US defence firms closing down offices in India?

The global economic slowdown and convoluted acquisition processes of Indian Armed Forces has compelled the US defence giants in India to either pack up their offices or cut down manpower drastically.

The six Lockheed Marting C-130Js purchased from the US through FMS route

As procurement programmes of the Indian forces are becoming a game of ‘snake and ladder’ where tender cancellation and retendering has happened quite often, the US firms are relying more on the Foreign Military Sales (FMS) or government-to-government sales route. Facing economic slowdown back home these firms have been advised to pack up from India or at least cut down expenditure. Among the defence giants likely to cut down their staff in the country significantly include Northrop Grumman, Lockheed Martin and Boeing.

“The US aerospace firms were relying heavily on the MMRCA (medium multi-role combat aircraft) deal. But the high sales pitch fell flat as the IAF chose the French fighter jet. Thereafter the deals bagged by the US firms have not been through competitive bidding but through government-to-government sales,” sources in the market said.

The big ticket deals signed with the US through the FMS route have been eight P-8I maritime surveillance and anti-submarine warfare aircraft from Boeing valuing $ 2.1 billion. India is also buying 10 C-17 heavy-lifters from Boeing for $4.1 billion. The six C-130 J special operations aircraft valuing $ 1.2 billion have already arrived in the country and order for six more is in the offing. India is also planning to place an order for M777 ultra light howitzers for $ 700 million to augment its firepower in the mountainous terrain. In total Indo-US defence trade has been worth $ 10 billion and in 2011 only India has purchased military equipments worth more than $ 4.5 billion.

Though no company is openly accepting the cut down, sources confirm that starting with Northrop Grumman they have decided to cut down as fast as possible. Northrop Grumman had opened office in India in 2007. Lockheed Martin and Boeing are also focusing on deals through FMS route.

“In India the competitive tendering is still in formulative stage where the process takes years at length. So the efforts are more. However, we have realized that India will come to the US for weapons and platform it desires and FMS route is giving more dividends and saving time for both sides,” added company sources requesting anonymity.

Boeing's AH-64 Apache helicopter is frontrunner in the 22 attack helicopters tender of the IAF

Cutting down spending on maintaining big offices in India, the US along with many European defence firms have shifted focus to the Middle-East and the South American country. The BAe Systems is also expected to cut down their staff and in six months might go back as there is nothing significant happening for them in India, unless Eurofighter makes a re-entry in the “Mother of all Deals” – $ 20 billion order for 126 fighter jets.

“The Middle-East region is perpetually volatile and there have been sustained demands from these countries. Also South American countries have also shown interest in the US military hardware – making them desired market for us,” added the sources.