationalAs US Defense market tightens its collective belt, Raytheon increasingly looks overseas for customers for its “mid-

range, high value” defense solutions

Raytheon Company Strategy: (points 2-5)

• Leverage our domain knowledge in air, land, sea, space, and cyber for all markets.

• Expand international business by building on our relationships and deep market expertise.

• Build upon our Customer Focused mindset, further strengthening our company based on performance, relationships and

solutions.

• Deliver innovative supply chain solutions to accelerate growth, create competitive advantage and bring value to our global

customers

“Raytheon International, Inc. leads the company’s efforts to capture new overseas business, and coordinates the operations of its

international locations. Recent bookings with civilian and military customers in Europe, Asia and the Middle East demonstrate

Raytheon International’s successful strategy of pursuing a worldwide customer base.”

“International sales were principally in the areas of air and missile defense systems, missile systems, airborne radars, naval

systems, air traffic control systems, electronic equipment, computer software and systems, personnel training, equipment

maintenance and microwave communications technology.”

“International sales rose 10 percent in the quarter from a year earlier, and overseas sales will account for 28 percent of revenue

this year, up from 26 percent in 2012” – Dave Wajsgras, CFO of Raytheon, 7/25/13

International Growth:

“Because of the breadth of our offerings, our systems integration capability, the value of our solutions and our strong legacy in

the international marketplace, we believe that we are well positioned to continue to grow our international business... We believe

demand continues to grow for solutions in air and missile defense, air traffic management, precision engagement, homeland

security, naval systems integration and ISR [Intelligence, Surveillance & Reconnaissance]. In addition, as coalition forces

increasingly integrate military operations worldwide, we believe that our capabilities in network-enabled operations will continue

to be a key discriminator in these markets.”

“International sales of air and missile defense offerings helped the contractor boost [operating income] by 21% at its Integrated

Defense Systems unit in the quarter from a year earlier, according to the statement. While the company’s profits and sales rose,

order backlog declined 4.4 percent to $32.4 billion in the quarter, compared with $33.9 billion a year earlier.” (9% increase in actual

sales)

Source: Raytheon Annual Report 2012, Website, Bloomberg News

15

Recent Raytheon Contracts

(2012-2013)Middle East

• Oman: Approx. $1.5B contract for ground-based air defense system currently in final negotiation stage

• “Raytheon Chief Executive Bill Swanson said on the company's earnings call that Raytheon is also making

good progress on several other large international sales, including missile defense systems to Qatar and

Kuwait”

• Oman: Raytheon Anschütz awarded contract for four Integrated Bridge & Navigation Systems for Royal Navy of

Oman

• UAE: AutoTrac III air traffic management system installed for undisclosed amount

• Saudi Arabia: $600M+ contract for Command, Control, Communications, Computers & Intelligence system (C4I)

• Saudi Arabia: $55M contract for TOW 2A Radio Frequency missiles (2010)

Europe

• Germany: $155.6M contract for Block 2 Rolling Airframe Missiles for delivery to the German navy, largest single

RAM award by Germany

• UK: Approx. $120M contact for Paveway IV precision-guided bombs

Asia/Pacific

• Australia/India: $45.3M contract to provide MK 54 lightweight torpedo hardware, test equipment, spares and

related engineering and repair services for both Navies

• India: Building ground stations for the GPS-Aided Geosynchronous Augmented Navigation system (GAGAN) in

partnership with the Indian Space Research Organization (ISRO) & Airports Authority of India (AAI)

Patriot Missile Program

• Installed in 12 countries: US, Netherlands, Germany, Japan, Israel, Saudi Arabia, Kuwait, Taiwan, Greece, Spain,

South Korea and UAE

• Turkey in talks for ~$500M installation, Qatar in talks for ~$2B contract to install 11 fire units

Source: Raytheon Website, Reuters

16

General Dynamics has no actual division devoted to pursuing International sales, or

overarching International strategy, however, the Combat Systems and Information

Systems & Technology Business Groups “continue to pursue opportunities presented by

international demand for military equipment and information technologies from our

indigenous international operations and through exports from our U.S. businesses.”

