Transcript 7PC3_Green

Specialty Metals Compliance:
What’s the problem?
Jeff Green
J.A. Green & Company, LLC
March 2007
J.A. GREEN & COMPANY, LLC
OVERVIEW
1. Why are specialty metals critical?
2. Supply chain management
3. Concern with DPAP guidance
4. What’s the real problem here?
5. A workable compromise
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Why Are Specialty Metals Critical?
 Titanium
 9th most abundant element in earth’s crust
 High performance specialty metal
 Superior physical properties
 Rare Earth Magnets
 Four primary types used by DOD
 Magnequench sold to Chinese in 2000
 Many don’t even know they’re covered
Fighters & Transports
C-17 Military Transport
F-18 E/F
F-16
F-15
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Rolls-Royce Jet Engine
Titanium
Nickel-based superalloys
Steel
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M777 Lightweight Howitzer
7,000 lbs. of titanium per gun
1,000 + anticipated production units
High Performance Magnets

Aegis Radar - used widely by Army and Navy
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Valves in nuclear submarines

Hellfire missile guidance systems
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Military aircraft, including F-18, F-22, F-35
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Power klystrons
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ground-based earth-to-satellite communications
amplifiers and troposcatter communication
terminals
Minuteman IV ICBM
High Performance Magnets
Consider number of US producers:
 3 alnico magnet producers
 1 samarium cobalt magnet producer
 0 neodymium iron boron magnet
producers
 2 electrical steel producers (mills)
If domestic magnet industry disappears,
China will become a critical US defense
supplier.
Supply Chain Management
 Basic manufacturing ensures components
are accountable
 Quality assurance
 Accounting – how do you pay?
 Auditing = accountability
 Customer specifications – production changes
 Accountability
 Defense contractors are sophisticated
 This is law
Concerns With DPAP Guidance
 Dec. 6th guidance
 Applies to all tiers of primes and subs
 Lacks transparent waiver process
 Adds arbitrary “third-tier” exemption
 Jan. 17th guidance
 Expands definition of “required form”
 Adds consideration of “end item” price
 Joint Aeronautical Logistics Commanders
 Corporate-level multi-service waivers
What’s The Real Problem?
 Compliance with the specialty metals
provision has a cost
 But isn’t this passed-through?
 Leveraging DOD volume against the
commercial production line
 Outsourcing our strategic materials to the
lowest bidder
A WORKABLE
COMPROMISE
10 U.S.C. 2533a and 2533b
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Separates specialty metals and textiles
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Bitter battle between House/Senate and
Aerospace/Specialty Metals
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Results
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4 year “get-well” period
Non-availability waiver for “form”
Exemption for “commercially available
electronic components”
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SUMMARY
1. Why are specialty metals critical?
2. Supply chain management
3. Concern with DPAP guidance
4. What’s the real problem here?
5. A workable compromise
J.A. GREEN & COMPANY, LLC
QUESTIONS?
For additional information contact:
J.A. Green & Company, LLC
Jeff Green – (202) 641-3215
[email protected]
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