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Larry Trowel General Manager, Government Business Practices & Processes GE

Common Ground: The New Specialty Metals Rules and How Government and Industry Can Work Together. Larry Trowel General Manager, Government Business Practices & Processes GE July 26, 2007 9:30 a.m. – 10:30 a.m. “Defense” Industry has Multiple Business Models. Defense-focused Facilities

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Larry Trowel General Manager, Government Business Practices & Processes GE

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  1. Common Ground: The New Specialty Metals Rules and How Government and Industry Can Work Together Larry TrowelGeneral Manager, Government Business Practices & ProcessesGE July 26, 2007 9:30 a.m. – 10:30 a.m.

  2. “Defense” Industry has Multiple Business Models • Defense-focused Facilities • Build-to-DOD-order; supply chain responds to DOD orders with serial processes • No need to segregate materials • Integrated Commercial-Military Facilities • Build-to-DOD-order with common components and integrated production lines • Segregated materials impractical • Commercial Facilities • “Off-the-shelf” products and components; global supply chain driven by forecast, not individual orders • No opportunity to segregate Business Model Drives Impact of Restrictions

  3. Integrated Production - Example Final Part - Number CF34 Comm’l Application Final Part - Number TF34 Military Application Jet Engine Airfoils CF34 Comm’l Application COMMON PART NUMBER Titanium Bar Stock Common Airfoil Forging Final Part Number Common Inventory TF34 Military Application COMMON DESIGN – DIFFERENT PART NUMBER Titanium Bar Stock Common Airfoil Forging In-process Differentiation of Part Numbers (usually minor differences) Efficient Production Drives Common Processes

  4. Commercial Off-the-Shelf Item - Example CF6 Engine Commercial Applications Boeing 747-300, -400, -400ER 767-200, -300, -400 MD–11 Airbus A300–600 A310–200, -300 A330-200, -300 Engines in Commercial Operations = 6641+Commercial Operators = 249 US Military Applications VC-25 (Air Force One) E-4 KC-10 Air Borne Laser C-5M (re-engining in process) Engines in Military Operations = 225 Spare Parts Commercial Operators Consume 99% of Spare Parts DOD procures its spares directly from commercial warehouse in same manner as other commercial customers Commercial Market Drives Production, Support – DOD Benefits

  5. Commercial Conundrum – Specialty Metals • End items and components forecasted and manufactured for commercial market • DOD participates, but does not drive • Materials typically procured well in advance of customer orders • Little opportunity to impact basic materials • Segregation in production impractical, costly, disruptive • Requires “job order” processes • Commercial products focus on material properties, not country of origin • Some exceptions for special applications • Unreasonable choices . . . • Compliance across all products – commercial and DOD? • Segregate DOD materials, production, inventory? • Do not sell to DOD or its suppliers?

  6. Summary • OSD, DCMA, Contractors working well together to make current policy work • Statutory and policy flexibility are warranted… specialty metal industry is healthy now and in foreseeable future • Policy flexibility especially important where DOD relies on commercial market place

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