Aerospace (Gulfstream and Jet Aviation)

• Solely commercial business, zero integration with defense businesses

• Though 60% of backlog is with international customers, both companies operate as separate entities from GD, not

leveraging either brand name or goodwill (new International service centers say “Gulfstream” over front door)

Marine Systems (Bath Iron Works, Electric Boat, and NASSCO)

• Solely domestic market, almost entirely for the US Navy

Combat Systems (Land Systems, Armament & Technical Products, and Ordnance & Tactical Systems)

• Land Systems and its subsidiaries, Land Systems - Canada, Land Systems - Australia, & European Land Systems

do the largest chunk of Combat Systems’ international business, utilize the “demonstrated success of [General

Dynamic’s] US military vehicles” in promoting sales, but also design vehicles especially for those markets

• Armament & Technical Products has two international branches manufacturing heavy-duty axles, suspension,

planetary axles, etc. for commercial vehicles, but only as a result of buying AxleTech International

• Have a specialized branch of OTS, Ordnance & Tactical Systems – Canada, which is the Prime Contractor &

Ammunition System Integrator to the Canadian Government

Information Systems & Technology (IS&T) (Advanced Information Systems, Information Technology,

and C4 Systems)

• C4 systems provides a number of command, control, communications, and computer services “to non-U.S.

customers, including the Canadian Department of National Defence, the U.K. Ministry of Defence and public

agencies and private companies in Europe and the Middle East”

General Dynamics Int’l Strategy

Source: General Dynamics Annual Report 2012, website

17

General Dynamics General Facts

• $31.5B in revenue (down $1.18B, or 4% from 2011)

• $6.5B in International revenue, 21% of total revenue (up $.2B, 3%

from 2011)

• $51.3B in total backlog (down $6.1B, or 11% from 2011)

• $35.6B in defense backlog (down $3.9B, or 10% from 2011)

– “The decrease occurred in our Combat Systems and Marine

Systems groups as work continued on large, multi-year contracts

awarded in prior periods.”

• $(332)M in net income (down $2.86B, or 113% from 2011)

Only commonality between four Business Groups is the tendency to

make acquisitions of companies poised to seize a key or niche market,

instead of competing. This fails if they misread the long-term market

value of their acquisitions, as was the case in 2012 with IS&T, which

resulted in an operating loss of $1.37B for that Business Group.


18

General Dynamics Sales by Region

and Division (2012)

$878 $165

$1,027

$679 $548

$288

$534

$876

$541 $713

$260

International Sales ($6.5B)

Canada Other N. America

UK Switzerland

Russia Spain

Other EU China

Other Asia/Pacific Africa/ME

S. America

$6,912 22%

6,592 21%$7,992

25%

$10,01732%

Total Sales$31.5B

Aerospace

Marine Systems

Combat Systems

Information Systems & TechnologySource: General Dynamics Annual Report 2012

Sales (in Millions) Sales (in Millions)

19

General Dynamics Global Footprint

Countries with General Dynamics Subsidiary OperationsCommercial + Defense – 92,000 employees

Canada

U.S.

Australia

Brazil

UK

France

Spain

Germany

Italy

Switzerland

Mexico


“In 2012, 66 percent of our revenues were from the U.S. government, 13 percent

were from U.S. commercial customers, 8 percent were from international defense

customers, and the remaining 13 percent were from international commercial

customers.”

20

General Dynamics Leadership

General Dynamics, Chairman &

CEO

Phebe N. Novakovic

Exec. Vice President

Marine Systems

John P. Casey


Information Systems &

Technology

David K. Heebner


Aerospace

Joseph T. Lombardo


Combat Systems

Mark C. Roualet


General Counsel &

Secretary

Gregory Gallopoulos


Planning & Development

Robert W. Helm


HR & Administration

Walter M. Oliver


CFO

L. Hugh Redd

Vice Presidents

President, CFO, Administration & General Counsel, Gulfstream Aerospace; President , Jet Aviation; President, Bath Iron Works;

President, NASSCO; President, Electric Boat; President, Advanced Information Systems; President, Information Technology;

President, C4 Systems; President, Armament & Technical Products; President, Ordnance & Tactical Systems; President, Land

Systems; President, European Land Systems; GD Tax; GD Controller; GD HR & Shared Services

