Select Committee on Defence Written Evidence


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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