On Thursday, February 2, 2006, Northrop Grumman Chairman, CEO and President Ronald D. Sugar addressed the Royal United Services Institute (RUSI) in London. Below are his delivered remarks.

Trends and Opportunities: U.S./U.K. Defense Cooperation in a New Environment

Thank you Sir Paul (Lever, chairman of RUSI). I am very pleased to be here at the Institute.

I marvel to think of all the speakers who have addressed RUSI audiences over the decades. Many of them no doubt drew parallels between the importance of their topic and the gravity of their times. I believe these, too, are important times, and that the importance of defense cooperation between the United States and the United Kingdom is of a comparable scale. The geopolitics is a topic best left to the leadership of your nation and mine. But I can discuss the industrial defense cooperation that those geopolitical realities compel.

I am quite optimistic about our future together. This is not empty sentiment. One reason I am here in London is to cut the ribbon on a new office that my company — Northrop Grumman — is opening here. We are already very active in the UK, but this new office will help us pursue even more cooperative opportunities. So, when I say that we foresee better cooperation between the U.S. and the U.K., I mean it.

Yes, our nations disagree on some questions like export controls and market access, and I will discuss those in a moment. But, all in all, I believe that we agree far more often than not. I also believe that the current course of history will only confirm those areas of agreement and eventually deflate many areas of contention. The past five years offer a case in point.

For over a decade before the attacks of September 11th, serious thinkers about military affairs pondered what they foresaw as a coming transformation of warfare. The one thing they all seemed to agree on was the growing importance of advanced technologies to deal with a more diffuse list of threats. This has largely come to pass.

The Cold War military priorities of massed armored formations and maneuver have been displaced by new priorities: Precision targeting, information, training, networks, space systems, special operations, agility, versatility, and imagination. In short, the national security of your nation and mine now balances on the fulcrum of intellectual capital.

As the world’s two foremost defense innovators, these trends play to our natural strengths. And these strengths are best maximized through collaboration and cooperation. The relationship between the United Kingdom and the United States has never been more relevant.

The question now becomes, how does defense cooperation between the U.S. and the U.K. translate from imperative to reality? Clues to that answer can be found in several policy documents. One is the Quadrennial Defense Review (QDR) from the Department of Defense, and another is the Defense Industrial Strategy (DIS) from the Ministry of Defense.

The Pentagon will deliver the QDR to Congress on Monday. The Congress mandates that our nation’s defenses be reviewed every four years with particular emphasis on Force Planning and modernization. Though not yet released to the public, we may predict several things about it. First of all, we are confident it will renew the momentum of defense transformation even in the midst of an on-going war. This will continue to be a challenging task. President Bush has described the objective of transformation as nothing less than the redefinition of war on our terms. He has also said that doing so under our current circumstances is like overhauling an engine while going at 80 miles an hour.

If past is precedent, I believe it is safe to predict that the QDR will continue to stress agility and situational awareness. It will also stress integration and jointness among the U.S. military services, connectivity across our federal, state and local agencies, and interoperability with our friends and allies. As to this last point, it is worth noting that one of the key drafters of our QDR is in fact an official from your Ministry of Defense.

The QDR will look at four core problems: First, the defeat of extremism; Second, the in-depth defense of the homeland; Third, shaping the choices of rogue states or countries at a strategic crossroads; and fourth, restricting the proliferation of weapons of mass destruction. Some of the capabilities necessary to address those core problems will include intelligence, surveillance, and reconnaissance technologies such as unmanned vehicles, sensors, and space-based intelligence assets. Our ground forces will need enhanced force protection, improved battle command and control, and precision joint fires. The QDR will spur us to think about how to integrate strategic offensive capabilities with layered missile defenses. It will also imply a need for advanced and integrated maritime systems to multiply the capabilities of the Navy, the Coast Guard, and the naval forces of friends and allies.

Though not analogous to the QDR, your nation’s recently released Defense Industrial Strategy also provides some clues to the future of US/UK defense cooperation. It is candid and comprehensive and its starting point is quite logical — to create long-term value for money spent, while supplying Britain’s military with the tools it needs to defend the Kingdom.