Source: General Dynamics website

http://technews.ltu.edu/wp-content/uploads/2010/09/Roualet.mark_.web_.jpg

http://technews.ltu.edu/wp-content/uploads/2010/09/Roualet.mark_.web_.jpg

21

“As a result of the demonstrated success of our U.S. military vehicles, we have cultivated continued international

demand. The group’s U.S. exports include Abrams tanks and Light Armored Vehicles (LAVs) for U.S. allies around the

world. The international operations of our U.S. military vehicles business also have generated significant indigenous

opportunities. We are modernizing approximately 600 LAV III combat vehicles for the Canadian government, as well as

providing long-term support to all Canadian LAV vehicles. For the U.K. Ministry of Defence, we are producing the

Foxhound armored vehicle and will co-produce the Specialist Vehicle with the U.K. operations of our Information

Systems and Technology group.”

General Dynamics Land Systems – Canada

• Formerly GM Defense, acquired in 2003 and are the preferred provider to the Canadian Gov’t of LAVs, sub-system

integration; presence in Canada for 35 years

General Dynamics Land Systems – Australia

• Provides Australian Defence Force with ASLAV/LAV (light armored-vehicles) and M1A1 tanks

General Dynamics European Land Systems

• Through its offices in Madrid, Spain, Kaiserslautern, Germany, Kreuzlingen, Switzerland, and Vienna, Austria it

sells Wheeled Vehicles (PIRANHA, EAGLE, PANDUR), Tracked Vehicles (Pizarro, ASCOD), Mobile Military Bridge

Systems, and Artillery & Ammunition to various allied governments

• Recently awarded contract by Germany for 100 EAGLE V 4x4 Vehicles

General Dynamics – United Kingdom Limited

• Provides Armoured Fighting Vehicles (AFV) to the British Army

General Dynamics – Ordnance & Tactical Systems Canada

• Prime Contractor & Ammunition System Integrator to the Canadian Gov’t

General Dynamics Armament & Technical Products (two international locations)

• Saint Etienne, France: “This facility houses the company’s European product development team & aftermarket

support & manufactures high-speed planetary axles, independent suspension axle systems & transfer cases”

• Osasco, Brazil: “This location manufactures axles and provides engineering & quality support for the local

Brazilian market”

General Dynamics Combat

Systems International Subsidiaries


22

General Dynamics IS&T

International Subsidiaries


“Our Information Systems & Technology group provides critical technologies, products and services that support a

wide range of government and commercial communication and information sharing and security needs. The group

consists of a three-part portfolio centered on secure mobile communication systems, information technology

solutions and mission support services, and intelligence, surveillance and reconnaissance systems.”

• Also self-defined as C4 Systems, Information Technology, and Advanced Information Systems, respectively

• Information Technology’s only international clients are large commercial companies like AT&T, Verizon, and T-

Mobile, which are based out of the US, and a small handful of logistical contracts for the UK Dept. of Health, and

systems engineering for two London boroughs

• Advanced Information Systems is made up of a number of smaller companies GD bought for the purpose of

satisfying certain customer needs, but revolves around cybersecurity, mission systems, and ISR, and serves the

US Gov’t almost exclusively

• C4 Systems operates in 13 countries and “specializes in command and control, communications,

networking…computing and information assurance” as well as “land, airborne, and underwater ISR systems” for

the DoD, federal and civilian agencies and also “to non-U.S. customers, including the Canadian Department of

National Defence, the U.K. Ministry of Defence and public agencies and private companies in Europe and the

Middle East. For example, we designed, procured, integrated and installed the telecommunications, security and

control systems for the newly operating Khalifa Port in the United Arab Emirates.”

General Dynamics – Canada

• “System architect, system design authority, and system integrator” for BOWMAN system for the UK MoD,

replacing outdated Clansman radio with secure integrated voice, data, and multimedia mobile communications

system

• Responsible for a multitude of other smaller systems for Canadian military, including either design and production

or support services for integrated mission sensors and systems for ground vehicles, helos, ships and submarines

General Dynamics – United Kingdom Limited

• “Prime Contractor and Systems Integrator” for BOWMAN system for the UK MoD

• Supplying Royal Netherlands Navy with the New Integrated Marines Communications and Information System

(NIMCIS)

23

Australia

• Received five year, $40M Through Life Support contract for Armored Vehicles

Middle East

• Egypt: $225M for production of M1A1 tank kits for the Egyptian Land Forces under an Egyptian

tank co-production program

• Saudi Arabia: $160M for the production of an M1A2 variant for the Kingdom of Saudi Arabia.

