Examination of Witnesses (Questions 40
- 59)
TUESDAY 27 MARCH 2007
AIRBUS UK
Q40 Rob Marris: Clearly you wish
for that support, do you need it?
Mr Gray: We do need it, unambiguously
we do need that.
Q41 Rob Marris: Given the dispute
of the WTO on Launch Aid, could you specify a little more clearly
than you have up to now in what form you think such government
support might take? You have talked broadly about partnership
and so on, with particular emphasis on technology, can you be
more specific about what sort of support you think Airbus needs
from the UK Government?
Mr Gray: There is a variety of
ways in which the Government can help in terms of working in partnership,
which range from help related to skills development, sales, health
and safety regulations. I think where you are driving though and
for me what is the most—
Q42 Rob Marris: I asked about technology.
Mr Gray:—fundamental thing
is investment in new technologies. For me, investment in new technologies
for future Airbus products is absolutely key to sustaining the
UK's role as world leader. I would see that as the absolutely
principal area where we should be working in partnership. Investment
in new technology is absolutely paramount.
Q43 Rob Marris: What do you mean
by government investment in new technology? I am not quite sure
I understand you.
Mr Gray: Investment in terms of
technology programmes. To reinforce again a bit of work which
has gone on in recent years and I am not talking specifically
about Airbus, I am talking about the aerospace industry at large
there was a National Aerospace Technology Strategy which was developed
in partnership and sponsored by the Aerospace Innovation &
Growth Team. That National Aerospace Technology Strategy programme
was looked at in terms of what the key priorities are for UK plc.
It was recognised that to achieve the objectives of that National
Aerospace Technology Strategy programme we would need to see an
increase in Government funding for civil aerospace R&T from
some £20 million up to £70 million per annum. Some very
significant progress has been made. I am very pleased that in
recent months the government has supported the launch of, for
example, the Integrated Wing Technology Programme. It was launched
at our Broughton facility just before Christmas. There is another
very good example of a programme called The Centre for Fluid Mechanics
Simulation Studies. There is a superb example of a composite development
centre which was established at our Filton facility. The partnership
arrangement has been with Government, the DTI, the regions, in
particular in the composite development centre in partnership
with the South West Regional Development Association and with
the supply chain. This National aerospace technology strategy
is something which I view as being enormously important from a
broader UK point of view, and commitment to that National aerospace
technology strategy programme is wholly consistent with what our
objectives inside Airbus are to secure long-term leadership.
Q44 Miss Kirkbride: On that, do we
assume then that you are fully satisfied with the Government's
research and technology support as it stands at the moment given
your last answer?
Mr Gray: As in all aspects of
life, there are always things that we can be doing better. If
we look at the investment in technology, because that is where
my key priority area would be, I see two key aspects that we still
need to work on. One is in absolute terms the amount of money
which is spent in terms of aerospace technology development. The
National Aerospace Technology Strategy programme was costed out
at around a £70 million per year contribution from across
government. We are currently operating at around £40 million,
so there is still a gap and a gap that we need to close. There
is some terrific work which has been done, some excellent examples
where we have increased the amount of money on research and technology,
but there is still a gap. The other aspect where I think improvements
can be made is in the management process itself. As we have moved
away from sector-specific research and technology funding regimes,
the aerospace sector itself has to fight, along with other sectors,
for its share of the technology funds which are being expended,
but the aerospace business is a long-term R&D intensive business
and we need a management process in place which provides forward
visibility of what the R&D investment is going to be in the
years ahead. We welcome the launch of the new Technology Strategy
Board, this new arm's length board, which will take on board the
views of business in terms of providing focus on what their business
needs are. There are areas that we can improve and we need to
improve to ensure our competitiveness moving forward, but there
are some very good examples of the types of improvement we have
seen in recent months.
Q45 Miss Kirkbride: Do the regional
development agencies get in the way of this national strategy?
