Michael Wynne on: The Industrial Impact of the Decision to Terminate the F-22 Program


Michael Wynne at Normandy
Michael Wynne at Normandy

Secretary of the Air Force Donley together with the Air Force Chief of Staff Schwartz wrote an oped over this past summer wanting to put the contentious F-22 debate behind them. With their then recent installation and the heated debate on ‘next war itis’’ that surrounded their predecessors departure one might have wondered whether we heard from their head or their heart; but now in the Fall of 2009; perhaps it is time to assess beyond the impact on the Air Force and look at the impact on the Industrial base.

Recently, sponsored by CSBA, Barry Watts looked at the operational impact, and the series of policy, schedule and technology driven decisions, which contributed to the costly appearance of the F-22 (The F-22 Program in Retrospect [pdf]).

Though this required reading into the commentary just a little, producing more units through recurring production from the program would have been a less costly and prudent decision. Especially in light of the continuing assessment by the Air Force Warriors that at 187 units, the mission set was highly risky; 243 was labeled medium risk; and the stated requirement of 381 remains unchanged; and unfulfilled. But, as the Secretary of Defense called these requirements ‘Silly’; the paper reasoned that the decision would allow the Air Force to focus its investment elsewhere because of the central role of the aircraft in future USAF air dominance strategies. Only time will tell which of these arguments – the requirements are silly or that the requirements reflect real needs for air dominance — get validated; but the recent rush for Aviation technology and in integrated Air Defenses by global competitors suggests an increasing probability that there will be a test. And as I have often noted, it is not simply a question of peer competitors; it is a question of access to advanced air defense technologies globally to the Irans of the world which is of consequence to the USAF and to its joint and coalition partners.
As one assesses the impact on the industrial base; it is prudent to do two things. First review the program as an industrial base issue over its history, taking some leads from Watt’s research. Second, look at the program as the industrial base stands today; and the impact of this decision on the future choices the Nation now has due to this decision to terminate.

The program was born of the experience in the Vietnam Engagement when the Nation lost over 2200 Airplanes to a layered, but not integrated air defense system purchased from peer competitors, but operated by non-peer competitor forces from North Vietnam. The specifications for speed, stealth, and precision were very stringent as this was to provide the Nation with Air Dominance though the mid 21st century. At the time, the United States was at the threshold of the revolution in information technology which burned brightly through the 1990’s and beyond. Because of a nagging fear of being hostage to an industrial solution, the Defense Department specified in detail its own operating system, called ADA; and as a result of the pace of the technology change has been left rooted in this operating system. The roster of programs is recognizable by their subsequent history, for the Army—Crusader, and Comanche; for the Air Force, Space Based Infrared System (SBIRS) and F-22. The Navy has a similar list.

This excursion shaped by government only specs has since been discarded, and a new philosophy of depending on the commercial investment in information technology and then adapting it to defense is now the vogue. Recently this has brought with it some security concerns which are being separately addressed.

The purpose here is to illustrate the technology barrier that was pierced, and the scramble to retain talent for ADA when careers were being made in DOS, Apple and LINUX. As SBIRs continues to struggle; the problems with the F-22 that surfaced during ground and flight test were resolved slowly by a very dedicated team from both Government and Industry. The costs associated with this effort added to the total for development, but should not go unmentioned in the history. As F-35 enters its period of test, many are predicting delay, but hopefully lessons from the F-22 will smooth its way.

The Nation’s concern for the industrial base was highlighted by the parsing out of the resultant production to the three competitors; and was also a bit of a reward for the massive investment all were asked to bring to the problem.

The expectation of a 750 unit production program for both the Air Force and the navy collapsed with the withdrawal of the Navy from the program. Later their derivative program, the A-12 was terminated, leaving the Navy to wait for the next stealthy program, the F-35.

With the decision by the Secretary of Defense in the early 90’s to reduce the expected volume, and the subsequent decision to stretch-out the technology development; all hope of a positive Return on Investment for the program vanished, and across the board investors fled aerospace stocks.

