Dutch Close to Approving F-35 Production Participation
Oct 05, 2006 09:32 EDT
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DID’s Benelux reader David Vandenberghe offers us translations and links to a number of Dutch documents and speeches re: their continued participation in the F-35 Lightning II/ Joint Strike Fighter program. The Netherlands is a Tier II JSF partner, and like other partners they needs to decide if they wish to remain part of the F-35 JSF consortium into the production phase.
Though Parliamentary approval has not yet been given, their Ministry of Defense notes [release in Dutch] that the Council of Ministers has approved ongoing participation. David provides us with translations and additional source material re: the Netherlands’ decision, its economic implications, and its expected defense needs. His comments and translations follow below, edited and reorganized for clarity:
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The MINDEF release, in brief:
The Dutch Council of Ministers has decided to participate in the next phase of the JSF development after a proposal by Secretary of defense Van der Knaap and Secretary of economic affairs Van Gennip. If parliament agrees the Dutch government will sign a MoU with the US in November 2006 for the Production Sustainment and Follow-On Development Phase. The decision to eventually acquire the JSF will fall in 2009, the current step does not automatically mean that they will acquire the JSF.
Op dit moment is er ruim 580 miljoen euro verplicht (van in totaal 800 miljoen dollar) geïnvesteerd in de ontwikkeling, en inmiddels hebben 70 Nederlandse bedrijven voor ruim 700 miljoen dollar aan contracten binnengehaald. Dit kan leiden tot een omzet van meer dan 8 miljard dollar in de productiefase en veel extra (hoogwaardige) werkgelegenheid.
Translation: Currently EUR 580 million (of the US$ 800 million commitment) has been invested in the development, and so far 70 Dutch companies received contracts worth $700 million [DID: see supporting Stork Fokker release]. This could lead to a turnover of more than $8 billion in the production phase and ongoing high-quality employment.
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The letter/ proposal written by Secretary of defense Van der Knaap to the Council of Ministers can be found via this web page [Dutch] which includes a full download [PDF].
In the proposal, one can read on page 6 that Lockheed Martin expects a turnover of $8.8 Billion for Dutch companies if they’re sufficiently competitive, based on a 2002 letter to the Dutch Ministry of Economic Affairs. In 2004 the $8.8 billion was reconfirmed in a letter to the Secretary of economic affairs, and a turnover of $2 billion was added for the engine producers Pratt & Withney [F135] and the General Electric/Rolls Royce team [F136].
Page 4 has more financial details:
“De thans voorziene aantallen van de negen partnerlanden zouden voor Nederland leiden tot een kostenplafond van 586 miljoen dollar in lopende prijzen1 ofwel 359 miljoen euro in prijspeil 2006. Hiervan is 231 miljoen dollar respectievelijk 153 miljoen euro bestemd voor de inrichting van de productie en de instandhouding en 355 miljoen dollar respectievelijk 206 miljoen euro voor de technische voorbereiding van de doorontwikkeling. De plafondbedragen gelden voor de looptijd van het MoU, te weten 45 jaar, met een betalingsreeks van 40 jaar. De plafondbedragen zijn in het MoU opgenomen en kunnen niet zo maar worden overschreden; daarvoor is een wijziging van het MoU nodig die de partners gezamenlijk moeten overeenkomen. Dat geldt ook als een partner zijn vliegtuigaantal aanzienlijk zou verlagen waardoor de bijdragen van de partners de kostenplafonds zouden gaan overschrijden”.... “De betaling die Nederland na ondertekening van het MoU in november a.s. voor het eerste PSFD-jaar moet doen, bedraagt 3,1 miljoen euro (prijspeil 2006)”
In short: With the current 9 partner countries the financial cost ceiling for the Netherlands should be $586 million (signed on MoU day) or EUR 359 million (2006). $231 million (EUR 153 million) would be committed to start & maintain production. The other $355 million US$ (EUR 206 million) would cover technical preparations for the F-35’s continued development. The cost ceiling is a fixed price which requires both signing countries of the MoU to agree to change the numbers, including if partners were to acquire less aircraft then anticipated.
The Netherlands will have to pay EUR 3.1 million (2006) for the first PSFD-year after signing the MoU in November 2006.
On page 5 it continues that the EUR 206 million for “continued development” is linked to possible technical adjustments to the F-35A JSF depending on operational evolutions/development, law & legislative changes and for maintenance purposes. As I understood it these costs are related to possible changes to the program due to normal evolution changes (new weapon systems, laws that may prohibit certain weapon systems in certain countries, etc).
The proposal later adds that during a 2005 report about the replacement of the F-16s, the industrial participation in the current development phase was estimated at $650 million and has already risen to $700 million. At the end of page 6 it notes that negotiations are being finalized with the engine producers regarding industrial participation, and that a Letter of Intent was negotiated & signed concerning overall industrial participation, but it holds no further details.
Nevertheless, some additional details can be found in other sources.
For instance, there is a speech [in Dutch, PDF format] given by the secretary of Defense at the Air Power Symposium in Hilversum [MINDEF release, in Dutch]. Regarding the JSF it adds that according to a study of the university of Tilburg the JSF Production will create 17,000 to 25,000 ‘labor years’.
The Netherlands and Italy have also signed a MoU on 30 March 2006 to enhance cooperation between European partners regarding the JSF. Agreed upon is the following: the Netherlands is examining if it can produce its JSF fighters in Italy, whilst Italy examines the possibility of performing maintenance on the ‘Italian’ Engines and aircraft parts in the Netherlands. This MoU can be expanded to add mutual activities, and the 6 other JSF-partner countries can join in the MoU concerning the production & maintenance of the JSF.
It seems the Dutch are creating a ‘Maintenance Valley’ in the Netherlands, an initiative stated in a letter from the secretary of economic affairs. (mentioned on page 8 of Van der Knaap’s proposal).
The Italo-Dutch MoU becomes effective after the signing of the PSFD MoU. Stork Fokker & Alenia Aeronautica have signed an agreement concerning the foreseen Turin F-35 production line, and an agreement between Dutch Aero and Avio is in process.
“Eerder is in de business case die de overheid en de industrie in ons land hebben opgesteld het aantal van 85 toestellen gehanteerd.
Dit getal zal in een aanhangsel bij het PSFD MoU worden opgenomen en is indicatief voor de capaciteiten die Defensie vanaf het begin van de jaren 20 denkt nodig te hebben. In vervangingsscenario’s houdt Defensie er rekening mee dat er ook na 2020 toestellen instromen.”
Van der Knaap’s proposal adds on page 3 that the Dutch Royal Air Force believes it will require 85 planes by the year 2020, the MoD has also took into consideration (in its replacement program) that there may be aircraft arriving after 2020.
