The United States defense market is trending open and Europe needs to follow suit while increasing investment needed for meaningful contributions to transatlantic initiatives if NATO hopes to remain effective militarily in the 21st Century, Robert Stevens, Lockheed Martin‘s [LMT] CEO, president and chairman said Monday.
“There is no substitute for real expenditures on tangible programs if the health of European industry is to be improved and if further transatlantic cooperation is to be possible,” Stevens told attendees in Brussels at a Security and Defence Agenda conference on NATO’s future. “The very best way for European governments to protect European industry is to invest in it.”
Stevens called the transatlantic industry and government partnerships developed over time “among our most valued treasures” and “indispensable” in an increasingly complex and globalized world.
However, he cautioned that the Alliance countries are dependent on the performance of their security and defense systems. And, for this, further and deeper transatlantic cooperation is critical, he added.
The ability to meaningfully contribute the technology and equipment needed to carry out essential mission requires industry health, and long-term vitality is only possible with adequate investment that is kept efficient through an open and competitive market, Stevens said.
“Protectionism is not now, and has never been, a substitute for competitive strength,” he said, in a message possibly intended for grumblers on either side of the Atlantic. “With each passing opportunity, those companies who linger under this veil will only grow weaker–until they will be quite literally protected to death,” he added.
Stevens pointed to several positive trends, such as the European Commission’s draft directive on defense procurement that calls for greater openness in the European market.
Another positive trend is the increasing number of transatlantic programs, including the Northrop Grumman [NOC]-European Aeronautic Defense and Space Co. (EADS) Airbus tanker purchase for the Air Force, the Army’s procurement of Italian Finmeccanica subsidiary Alenia North America and L-3 Communications [LLL] C-27J transport aircraft and EADS UH-145 helicopters, Stevens said.
Lockheed Martin’s MEADS program with Italy and Germany, the U.S. Presidential helicopter program, the Aegis combat systems for Spanish and Norwegian frigates built in Spain and the “flagship program for international cooperation”–the F-35 Joint Strike Fighter–are other examples of “the growing willingness of the United States to look to global sources of supply for vital equipment,” he added.
The recent Finmeccanica bid to acquire DRS Technologies [DRS] caps a string of successful initiatives by European firms such as EADS, Britain’s BAE Systems, Rolls-Royce, and France’s Thales toward U.S. companies and is further evidence of an open market on the left side of the Atlantic, Stevens said.
Yet according to Stevens, important barriers remain to open markets, international competition and investment in transatlantic partnerships and industrial content. Countries in the Alliance must work to remove legal, bureaucratic and political obstacles to true industrial collaboration.
These barriers are why only six countries provide 80 percent of Europe’s defense spending and why only “very few European members of NATO meet the nominal requirement of spending 2 percent of GDP on defense,” Stevens said.
The United States, he added, spends about 4 percent of GDP on defense, devotes twice as much as the Europeans to procurement and about six times as much on research and development. This has created the much-discussed “gap” between members of the Alliance.
“But there is a new implication,” Stevens said. “The cumulative effect of this differential, repeated year after year, is creating a capabilities gap across the Atlantic that threatens to become unbridgeable,” he added.