Mr Gray: The regional development
agencies are working very closely with us in terms of scoping
out what we should be doing. What I would like to see is the Regional
Development Agencies operating within the framework of a National
Aerospace Technology Strategy so we set a direction. I think we
are all on a learning curve on this but there are some excellent
examples. If we look in the south-west of England or the south-east
or the north-west, there are some excellent examples where the
Regional Development Agencies has been working in close partnership
with industry and making a difference. What we need to avoid,
however, is a situation where regions are competing with each
other to duplicate technologies. In my view, there are improvements
that need to be made.
Q46 Miss Kirkbride: Is that happening
in some areas?
Mr Gray: I cannot give you specific
examples but I am sure there are improvements which can be made.
I can give you some very good examples where it has worked very
well as well, however.
Miss Kirkbride: You should be a politician,
Mr Gray!
Mr Binley: You should be a diplomat!
Q47 Miss Kirkbride: What about comparisons
with America on R&D? What does the American Government do
better or worse or the same as us?
Mr Gray: If I could generalise
for a minute. Aerospace is a strategically important business
and around the world there are governments that recognise the
strategic importance of aerospace and work very, very closely
to secure long-term investments with their industries. The US
has played a very strong role in supporting US industry. The EU
case at WTO is that Boeing has received some $24 billion.
Q48 Miss Kirkbride: Over what timescale,
the $24 billion?
Mr Gray: They have received very
significant sums of money over a relatively long period of time.
They received significant technology funding through NASA, through
Department of Defence funding. We should also recognise that on
programmes, for example, like the 787 programme where, again,
just to restate something I said earlier, Boeing have outsourced
the complete wing of the 787 to Japan, in Japan they receive the
benefits of a launch investment programme from the Japanese Government.
Q49 Miss Kirkbride: You are doing
quite well to compete then, are you, if they have had $24 billion
and you have just had £70 million or something? There is
quite a discrepancy there.
Mr Gray: We are a hugely important
business in strategic terms. The benefits which flow from the
investment into aerospace in the UK are huge. In terms of long-term
investment in technology, these are not huge sums of money, what
they are is focused on what the national priorities are and they
are focused in on the right areas. I believe we are making the
right kinds of steps but what we need to see is some increase
in the levels of funding and a change in the management process
to ensure that industry has a good long-term forward view of what
the technology funding is going to be. With that I believe we
can be hugely successful here in the UK if we get that right.
Q50 Miss Kirkbride: Is a symptom
of that the fact that you have got a 20% share in the A350 XWB
project? Is that testimony to the fact that you are getting it
right?
Mr Gray: I think that was a very
important decision. The aerospace business is a long-term business
and if that decision had played against us, I think it would have
been very hard to get back in. What is really important for us
in UK plc terms now is that we continue to invest so we can secure
the technology for the next generation of products. That is where
the spotlight is very quickly going to turn in terms of UK's commitment
to this business moving forward, a spotlight on technology funding
from a company point of view, a supply chain point of view and
a government point of view.
Q51 Mr Wright: To turn to the skills
base, one of the areas we have got concerns about is the skills
shortages and, indeed, you allude to that fact in your memorandum
where you say quite clearly that the quality of graduates is high
but you are concerned about the availability of senior engineers.
How serious is this lack of senior engineers for your company?
Mr Gray: It is a very significant
issue and it is a significant issue in particular skill areas.
I think there are two different aspects I would focus in on. There
is the issue on engineers, as you rightly say, with experience,
and there is also the issue of how we attract young people in
general into engineering and manufacturing from a long-term business
point of view. Those are both areas that we as a company are committed
to working with the various regional bodies and advisory bodies
to ensure that we can come up with the right solutions, but they
are significant issues for us.
Q52 Mr Wright: Have you looked further
afield? Have you looked abroad to some of the university graduates
to come to work in the UK?
Mr Gray: As a company we operate
an apprentice training scheme, I think it is generally viewed
as one of the best apprentice training schemes in the country.
