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The likely shape of the Defence Industry in the future

The likely shape of the Defence Industry in the future. Simon Allan Berwin Leighton Paisner LLP. Structure of Presentation. Assumptions Some existing trends Some sources of change Synthesis. Policy Assumptions. DIS maintained Defence Procurement Directive implemented

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The likely shape of the Defence Industry in the future

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  1. The likely shape of the Defence Industry in the future Simon Allan Berwin Leighton Paisner LLP

  2. Structure of Presentation • Assumptions • Some existing trends • Some sources of change • Synthesis

  3. Policy Assumptions • DIS maintained • Defence Procurement Directive implemented • UK Market remains “open” • Constant budget • Shipbuilding and complex weapons in a special position

  4. Policy Assumptions UK Defence Spending as % of GDP Calculation = Defence Expenditure Limits as a percentage of gross domestic product at market prices. Sources: Defence Spending Reviews 2004 and 2007 and UK National Statistics UK Output, Income and Expenditure 2nd Qtr 2007

  5. Martin Marietta OAO Corp Sipping Holdings Sytax Gray Lockheed ACS Lockheed Martin Stasy Ltd (UK) Aspen Systems Loral Oricon Boeing Co Jeppeson Sanderson Rockwell Aerospace C-Map Boeing Co. Hughes Electronics McDonnell Douglas Aviall British Aerospace Siemens Plessey Electronic Systems United Defence Industries GKN Vickers Alvis SEMA BAE Systems LM Electronics Systems Marconi ATPI STI Armour Holdings Westinhouse Electric Teledyne Ryan Litton Industries TWR Inc. Illgen Simulation Northrop Corp Northrop Grumman Grumman Corp Logicon Newport News Shipbuiding Xon Tech Integic Corp Hughes Aircraft Honey well Business Unit Raytheon E-Systems Oakley Networks Raytheon Corp Photon Research CTAS Texas Instruments Solypsis Corp Beechcraft Industry consolidation 1995 2000 2005

  6. Industry Consolidation • Capacity effects • Competition effects • Market attraction effects

  7. Mod Procurement Strategies • Outsourcing/PPPs/Privatisation • Condo/Sponsored Reserves • Use of “integrator” models – FRES, MFTS etc

  8. Platform Longevity • Upgrades • Inserts • TLCM

  9. “unmanned” Technologies • Section 220 National Defence Authority Act 2006 “ It shall be a goal of the Armed Forces that: (1) by 2010, one-third of the aircraft in the fleet are unmanned; and (2) by 2015, one-third of the operational ground combat vehicles are unmanned”

  10. Changes to the “definition” of “defence” • Social appetite for sustained ground troop deployments? • Boundaries between “defence” and “homeland security” • Cyber warfare – economic “warfare” – sovereign funds • Climate change/security of supply issues

  11. Synthesis • Growing support service companies • High level systems integrators supported by agile technology companies • Consolidation with higher levels of “foreign” ownership • New product “segments” eg UAVs, UCAVs etc • Migration to “new” markets with higher margins and better social profile

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