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KEY POLICY ISSUES 149 Conversely, of course, advances in military technology have often found use in civil aircraft. For many years the interests of military and civil procurement tended to move in parallel, and little thought or effort was required to insure continued synergy. The situation is changing. DOD is sponsoring the launching of fewer new aircraft, and its interests in pushing the state of technology have focused on high-speed combat aircraft. For its needs in support aircraft, it is continuing its practice of buying off-the-shelf technology. Reinstituting careful consideration of dual-use requirements between military and civil applications, especially in support aircraft, could have helpful leverage for all classes of aircraft included in this study. Timing the procurement of military aircraft so as not to exacerbate the large swings in production that characterize the industry could also be helpful, but the panel recognizes the practical barriers to this goal. MANAGING IN THE NEW ENVIRONMENT The changes occurring in both the domestic and international environments pose some severe challenges for the management of civil aircraft development and manufacturing. As noted, historically the large air transport manufacturers have excelled at producing technically proficient aircraft that were well matched to market needs. Although it sold and serviced airplanes worldwide, the industry operated from an exceedingly powerful domestic base and faced little foreign competition in any markets. It dealt with a short list of customers whose characteristics were well known and who handled the financing of their own purchases. In the environment that is emerging, the domestic manufacturers face potentially powerful competition, increasingly important international markets, and both domestic and foreign customers with uncertain futures and shaky financial resources. As this study has indicated, additional technical opportunities are still present for important advances in technology. These technical advances will provide significant improvements in the economic performance of air transports. They will, however, require very large investments to bring the technology to the state of readiness necessary for incorporating it into new products. The major consequences of these emerging trends are that the manufacturers are having to move from a position of strongly autonomous operation to one of complex interdependence. The panel perceives four important challenges for management:
KEY POLICY ISSUES 150 1. Developing an approach to managing the introduction of new technology that will spread the high cost and risk among partners to an extent that goes beyond the traditional contractor-subcontractor relationship. 2. Becoming participants in complex arrangements with customers, banks, other financial institutions, and insurers to develop new financial instruments and arrangements that will spread risk adequately to permit purchase of needed new aircraft. 3. Moving from a position of global preeminence to one of senior partnership with international partnersâa change that will require sensitivity to new cultural and national nuances. 4. Achieving the necessary selectivity to maintain dominance in strategic technologies in a world where total dominance across the board is no longer possibleâor even desirable, i.e., retaining the overall U.S. lead in a situation of complex partnership with foreign firms. In all of these areas, U.S. manufacturers are demonstrating impressive flexibility and drive, but the necessary responses have just begun. Furthermore, the needed changes will be controversial because they will raise questions in the eyes of the public regarding loss of technology and displacement of American workers that cannot be answered definitively in advance. The challenge for the manufacturers of the other classes of aircraft is more direct. They face the more immediate threat of international competition in both domestic and international markets, and they do not occupy the position of global dominance enjoyed by manufacturers of large transports. Furthermore, until recently they faced little in the way of competition. Consequently, they have had little exposure to the exigencies created by facing new, well-designed products in their markets. The managements of these companies seem destined to feel severe pressure for many years. They have the advantage and challenge of retaining a domestic market that will continue to dominate in scale the world's markets. Historically, the relationship between these companies and the government has been remote âthe companies saw little need to seek government help and the government was not set up to serve them anyway. That situation is changing. The government is now positioned to provide assistance on tradeâon terms of sale of exports, restraints on imports by other countries, or unfair trade practices by international competitors. Less positive are the unintended or underweighted effects of government policies that tend to inhibit exports. It is important for both industry and government to develop even closer and more effective interactions on these problems.