The concentration of the industrial base was further determined by the meeting held in the early 1990’s with then Secretary Perry dubbed the ‘Last Supper’ wherein he actively sought the exit from defense of the industry. The result was the consolidation of the 1990’s not only at the prime level but also at the suppliers.

This action contributed to the present fragile structure, as well as the concentration and pricing volatility as aircraft programs singled up on the same vendors for supply to get the benefits of quality and reasonable costs. As we will see subsequently, this exacerbates the penalty of terminating one program only to see the costs grow on others.

This same concern for the industrial base was not evidenced by the award of the F-35 program to a single prime; which has the effect of increasing the fragility of the industrial base, and with that the F-22 decision highlights to investors the relative volatility of having incomplete programs terminated not by fulfillment, but by bureaucratic action. Though the present Secretary endorses the need for the F-35, his actions do not speak well for the durability of the department’s loyalty.

The F-22 was nearly 20 years from concept to its interim operational capability. Though the F-35 is seen as a model; it will be just about 20 years as well. Though analysts do not like to go back to the JAST research program in the late 1980’s and early 1990’s; this program contained the seeds for the F-35 program. The point here is the continuous nature of the investment in parallel programs to retain the engineering talent.

What is of critical concern in the present era is the lack of a parallel development, as even the investment in the Unmanned aircraft does not have the same requirement for technical breakthroughs; and will likely never get to the same demanding flight regimes without man to protect. The reduction in engineers from both of the Aircraft programs will occur nearly in parallel with the voluntary standdown of the shuttle program by NASA, and thus the net demand by government for science and engineering talent will continue to encourage Americans not to enter this field. Government is the employer today of 50% of the science and engineering talent produced in America, and the reduction will be felt for decades in our universities. While each year is different, there seems to be a generally deteriorating market across the government sector for this talent.

We should not forget the generational qualities underlying our achievements in aerospace and defense and the need to invest today. Progress does not happen without the efforts of talented people. The dramatic output of World War Two was created in the heyday of investment and creativity in the field of aviation, with engineering talent exiting the university system at a critical time for America. Today, our talent is in Finance, and Information Technology, with the physical sciences, and the supporting engineers going begging.

But let’s take a look at the impact of F-22 termination on the manufacturing base we currently enjoy. The backdrop for this is the current stimulus and the many billions being spent to preserve jobs in the automotive sector, and the further billions spent to recover from housing and banking errors made over the past decade.

There is a substantial overlap between the F-35 and the F-22 program stemming from the previous decades of consolidation, and the increasing need to pile on to successful suppliers for cost and quality purposes. As well the increasingly intrusive defense auditing has isolated commercial industrial practices from defense, such that often a commercial product is ‘delivered’ to a defense modification center for conversion. In this way, commercial derivatives can be properly accounted for, while commercial profits contained by the use of commercial fixed price.

This accounting combination has the upside of sharing overhead throughout the sector; and the similar downside of overburdening surviving programs with the overhead and facilities remaining from program cancellations. While it is always very clear at the prime or delivery location, as in the F-22 at Marietta shares facilities with the C-130 program as well as the C-5 modification program; it is just as true at the propulsion level where Pratt and Whitney produces both the F-22 engines and the F-35 Engines. It is therefore expected that costs for the companion programs will rise. But because of the overlap at the lower tier supplier, the cost growth on companion products is often surprising, as in Honeywell avionics, or Goodyear Landing gears; and the list could go on.

Here again the cost sharing can have benefits, such as the international sales of the F-16 have benefitted the Air Force program very dramatically; as have the F-18 international sales benefitted the Navy F-18 program. But, in the case of the F-22, there has been a ban on the international sales, due in no small part to the expected operational impact.