Of note are its calls for industry that is rationalized, leaner, more efficient and productive. For its part, Her Majesty’s Government recognizes a need to partner more closely with industry, and support its reshaping to emphasize platform based acquisition to through-life support of systems. This last point simply recognizes the reality that, in most cases, the physical platform is no longer as important as the intelligent systems placed on it or in it. For example our youngest B-52 bomber aircraft is older than the pilots who fly it, but it is still a relevant aircraft because of the electronic systems upgrades it regularly receives. In like fashion, Northrop Grumman has been given the job of keeping your Airborne Warning and Control Systems — or AWACS — up to date at RAF Waddington. I just visited Waddington Tuesdays and was impressed with what I saw.

A reading of the DIS makes clear your governments desire to attract outside investment in its defense industry, and to develop symbiotic relationships therein. Clearly, your government is looking not just to modernize but — to coin a term — to futurize. You have looked down the road a long way and made a shrewd assessment of where defense transformation is headed.

Clearly your government intends to capitalize on these trends to the benefit of your nation’s autonomy and freedom of action. One can also infer your government’s desire for the valuable, high-quality jobs that characterize intellectual capital and cutting-edge technology. For example, the document emphasizes systems engineering, open architectures, and the accumulation and retention of scientific and engineering talent. I see wisdom here. How many times have we underestimated the magnitude of tomorrow’s technology? Let me read you a brief quote from the March, 1949 edition of Popular Mechanics magazine. It concerns the ENIAC computer, the world’s first electronic digital computer, built just a few years before.

"Where a calculator on the ENIAC is equipped with 19,000 vacuum tubes and weighs thirty tons, computers in the future may need to have only 1,000 vacuum tubes and perhaps only weigh one and a half tons." That was a visionary statement.

Now, let’s fast-forward to that future the writer was talking about. In 1968 an engineer at the Advanced Computing Systems Division of IBM was pondering the new microchip. He was heard to say, “But what is it good for?” That wasn't such a visionary statement.

Now, let’s go a few more years into the future, just to make the point. 1977. The President of Digital Equipment Corporation said, “There is no need for any individual to have a computer in their home.”

It is not possible to overstate the national security importance and economic potential of high tech intellectual capital. The future of information systems, software engineering, systems engineering, and electronic engineering is virtually without bounds for as far as the eye can see. Just compare that future to the current outlook of one of America’s flagship heavy industries, auto manufacturing.

Northrop Grumman started out as an aircraft builder. We designed the F-14 Tomcat, the B2 stealth bomber and the F/A-18 Hornet to name three. But it would have been industrial suicide to sit on those laurels, impressive though we think they are. So several years ago we embarked on a transformation — a series of acquisitions that made us major players in IT, integration, systems engineering, and other related technologies. As one-time builders of just manned combat aircraft, we felt we had no choice.

Perhaps you have heard the description of the cockpit crew of the future. It conveys the nature of the changes now taking place in many areas of defense technology. Future cockpit crews, it is said, will consist of a human pilot and a dog. The pilot’s job will be to feed the dog. And the dog’s job will be to bite the pilot if he tries to touch anything. Actually, now with unmanned air vehicles like Northrop Grumman’s Global Hawk, which operates autonomously for 35 hours at a time, we need neither the man nor the dog.

Facing the challenge of declining demand for manned aircraft, we decided to rebuild our company from the ground up. The DIS seems to convey similar vision. For example, it implies that the United Kingdom does not care who builds your navy’s hulls. It is the systems, software, and electronics that go into them that your government wants to design, build, and control. I can understand why.

Taken together, what do these two documents — the QDR and the DIS — indicate for the future of U.S./U.K. defense cooperation? I think we can safely conclude a few things. First, the “brain over brawn” trend in defense will continue for both the U.S. and the U.K. This is one of the trends that has allowed British defense — combat forces — to punch above their weight for so long. Technology, innovation, imagination and agility will continue to be the watchwords.

Second, your government is warmer than ever to the notion of industrial partnering under the right circumstances. Last year Northrop Grumman and the wireless division of British Telecom completed such a partnership by deploying, and making operational, the Public Safety Radio Program here in the UK. This was an enormous undertaking that included cell towers, hand-held units and other infrastructure. It amounted to the establishment of a nation-wide private and secure cellular system for your first responders — police, fire brigades, and the like. This program went without a hitch and speaks loudly in favor of other such partnerships in the future.