• Israel: $315M for Merkava Armored Personnel Carrier hulls and material kits for the Israeli Ministry

of Defense

Europe

• UK: $115M for 151 Foxhound armored vehicles for the U.K. Ministry of Defence

• UK: $110M for the design, integration and production of seven prototypes under the U.K.’s SV

program, in addition to the integration work being performed by the Information Systems and

Technology group

• Spain: $150M for Pizarro Advanced Infantry Fighting Vehicles scheduled for delivery to the

Spanish Army through 2016

Canada

• “$870M for the upgrade and modernization of LAV III combat vehicles for the Canadian Army,

including a $135M contract modification awarded in 2012 to upgrade an additional 66 vehicles

bringing the total to approximately 600 vehicles “

South Africa

• $75M contract awarded to GD SATCOM Technologies and partner Stratosat Datacom Ltd. To

supply 64 radio-telescope antennas, ancillary electronic components and support for S. Africa’s

MeerKAT radio telescope programSource: General Dynamics Annual Report 2012, website

Recent General Dynamics Contracts

(2012-2013)

24

International markets not a key piece of overall strategy

“As part of our business and operational strategies and priorities, we continue to seek effective ways to help build and strengthen

the communities where we work and live. As we grow our presence in international markets, we will be expanding our community

support in those regions as well.” – Annual Report 2012, “Letter to Shareholders”

“Our corporate citizenship team developed an international engagement strategy that we began to implement in 2013.” –

Corporate Responsibility Report 2012 (only mention of International involvement other than in Costa Rica)

• No mention of “worldwide”, “world-class”, “global”, or “International” in Corporate “Vision, Values, and Behavior”

• But, because “Revenue from the U.S. Government… accounted for 90 percent or more of total revenues in each of the years

ended December 31, 2012, 2011 and 2010” they have been well aware for some time that “We face continued uncertainty in our

business environment due to the substantial fiscal and economic challenges facing the U.S. Government, our primary

customer, including the potential for sequestration and issues surrounding the national debt ceiling.”

• As a result, pursuing more and more business through their UK office, which explains why all descriptions of foreign business

are written with UK spelling, with a heavy emphasis on modernization & logistics:

“A full 70% of the lifecycle cost of a military weapons system, or a piece of military hardware or capability is post-production. It’s

in logistics, sustainment and modernization. So we feel that’s a very good business for us. What we’re focused on is that part of

logistics where we can apply the decades of experience Northrop Grumman has in designing, developing, building, maintaining

and upgrading military equipment. So we feel we have the level of expertise and capability required to provide the solutions that

our customers need. You know, given the global security environment, we feel there will be operations ongoing throughout the

world.” – Christopher Jones, CVP and President, Technical Services, June 25, 2013

Narrowing and Strengthening Focus Through Divestitures, Utilizing UK as Point of Sale

• Sold Shipbuilding Business Sector, and some non-core businesses, concentrating on what they believe are biggest potential

growth markets: Cybersecurity, C4I, Unmanned Systems, Airport Systems, and Logistics & Sustainment

• Primarily selling to European markets through UK, have redone most European Postal Centers, and a handful of Air Traffic

Management systems, commercially, provide Radar and Sensing Systems, Navigation Systems for defense

Emphasizing Trustworthiness, Ethical Behavior

• Only A&D Company with clearly promoted versions of their “Vision, Values, and Behavior” and “Standards of Business

Conduct” written for “our associates employed overseas” in Belgium, Holland/The Netherlands, Norway, Germany, Italy,

France, Spain, Japan, Malaysia, Taiwan, and China

• Also have separate OpenLine channel to report Ethics & Business Conduct 24/7 for Europe, Taiwan, Japan, China, and Korea

Northrop Grumman Int’l Strategy

Source: Northrop Grumman Annual Report 2012, Northrop Grumman Corporate Responsibility Report 2012, Website

25

• $25.2B in revenue (down $1.2B, or 5% from 2011)

• $2.5B in International revenue, 10% of total revenue (up $.003M, or .5%

from 2011)

• $40.8B in total backlog (up $1.3B, or 3% from 2011)

• $4.9B in International backlog, 12% of total backlog (up $2.13B, or 43%

from 2011)

• $1.98B in net income (down $.14B, or 7% from 2011)

Stated Vision:

“Our vision is to be the most trusted provider of systems and technologies that ensure

the security and freedom of our nation and its allies. As the technology leader, we will

define the future of defense—from undersea to outer space, and in cyberspace.”

