Tuesday, 29 July 2014
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Aerospace and defence firms signal move to green sector

Five of the world’s biggest aerospace and defence firms have signalled their intention to move further into the environmental and energy technology sectors.

Lockheed Martin, Raytheon, Saab, Finmeccanica and Northrop Grumman have taken the unusual step of releasing a joint statement saying they want to help tackle what they call ‘global challenges’, referring to issues such as developing renewable energy technologies, disaster relief and mitigating the effects of climate change.

Although the companies already have some business operations in these areas, the statement suggests they are looking to make a more substantial move and seek new revenue streams in the face of declining defence budgets in Western countries.

The statement reads: ‘With decades of relevant expertise, the Aerospace, Defence, and Security sector is ideally suited to address wide-ranging global challenges, whether they be security-related, environmental, technological, or economic.

‘Our experience in providing innovative mission solutions uniquely positions us to support government and other industry sectors as they endeavour to tackle these complex challenges. We are ready, individually and collaboratively, to offer ourselves in this role.’

Aerospace and defence firms have long had involvement in areas such as alternative power generation because of the importance of securing energy sources for military uses, while improving environmental standards have forced companies to develop more efficient engines and electrical systems.

Other technologies such as those used to create temporary and secure infrastructure in conflict zones could find their way into humanitarian operations and even smart grid systems. Saab has already revealed plans to support Latin American cities looking to integrate and modernise their infrastructure.

Although there were no announcements about specific new projects or collaborations, the statement indicated the firms were interested in building on their existing experience by working with each other or partners in other industries.

The statement was organised by Nick Cook, CEO of the consultancy Dynamixx, which specialises in the crossover between these sectors. He told The Engineer the move represented a sea change in the aerospace/defence industry that had been building over the last few years.

He said that cuts to government defence budgets were forcing companies to look for new markets but that while they had the technological capability to develop solutions to environmental problems they needed to find new ways of working without the dedicated state contracts they were used to.

‘The real challenge for these guys is to construct business models to enable them to engage the commercial arena and that is where they’re going and why this statement is so significant,’ he said.

Graham Chisnall, deputy CEO of trade body ADS, said there was an obvious crossover between energy, environment and security issues, all of which needed technological solutions.

‘A lot of the solutions to tomorrow’s environmental problems are going to be technology based. And a lot of those technologies are very similar or very compatible with the kind of technologies that aerospace and defence companies have.

‘There is a significant degree of involvement that we would see going forward. Companies are at all sorts of positions on the spectrum, from looking for opportunistic bits of little spin-off business all the way through to very decisive, strategic plays.’

Dean Gilmore, UK head of aerospace and defence at consultancy PWC, agreed that companies were looking for new markets but struck a cautionary tone on how easy a profitable shift into energy and environment would be.

‘It’s certainly true that we are seeing major defence corporations looking for diversification of one sort or another, as the market becomes increasingly competitive and budgets become more constrained,’ he said.

‘The key thing for the companies to consider in their approach to new markets is what makes them competent or capable in that space and, more importantly, are the capabilities you have matched to your long term business objectives?

‘Collaboration has proven itself to be not impossible but very difficult. If five sign up and say they’ll throw their weight together but it turns out one partner’s technology is needed more than any other, how will a collaborative agreement be reached? That will be the next step if such a programme is to work.’

Dynamixx is hosting the ‘E3DS’ conference in London on November 13-14 focusing on the activities of and opportunities for aerospace and defence firms in the environmental sector.

The headline and first sentence of this article have been amended to clarify the companies are moving into the energy-related technology rather than energy generation sector.


Readers' comments (5)

  • after all the rumblings about failed BAe merger to obtain a civilian workstream cashflow, i was expecting to see their name in the list.
    BAe just seem to lack any strategic direction, there must be plenty of areas their military expertise could be used? Might be just me, but i feel if thery were run by anyone with a modicum of strategic vission they would be a bigger, more successful company.

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  • This may be overtly cynical of me, but perhaps they see government sponsored projects/grants looming in these arenas of spend.

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  • Maybe cinical of me but the first things these companies need to learn is how to stick to a budget and how to deliver to a deadline.

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  • While application of defense technology for civilian purposes is nothing new, a concerted, very public effort by a block of large A&D firms is quite remarkable. Be as cynical as you want, if these problems can be resolved by these organizations, there is inherent value to the nations and populations involved, and an improved standard of living benefits the global socila and economic fabric. If anything positive is to be said of the global economic crises of the recent past, it's that capitalists seek to fill the needs of others to sustain themselves, and some of those needs may be just what an underserved community must have to survive and prosper.

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  • Some nice thinking here, congratulations.
    Apropos B Ae: nearly 60 years ago, its quite recent CEO (Sir) Dick Evans was in my House and Corps platoon at the Royal Masonic School: I used, as platoon sergeant to have to make him double-on-the-spot with his rifle above his head for having dirty 'brasses' on Corps parade: so am possibly responsible for elements of the strategic direction and management of that firm! Making items by the million bought by individuals rather than in ones and twos and bought by governments is the route to economic success? Same with environmental issues. Enhance the efficiency of day-to-day equipment, not seek one-off catch all solutions for an already poluted or energy inefficient society.. Sustainability is not just a word bandied about it should be a day-to-day
    reality.

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