There’s always been an undercurrent, but now with twenty thousand or more jobs across America looming with the cancellation, and the predictable impact of other aviation programs, selling the F-22 internationally is stirring Congress. Japan has previously expressed an interest, and perhaps it could be again stoked; but the previous response from the defense department has sent them off to examine the Eurofighter and other international offerings. Recently, Brazil has announced their intent to purchase the RafaleAircraft from France. This illustrates that there are other sources, and the United States is but one vendor in the global marketplace, and withholding our products may not make sense in this new world. If such a decision not to export is sustained, not only would the defense decision result in this loss of jobs, but now exports will be seen as lost as well.

Because termination has been framed narrowly as a budget decision, simply a cancellation of a future order, the immediacy of the impact is not felt. But because of the decision last year to eliminate any money for long lead items, the immediacy of the present decision is more acute. Immediately, there is no money to provide to Titanium Suppliers in North Carolina. Forging suppliers in the Midwest who were hanging on will now terminate their work and lay off workers. With the decreasing quantity, suppliers will be reevaluating the balance between defense and commercial; with commercial taking a larger slice of investment. Though they are two years away from the final delivery, Lockheed will have to be increasing the price for the seemingly timeless C-130’s that are scheduled for delivery; and considering how to decrease the footprint within and perhaps ultimately the Marietta facility.

Nationally; we have one fifth generation fighter facility left, and that ultimately will be the Fort Worth Facility. Yes, the Navy continues to buy the F-18 from the St. Louis Boeing facility, but the follow on program is the F-35, and the clock is now ticking loudly. Large Aircraft is Long Beach, and without the C-17, that facility will be history. Bomber programs—we have none, and the planned future one seems at risk. C-130 program will suffer further price increases, and the C-130J program barely made it to production as did the C-17.

While you cannot pile the entirety of two decades or more of industrial base decisions and program decisions on this F-22 decision, it is clearly correlated; it is a decision taken in a context and has strategic consequences.

And it is stunning to see the money being given to industries such as the automotive industry and little or no concern being expressed about the fate and future of the aerospace and defense industries. There remains time for a different set of decisions, and in context of $85 Billion for AIG; and more than 30 Billion for automotive, 2 Billion to provide future options for the F-22, and the workforce that has supplied us our freedom is not so much.

The Congress will need to fund some follow-on Air Force simply to preserve the line for international sales. This was done for the F-15 and F-16 programs, and so the precedence has been set; but the present administration has been labeling this decision with presidential aspirations and visions of a different future that will make any change seem far more momentous than ever before.

And how the F-22 is handled has consequences for the F-35. A nagging fear is that as the F-22 was destined at its start to be 750 units, with much fanfare, the expectation for the F-35 is multiple thousands, but the GAO is already calling to reduce the ramp up and the top volume. What the true future holds is a mystery, but if there are both termination of the F-22 and reductions in the orders of F-35, the impact on the industry will be dramatic. One question is why we have to squander a major US strategic defense capability in order to create a symbolic target for a populist President?

Hence the Air Force Secretary and Chief of Staff Note on putting this controversy in their rear view mirror. It is not without risk, and it is not without impact to an already fragile industrial base. The cost of this decision is now flowing to other programs, lost opportunities for building international partnerships, as well as displacing a talented workforce honed through twenty plus years of development and production. Should the nation ever want to recover the capability, it will not be at the speed available for World War Two; it will be decades. Let’s all hope our enemies signal us that far in advance.

Secretary Wynne was the 21st Secretary of the USAF; before this he served in the Bush Administration and Deputy Under Secretary of Defense for Acquisition, Technology and Logistics and then as the Under Secretary. Mr. Wynne has extensive industrial experience, including with the F-16, M-1 and military space programs. Mr. Wynne was a graduate of West Point and brought to his role as Secretary of the USAF extensive experience with and understanding of ground operations, Mr. Wynne has been an active participant in the F-22 debate and related defense issues. For a recent example of his treatment of the F-22 issue, please see http://www.dodbuzz.com/2009/08/27/holes-in-us-defense-umbrella-wynne/


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***Posted October 1st, 2009