From that example — and from the DIS — we can also conclude that as the line continues to blur between defense and domestic security, traditional defense companies must be versatile, offering systems and capabilities that have applications in domestic security and even general “non-security” markets. If this trend continues it could eventually obviate some export control disputes, while increasing other concerns such as third party indemnification.

The threshold for foreign companies to play in the UK marketplace is not impossibly high. Let me offer you a case study in how to satisfy the interests of all parties. Your government has a need for a biometric IT system that can cross-check identities against a database. Such a system will allow the Home Office to mitigate the security risks inherent in the one hundred million people who visit your shores each year. The company I lead aspires to be prime contractor.

The potential of such a product explains why. Once in place here, the requirement is for it to integrate with other EU nations, and even some nations outside the EU. Because the UK will retain the engineers and software designers, the product remains based here — with all the economic and security advantages that implies. The UK could then eventually migrate it to other friendly countries world-wide. Your government does not care which nations own the parent companies as long as the intellectual capital stays and grows here at home. The UK’s rule book is not that hard to adhere to.

Experience, like knowledge, is its own reward. Our understanding of that rule book comes from past partnerships with your government. Northrop Grumman was the prime contractor for the Home Office’s keystone project known as IDENT-ONE. This is a centralized database of six million sets of fingerprints, and will provide the foundation of the National ID program if Parliament passes that legislation.

What a wonderful industrial relationship we have.

Well, almost.

An old pilot’s axiom says that you know your landing gear is up and locked if it takes full power to taxi to the terminal.

Your nation and mine have all the makings for superb collaborative opportunities. We have the special relationship; a common language; similar values, economic and strategic interests; and a history of industrial partnerships and partnerships in wars cold and hot. But we can apply all the jet engine power we have and we still won’t get to the terminal until we figure out how to fix the wheels.

There may be many of you who cannot understand why the U.S. — your closest ally — will not grant you the same export and market access freedoms as the United States grants to Canada. I count myself among you.

Certainly there are issues that must be negotiated by governments — the commercial aircraft subsidy issue and the F-35 question are two such examples. It is also true that the International Traffic in Arms Regulations — or ITAR — discourages foreign cooperation. But it is the law of my land and all of us in American industry must play the cards our government deals to us. There is no doubt that some export control laws and regulations currently in force on my side of the Atlantic were established during the Cold War for reasons that no longer apply. That should be addressed.

I was recently elected Chairman of our American Aerospace Industries Association — a trade group that advocates on behalf of our aerospace industry. That organization counts several important British companies as members, including Rolls Royce, BAE, Smiths Aerospace, and GKN. It is my intention to make export control reform a major objective of my Chairmanship and we will soon formulate an agenda to do so.

In the meantime, there are things other nations can do to further their chances of playing in the American defense market. Foremost among them is the adoption of foreign counterparts to America’s Defense Industry Initiative on Business Ethics and Conduct — the so-called DII standard. Doing so would go a long way toward cultivating those in Congress who would otherwise not be supportive of reform.

The international adoption of this standard underpins our ability to improve our cooperation with other nations. The Aerospace Industries Association is now formulating an international version of the DII initiative. This, too, will be high on my agenda as Chairman.

The endurance of the special relationship between our countries has been remarkable. And the strategic and geopolitical fruits it has borne have been reproduced nowhere else in the world. Those fruits have included advances in radar, jet engines, submarines, space, nuclear, communications, optics, sensors, and aircraft carrier design.

During the Cold War the UK’s nuclear deterrent was critical. During the Falklands war, America shared satellite and communications intelligence with the UK, and helped your nation defeat Argentinean air defense radars and tracking systems. And of course, in Iraq and Afghanistan, the UK’s coalition presence has been magnificent — its contributions monumental.

Yes, we have our disagreements — market access among them. But as American Ambassador Mitchell Reiss once said, “It is our ability to disagree — to argue passionately, candidly, and forcefully with each other — and then to pick up the pieces, place our anger behind us and go forward together, that makes the relationship special and explains why it has thrived.”

I see great collaborative opportunities on the horizon for our two nations — opportunities that will benefit our economies, our mutual national interests, and the ideals and principles common to all free nations.