J.A. GREEN & COMPANY, LLC Specialty Metals Compliance: What’s the problem? Jeff Green J.A. Green &...

J.A. GREEN & COMPANY, LLC

Specialty Metals Specialty Metals Compliance:Compliance:

What’s the problem?What’s the problem?

Jeff GreenJeff GreenJ.A. Green & Company, LLCJ.A. Green & Company, LLC

March 2007March 2007


1. Why are specialty metals 1. Why are specialty metals critical?critical?

2. Supply chain management2. Supply chain management

3. Concern with DPAP 3. Concern with DPAP guidance guidance

4. What’s the real problem 4. What’s the real problem here?here?

5. A workable compromise5. A workable compromise

OVERVIEWOVERVIEW

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 & TransportsFighters & Transports

F-18 E/F

C-17 Military Transport

F-15

F-16


TitaniumNickel-based superalloysSteel

Rolls-Royce Jet Engine

M777 Lightweight Howitzer

7,000 lbs. of titanium per gun 1,000 + anticipated production units

High Performance MagnetsHigh Performance Magnets

Aegis Radar - used widely by Army Aegis Radar - used widely by Army and Navy and Navy

Valves in nuclear submarinesValves in nuclear submarines

Hellfire missile guidance systemsHellfire missile guidance systems

Military aircraft, including F-18, F-Military aircraft, including F-18, F-22, F-35 22, F-35

Power klystronsPower klystrons ground-based earth-to-satellite ground-based earth-to-satellite

communications amplifiers and communications amplifiers and troposcatter communication terminalstroposcatter communication terminals

Minuteman IV ICBMMinuteman IV ICBM

High Performance MagnetsHigh Performance Magnets

Consider number of US producers:Consider number of US producers: 3 alnico magnet producers3 alnico magnet producers 1 samarium cobalt magnet 1 samarium cobalt magnet

producerproducer 0 neodymium iron boron magnet 0 neodymium iron boron magnet

producersproducers 2 electrical steel producers (mills)2 electrical steel producers (mills)

If domestic magnet industry If domestic magnet industry disappears, China will become a disappears, China will become a critical US defense supplier.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 A WORKABLE COMPROMISECOMPROMISE

10 U.S.C. 2533a and 2533b10 U.S.C. 2533a and 2533b Separates specialty metals and Separates specialty metals and

textiles textiles

Bitter battle between Bitter battle between House/Senate and House/Senate and Aerospace/Specialty MetalsAerospace/Specialty Metals

Results-Results- 4 year “get-well” period4 year “get-well” period Non-availability waiver for “form”Non-availability waiver for “form” Exemption for “commercially Exemption for “commercially

available electronic components”available electronic components”


1. Why are specialty metals 1. Why are specialty metals critical? critical?

2. Supply chain management2. Supply chain management

3. Concern with DPAP 3. Concern with DPAP guidance guidance

4. What’s the real problem 4. What’s the real problem here?here?

5. A workable compromise5. A workable compromise

SUMMARY


For additional information For additional information contact:contact:

J.A. Green & Company, LLCJ.A. Green & Company, LLCJeff Green – (202) 641-3215Jeff Green – (202) [email protected]@jagreenandco.com

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