#1 “Key Behavior”:

“We all have the company values listed on the back of our badges—Quality, Customer

Satisfaction, Leadership, Integrity, People, Suppliers. Integrity must characterize

everything we do. We want everyone who comes in contact with us to know that we do

things the right way at Northrop Grumman. We don't take short cuts.”

Source: Northrop Grumman Annual Report 2012, Website

Northrop Grumman General

Facts

26

Northrop Grumman Sales by

Division (2012)

Source: Northrop Grumman Annual Report 2012

Aerospace Systems: “Aerospace Systems is a premier developer, integrator, producer

and supporter of manned and unmanned aircraft, spacecraft, high-

energy laser systems and microelectronics critical to maintaining the

nation's security.”

Electronic Systems:“Electronic Systems… is a leader in the design, development,

manufacture, and support of solutions for sensing, understanding,

anticipating, and controlling the operating environment for our

global military, civil, and commercial customers.”

Information Systems:“Information Systems… is a leading global provider of advanced

solutions for the DoD, national intelligence, federal civilian, state and

local agencies, and international allies, as well as certain commercial

customers. Focus areas are in cybersecurity; C4ISR; intelligence

processing; air and missile defense; decision support systems;

information technology; and systems engineering and integration.”

Technical Services:“Technical Services… is a premier supplier of life cycle solutions

and innovative technical support and services for customers

globally. Key capabilities include platform sustainment and

modernization, [as well as] innovative and affordable logistics, and

also provides an array of other advanced technology and

engineering services, including space, missile defense, nuclear

security, training and simulation.”

$9,977 37%

$6,950 25%

$7,356 27%

$3,019 11%

Total Sales$25.2B

Aerospace Systems

Electronic Systems

Information Systems

Technical Services

Sales (in Millions)

27

Northrop Grumman Global

Footprint

Australia

Taiwan

Japan

S. Korea

Singapore

U.S.

UK

France Italy

India

SwitzerlandBelgium

Saudi

Arabia

UAE

Germany

68,100 Employees in 25 Countries (Commercial + Defense)

Offices in 15 Countries

Most Significant Foreign Offices are in UK, France, Germany, and

ItalySource: Northrop Grumman Annual Report 2012, Website

28

Northrop Grumman Leadership

Chairman, CEO, and President,

Northrop Grumman Corporation

Wes Bush

Corporate Vice President

Government Relations

Sid Ashworth


President, Enterprise Shared Services

Mark Caylor


General Counsel

Sheila Cheston


President, Electronic Systems

Gloria Flach


Communications

Darryl Fraser


President, Technical Services

Christopher Jones


Operations

Linda Mills


CFO

James Palmer


President, Aerospace Systems

Thomas Vice


President, Aerospace Systems

Kathy Warden


Chief HR Officer

Denise Peppard


Chief Global BD Officer

David Perry

Source: Northrop Grumman Website

29

“A key element of Northrop Grumman’s growth is its commitment to the international

marketplace…Northrop Grumman has a well-established international presence outside the United

States and maintains a network of more than 30 regional business development offices and local

businesses serving customers in key international markets in Europe, the Middle East and Asia

Pacific regions.”

