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F-16 in flight
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"I was looking at my passport the other day, and I believe I've made 30 trips to Poland," says Mac Stevenson, Vice President for Business Development at Lockheed-Martin. An impressive feat, but all the more amazing when you learn that those 30 trips have all been in the last six years. And those trips have all been a crucial part of the campaign to sell the Polish government F-16 fighter aircraft for its military.
"The airplane that the Polish government is going to receive is the finest F-16 that's flying. They're getting the latest in modern electronic warfare, the latest in weapons. The performance of the airplane is not exceeded anywhere. This airplane has capabilities in it that actually exceed the capabilities of the United States Air Force's F-16s," says Stevenson.
On December 27, 2002, the Polish government made what the media called the "deal of the century" when it announced it would buy 48 F-16 aircraft from Lockheed for $3.5 billion, rejecting offers from two other competing companies. The decision was an impressive victory for Lockheed, the U.S. government, and for Poland, which will now be able to participate as a strong and equal partner in NATO. "It's a matter of national security. The Polish people should feel a sense of pride at what they're going to be able to accomplish with this plane," Stevenson notes.
But the deal includes much more than the plane. Folded into the package are $6 billion in so-called offset credits, investments that Lockheed and its contractors will make in the Polish economy to offset the cost of the aircraft purchase. The goal is to develop capabilities and technology in Poland that might otherwise be difficult to obtain, thereby boosting the economy. And at a value of $6 billion, the offsets are a return of almost twice the purchase price for the aircraft.
Offsets aren't cash to be spent on just anything, but they are promises that Lockheed negotiates with Poland to provide services, skills and technology transfer through projects that will be completed within ten years. Lockheed has offered the government a banquet of more than 100 proposals from which the Polish government may choose, based on the country's priorities. The offset negotiations are expected to conclude at the end of February with a select list of projects. Lockheed says it will be ready to implement the projects immediately upon conclusion of an agreement.
One example of such a project is a plant in Rzeszów where Pratt & Whitney will produce engine parts for the F-16 and other aircraft. Similarly, a plant in Krosno manufactures landing gear for every F-16 made. These factories provide jobs to the local population, generate taxes for the government, and offer an immediate, in-country supply of parts for Poland's new fleet of F-16s.
"The Polish people can have confidence that we, together with the Polish government, are going to construct an offset program that is going to accomplish a great deal for Poland," according to Stevenson. "We have offered more percentage-of-offset to Poland than we've ever offered anywhere else in the world. There will be good business for Poland and good business for the F-16 program."
Business, like government, is in fact another big winner in the deal. The offset program will cultivate economic ties between Polish and American companies. On a corporate level, Poland will be able to tap into markets it might not otherwise have access to. All of this enriches the worth of Polish corporations in the marketplace.
What makes the F-16 purchase a wise deal for Poland is also what makes it special. To help pay for the aircraft, the U.S. Congress passed a virtually unprecedented financial package -- a $3.8 billion loan to Poland which can be paid back over 15 years. And since it carries an interest rate comparable to commercial loans, American taxpayers won't foot any of the bill.
In fact, says Stevenson, "This is a way for the American public to have their economy continue to grow. Plus, the relationships built through this deal will bring in jobs." Right off the bat, the agreement will save 500 jobs that might otherwise have been lost at Lockheed's Texas headquarters.
But Stevenson doesn't discount one particular benefit of the deal that's sometimes overlooked: the personal relationships that are established between Poles and Americans in business, government and the military. He notes, for example, how pilots who train together establish relationships, get to know each other. Often, chiefs of staff from the air force of one country become personal friends of the U.S. Air Force Chief of Staff. And it's much the same situation for counterparts throughout the chain of command. "I'll tell you, that makes a difference when you are having to consider fighting together. Knowing each other and having relationships -- personal relationships -- is really an enhancement to cooperation on a grand scale."
That cooperation will kick into high gear in 2006. That's when Lockheed will deliver the first of the 48 F-16s. By that time, the offset projects will be well underway and business links, well established. Poland will be flying high with NATO forces, showing the world that -- with a good product, strong teamwork and a solid vision -- the sky's the limit.
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