Letter from Charles Blundell, Company
Secretary and Director of Government Relations, Rolls Royce, London
Thank you for your letter of 1 February inviting
Rolls-Royce to submit evidence to the European Union Committee's
inquiry into recent developments in the Common European Policy
on Security and Defence.
Our interest in this inquiry centres largely
on item 2c of your call for evidence:
"Now that the EU is committed to creating
a European defence capability, does this require the creation
of a European armaments industry, a common procurement policy
and standard military operations procedure and methods? If so
is this technically feasible?"
To put in proper context our position on this
issue, it is important that your Committee has a full understanding
of Rolls-Royce and its strategic dynamics.
Over the last decade, Rolls-Royce has developed
a strong position in the international market for power systems,
covering both defence and civil applications. The key elements
of this success include:
— International reach and Global
presence
Rolls-Royce supplies engines world-wide to customers
in 135 countries. With over 56,000 engines in service with some
300 airlines and more than 100 armed forces, the Company has been
able to take advantage of its own route to market to develop a
truly global business.
— A significant presence in the
US
Rolls-Royce is the largest offshore supplier
to the US DoD and the Company has established a strong position
on the Joint Strike Fighter (JSF) programme to develop a new multi-role
fighter.
In addition to the acquisition of the Allison Engine
Company Inc in 1995, Rolls-Royce has recently acquired Cooper
Cameron Corp. and National Airmotive Corp further increasing the
Company's presence in the US.
— A strong position within Europe
In Europe, Rolls-Royce is participating in a
number of military engine programmes including taking the leading
role in the EJ200 for the Eurofighter Typhoon.
Rolls-Royce has also taken full control of Rolls-Royce
Deutschland (formerly BMW Rolls-Royce) and retains a substantial
equity stake in ITP in Spain. With the acquisition of Vickers
plc, the Company now has interest in seven EU member states as
well as Norway.
— Technology and system integration
skills
The dual use nature of gas turbine technology
makes it impossible to distinguish defence from civil capability
in this sector.
In summary, Rolls-Royce is now the only aeroengine
company in Europe with the required level of system integration
skills, access to an independent route to market and a broad product
range covering the main thrust requirements for aeroengines from
1,900lbs to 114,000lbs
Against this background, your Committee will
understand that we have strong views on the issues raised by item
2(c) and we very much hope that your Committee will take into
account the following points in considering its own conclusions
on the question:
(a) Like many companies in the United Kingdom
aerospace industry, Rolls-Royce has significant interests in the
United States, both as the owner of US assets and as a supplier
to the US market which remains the largest in the world for civil
and defence products. If the principles of Smart Procurement are
to work a global strategy serving global markets is essential.
Without global markets the United Kingdom's defence centres of
excellence cannot tolerate the loss of major programmes to offshore
companies because MoD equipment budgets are not large enough to
maintain the base.
(b) In the case of the aeroengine sector,
it is in any case difficult to see how a common European defence
capability could be created. Although as is noted above, Rolls-Royce
already has significant interests in Europe, further integration
is currently constrained by the fact that Snecma of France is
already linked to GE of the US and MTU of Germany, to Pratt &
Whitney.
(c) We believe that the role of the EU should
not be to seek to create a European defence capability but rather
to introduce more commercial disciplines such as the abandonment
of the "juste retour" approach to procurement.
In the case of Rolls-Royce it is important that the United Kingdom
can win programmes on merit without having to be tied to inefficient
sources and management procedures involved in multinational collaborations.
The sources should have to qualify competitively not politically.
We hope that the Committee finds these comments
helpful and we look forward with keen interest to the publication
of their report.
24 February 2000
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