• 3 of 4 Business Sectors drive International sales: Electronic Systems (encompasses most

International Offices), Information Systems, and Technical Services

• Seven key International Subsidiaries:

– Park Air Systems: UK Office, provides both commercial and defense oriented ground-to-air

communication systems

– Remotec: UK Office, provides Airport Realtime Collaboration (ARC) and other Airport Systems

to commercial clients

– Northrop Grumman Mission Systems Europe: UK Office, provides C4I services, both “Civil &

Security” and Defense, especially focusing in Command & Control (C2) capabilities, and

integrated sensor systems for Situational Awareness (SA)

– Solystic: French office, “supplier to the largest international postal operators” of postal

automation systems

– Northrop Grumman LITEF Gmhb: German office, specializing in intertial sensors, intertial

reference and navigation systems

– Sperry Marine: German office, specializing in Commercial Navigation Systems & Integrated

Navigation & Bridge Systems

– Northrop Grumman Italia: Italian office, specializing in Integrated Navigation Systems (INS),

including GPS, Air Data Sensors (ADS), and Magnetic Sensor Units (MSU)

Northrop Grumman Global

Subsidiaries

Source: NG AR 2012, northropgrummaninternational.com, Solystic Website, LITEF Website, Sperry Marine Website, NG Italia Website

30

United Kingdom:

“The UK is Northrop Grumman’s largest international customer and remains a critically important market for the company as a

supplier base and a source for technology partners. The company has a heritage of operating in the UK that spans 100 years…

sales into overseas markets from Northrop Grumman’s UK entities accounting for some 70% of our UK businesses.”

• 10 Locations across the UK, sustains employment for 5,000 people in supply chain

• Developed a series of unmanned ground systems to deal with bomb threats in the 1970’s and has shifted to meet modern

threats, integral cybersecurity and technology partner for a number of British Government offices

Australia:

“Northrop Grumman has a strong customer base and has been supporting a variety of both defence and civil programmes for

more than 20 years. It is a key supplier in the defence, security, information systems, and public safety communications markets

providing a range of capabilities and technologies including as a key subcontractor for the Wedgetail AEW&C, F-35 Lightning II,

and the FA/18 Super Hornet programmes. The company was recently awarded a contract to build a cyber-test range for the

University of New South Wales and Canberra campus at the Australian Defence Force Academy. Further expanding and

solidifying the company’s presence in Australia, particularly in cyber security, Northrop Grumman recently acquired M5 Network

Security, a Canberra-based provider of cyber-security and secure mobile communications to Australian military and intelligence

organizations.”

India:

“Northrop Grumman has been working with the Indian armed forces and Indian industry for more than 25-years. We support

India in a variety of defence and civil applications including air traffic control communications systems and radars, unmanned

ground vehicles for the Indian Army and marine navigation systems for the Indian Navy and bring significant capabilities for

homeland defence modernization and command & control, intelligence, surveillance and reconnaissance (C2ISR). We continue

to develop our presence in India through strategic industrial partnerships and in 2007 opened offices in New Delhi which has

been expanded to include representatives from several Northrop Grumman businesses.”

Middle East & Africa:

“Northrop Grumman has had an active presence in the Middle East for more than a decade with its regional headquarters in Abu

Dhabi, UAE and has well established partnerships with Dubai, the UAE and other countries in the region, where it supports a

variety of defence and civil programmes. The company opened an office in Riyadh, Saudi Arabia in 2008.”

Other Northrop Grumman Global

Offices

Source: Northrop Grumman Website (NOTE: UK SPELLING)

31

• $1.7B contract for NATO unmanned Alliance Ground Surveillance System (AGS)

based on Global Hawk

• $66.3B JV contract w/ Finmeccanica for NATO cybersecurity

• $1.0B in contracts for “International Air Defense Programs”

• Contract to provide London’s Metropolitan Police Services’ new Command & Control

system

• (Park Air Systems) Contract for Air Traffic Communication System in North Sea,

offshore England

• (Park Air Systems) Contract for Ground-to-Air Communication System in Curacao for

Dutch Caribbean Air Navigation Service Provider

• (Park Air Systems) Contract for Integrated nationwide IP-based VHF System for all

aircraft operating in Uruguay

• (Park Air Systems) Contract for NATO to add Air Traffic Communications for

Kandahar Air Base, to existing Park Air T6 Radio Series in Afghanistan

• (Park Air Systems) Contract for Ground-to-Air Communication Systems across Chile

• (Remotec) Contract for Airport Realtime Collaboration (ARC) System to UK’s East

Midlands Airport

Recent Northrop Grumman

Contracts (2012-2013)

Source: Northrop Grumman Annual Report 2012, Website

international competitive intelligence report (boeing, raytheon, general dynamics, northrop grumman)

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