We regularly recruit over 100 graduate engineers every year. In
terms of experienced engineers, we look for the right skills,
we take people from all the different regions of the UK, we take
people from outside the UK. We place a limited amount of work
outside the UK, we have management control, for example, of an
engineering centre in the US, in Wichita, but we try and find
UK solutions where we can. A very good and recent example was
where we opened up a new engineering centre in the West Midlands
to take advantage of some of the engineering resource which became
available as a result of some recent developments in the automotive
business. We try to place work out and pull engineers in. Our
commitment to finding good quality solutions is absolute.
Q53 Mr Wright: In your opinion, what
do you think the Government can do to try to help things along
for you?
Mr Gray: I think it still surprises
me to some extent the amount of basic training that we require
in terms of fundamental skills, I think we have to spend more
time than perhaps we should, particularly on some of our apprentices
who join in terms of their knowledge of some basic fundamental
skills. I think the other key area is working with industry to
encourage people into engineering, manufacturing businesses, encouraging
people to do maths, physics, get those basic skills up, give support
to engineering clubs and issues like that, generally promoting
engineering and manufacturing as a good career way forward. I
think commitment to things like the National Manufacturing Skills
Academy was an excellent initiative and something that I would
applaud. Those kinds of initiatives will take time but they will
help.
Q54 Mr Wright: Do you think the emphasis
should be on the 14-19 year olds as much as it should be for universities?
Mr Gray: I do, yes.
Chairman: Thank you. That is very helpful
and you just reinforced the benefits of holding another inquiry
on manufacturing skills.
Q55 Mr Weir: You talked a lot earlier
about outsourcing of work and the A350 programme outsourcing 50%
of work. I understand some of that is going to China, but China
has announced an intention to move into the large civil aircraft
industry. Will that have any impact in outsource work?
Mr Gray: China is a hugely important
market in terms of aerospace. In terms of Airbus's position in
China, we have secured a very strong order book in China in recent
years and we want to ensure that we do continue to secure a significant
part of the Chinese market. In terms of placing work into China,
Airbus did announce the establishment of a final assembly line
for a capped number of aeroplanes, I believe it was four aircraft
per month. From an Airbus UK point of view we have established
a wing assembly line in China, again it is capped at four wing
sets per month, it is on the A320 programme which I would remind
you in technology terms is relatively old technology. We welcome
and recognise competition, we still continue to see China as a
very important part of the aerospace market moving forward and
we will continue to look at, from a supply chain point of view,
where the most competitive sourcing can be done and I am sure
China will play a part in that.
Q56 Mr Weir: You mentioned the wing
assembly plant and you made the point that that was an older technology.
There is not any intention, for example, for any of the wing technologies
that are manufactured in the UK to be outsourced to China?
Mr Gray: Again, to be very clear
the wing assembly technology which has been placed in China is
the A320 wing assembly—
Q57 Mr Weir: I understand that.
Mr Gray:—but from an A350
point of view, then the real absolute commitment and the good
news for us in the UK is that the A350, the first commercial wing
on an Airbus commercial airliner, will be assembled here in the
UK and that is not under threat.
Q58 Mr Weir: The other point is that
you talked about the Power8 programme but obviously there has
been some unrest in Germany and France due to the amount of job
losses on the Programme. Do you think there is a risk in the agreed
package of unravelling because of political pressure, particularly
in these countries?
Mr Gray: I acknowledge that there
has been a level of unrest around the system and around the workforce.
I think it is a great credit to the employees and the trade unions
in the UK that they have maintained a strong and steady view on
the opportunities of the Power8 as we move forward, and I see
no evidence at all that what we have secured in the UK will change
in the short-term at all. What I would say is what I see as the
next critical litmus test for us in the UK is the extent and the
commitment to investment in new technologies as we move forward.
Q59 Mr Weir: Given that Airbus is
a multinational operation, the political pressures are not just
in the UK but also in France and Germany. Could any changes there
have a knock-on effect in the UK? Are you quite confident of the
UK's part?
Mr Gray: I think it would be wrong
to speculate in the short term about that. What I can say is that
I see absolute commitment at EADS and Airbus management level
to get this business operating in a truly commercial environment
and the Power8 Programme represents a commitment from all of the
management team in Airbus to the steps that we believe we need
to take to ensure that this business is competitive moving forward.
| 
