U.S. jet-makers pitch 'made in India'

A model of an SC-130J Sea Hercules aircraft, made by Lockheed Martin Corp., is displayed during the Aero India air show in Bengaluru, India, in this file photo.
A model of an SC-130J Sea Hercules aircraft, made by Lockheed Martin Corp., is displayed during the Aero India air show in Bengaluru, India, in this file photo.

Boeing and Lockheed Martin promised to build plants in India if the world's biggest arms importer chose their fighter jets and weapons. That was before President Donald Trump's "America First" call.

This week will be a test for that promise as the biggest U.S. defense contractors, Russia's MiG Corp. and Europe's Airbus, line up to display their wares at an air show in Bengaluru in southern India.

Even as they compete for deals, they could find themselves torn between Trump's push for companies to keep jobs in the U.S. -- he has singled out a number of multinational firms on Twitter for public criticism -- and Prime Minister Narendra Modi's own program that seeks to tie military contracts to some of the manufacturing being done in India.

"All of us in Washington are guessing where Trump is going to land on these issues," said Alyssa Ayres, a senior fellow for India, Pakistan and South Asia at the Council on Foreign Relations in Washington. "He has certainly been very clear in his tweets and direct outreach to American companies that he wants to try to ensure that people don't move production facilities and try to retain jobs in the U.S."

India's Defense Minister Manohar Parrikar will use the air show to outline Modi's plans to strengthen the domestic defense industry by giving contracts to local companies as well as asking foreign manufacturers to tie up with Indian firms, according to people familiar with the plan who are not authorized to speak publicly about it.

Modi promised government spending of $250 billion in the coming years on fighter jets, submarines, howitzers and helmets to modernize his armed forces. Sensing an opportunity, conglomerates Tata Group, Mahindra & Mahindra Ltd. and Larsen & Toubro Ltd. have expanded more into the defense sector and formed joint ventures with international manufacturers.

India, which has traditionally relied on Russia and the former Soviet Union for fighter jets, is increasingly warming to the U.S. In his first phone conversation with Parrikar, Defense Secretary James Mattis committed to build upon the "tremendous progress in bilateral defense cooperation made in recent years," a Pentagon spokesman said last week.

Modi's domestic manufacturing program is a centerpiece of his economic policy that seeks to increase manufacturing to 25 percent of gross domestic product by 2022 from the current 18 percent, and aims to avoid dependence on foreign equipment, particularly in times of war.

Lockheed Martin offered to make its F-16 fighter jet in India, after India scrapped an initial tender with Paris-based Dassault Aviation for 126 planes. India later decided to directly buy just 36 fighter jets from the French government. That still leaves the country short of planes, meaning potential deals worth billions of dollars are on offer.

The Trump administration will want to take a fresh look at some of Lockheed's proposals, including plans to build the F-16 in India, the company said. All previous orders from India have created jobs for Boeing in the U.S., Boeing India's President Pratyush Kumar said in an interview.

The Chicago-based manufacturer sees no conflict between Trump's "America First" and Modi's "Make in India" calls, Kumar said separately Monday in Bengaluru, adding that the company is looking to sell F/A-18 jets made in the country.

Making fighter jets in India is viable with an order of 100 aircraft, he said. Boeing is looking forward to Indian Navy's interest in buying 57 combat planes that can operate from aircraft carriers, he said.

About a third of the nation's 650 planes are more than 40 years old and set to retire in the next decade. Boeing as well as Sweden's Saab are offering to shift some production to India as they seek to win contracts. Boeing and Lockheed have also been on the receiving end of Trump's criticism in recent times.

"The politics of it looks bad, in terms of the appearance back in the U.S. -- especially when he's talking about an 'America First' campaign," said Anit Mukherjee, a former Indian Army major and an assistant professor at Singapore's S. Rajaratnam School of International Studies. "If companies like Lockheed and Boeing go ahead with the 'Make in India' thing -- which in itself is a big question mark -- then perhaps he might intervene on that."

U.S.-India defense ties have grown in recent years, in part as India's neighbor China has increased its military clout in the region. India has also sought to diversify its sources of arms imports from a Cold War-era reliance on Russian weapons.

Business on 02/14/2017

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