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SA Still Waits For A400M Refund Part II  
User currently offlineRevelation From United States of America, joined Feb 2005, 12417 posts, RR: 25
Posted (4 years 1 month 6 days 23 hours ago) and read 6294 times:

Original thread: SA Still Waits For A400M Refund (by Revelation Mar 13 2010 in Military Aviation & Space Flight)

Seems SA is still waiting for thier money back, and EADS has yanked at least one set of work from SA.

Sisulu: We want our money back

Seems EADS is trying to get SA back into the fold via "a cut-throat counter-offer of four planes at a cost lower than the 2005 deal, despite that a four-year delay is likely to push up the price".

Quote:
The new discount offer sets the total price, without the first two years' maintenance costs, at about R4.3bn for the four planes, and states that the deposit already covers two- thirds of the full price.

Airbus military chairman Domingo Urena Raso suggests in the letter that the impact of South Africa's cancellation could be "severe" - including:

# The loss of industrial investment of R990 million.

# Future sales of R4.8bn.

# The loss of 160 direct skilled, and other, jobs.

# The loss to Airbus of R1bn of investments in the SA aerospace industry.

Since the letter, Airbus has cancelled one of the three "work packages" that went to parastatal Denel SAAB Aerostructures ( DSA).

And according to a SA government spokesperson,

Quote:

Asked for comment on the Airbus threat, she stuck to her guns. "The government position is very clear. We have withdrawn. We want our money back. Instead of threatening, they should concentrate on finalising the termination of the contract," her spokesman Ndivhuwo Mabaya said.

Pretty damn ugly, if you ask me...


Inspiration, move me brightly!
28 replies: All unread, showing first 25:
 
User currently onlinewingman From Seychelles, joined May 1999, 2228 posts, RR: 5
Reply 1, posted (4 years 1 month 6 days 19 hours ago) and read 6231 times:

Call a meeting with EADS, lock the doors, and then whip out the Vuvuzelas until they beg for mercy. 90 minutes of that kind of torture and EADS will not only fork over the cash buck they'll even throw in those 4 planes for nothing.

User currently offlinemarsciguy From United States of America, joined Jun 2007, 549 posts, RR: 0
Reply 2, posted (4 years 1 month 4 days 6 hours ago) and read 5979 times:

Quoting wingman (Reply 1):
Call a meeting with EADS, lock the doors, and then whip out the Vuvuzelas until they beg for mercy. 90 minutes of that kind of torture and EADS will not only fork over the cash buck they'll even throw in those 4 planes for nothing.

....if only there were a "like" button!   



"There weren't a ton of gnats there where a ton of gnats and their families as well!"
User currently offlineSeJoWa From United States of America, joined May 2006, 347 posts, RR: 0
Reply 3, posted (4 years 1 month 3 days 10 hours ago) and read 5833 times:

Quoting wingman (Reply 1):
whip out the Vuvuzelas until they beg for mercy


        


User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12134 posts, RR: 51
Reply 4, posted (4 years 4 weeks 1 day ago) and read 5575 times:

I agree with the SA government. What is taking so long to refund the money?

User currently offlineRevelation From United States of America, joined Feb 2005, 12417 posts, RR: 25
Reply 5, posted (4 years 3 weeks 6 days 7 hours ago) and read 5426 times:

EADS is setting a very poor example for future export deals by yanking work away from SA and not refunding their deposits. Who would want to deal with someone with such an abusive track record?


Inspiration, move me brightly!
User currently offlinequeb From Canada, joined May 2010, 663 posts, RR: 3
Reply 6, posted (4 years 3 weeks 6 days 6 hours ago) and read 5409 times:

Before criticizing, do you have read the contract between South Africa and EADS ? There are probably clauses that we don't know. If EADS has not refunded, there is necessarily a reason.

User currently offlineastuteman From United Kingdom, joined Jan 2005, 9997 posts, RR: 96
Reply 7, posted (4 years 3 weeks 6 days 2 hours ago) and read 5369 times:
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Quoting queb (Reply 6):
Before criticizing, do you have read the contract between South Africa and EADS ?

And let facts get in the way of the rhetorhic-fest? Unlikely on here, I'd suggest.

Rgds


User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12134 posts, RR: 51
Reply 8, posted (4 years 3 weeks 5 days 21 hours ago) and read 5273 times:

Quoting queb (Reply 6):
Before criticizing, do you have read the contract between South Africa and EADS ? There are probably clauses that we don't know. If EADS has not refunded, there is necessarily a reason.
Quoting astuteman (Reply 7):
And let facts get in the way of the rhetorhic-fest? Unlikely on here, I'd suggest.

Somehow, I don't think SA, or EADS would have entered into the original contract without a clear cancel clause spelling out what both sides needed to do, including the refund. But it not smart to mess with an entire country, seeing they can bring criminal charges if they needed to for embelezzing the country's money.

Quoting Revelation (Reply 5):
EADS is setting a very poor example for future export deals by yanking work away from SA and not refunding their deposits. Who would want to deal with someone with such an abusive track record?

I am sure this has been noticed by other potential countries for the A-400, C-295, or A-330MRTT.


User currently offlineRevelation From United States of America, joined Feb 2005, 12417 posts, RR: 25
Reply 9, posted (4 years 3 weeks 4 days 22 hours ago) and read 5149 times:

Quoting queb (Reply 6):
Before criticizing, do you have read the contract between South Africa and EADS ?

Feel free to send along a copy.

Till then I go by what I'm reading in the press, which has quotes from the SA Defense Minister.

Quoting queb (Reply 6):
There are probably clauses that we don't know. If EADS has not refunded, there is necessarily a reason.

Well apparently SA thinks there was a Jan deadline and are suing to get their deposit back:

Quote:
Last month, Sisulu acknowledged that Armscor had put Airbus on legal terms because it had still not paid back the R2.9bn deposit, despite a January deadline.

As for why Airbus isn't paying, the article speculates the reason why is that Airbus is trying to get SA back into the fold with a "cutthroat" offer:

Quote:
It also made a cut-throat counter-offer of four planes at a cost lower than the 2005 deal, despite that a four-year delay is likely to push up the price.



Inspiration, move me brightly!
User currently offlinezeke From Hong Kong, joined Dec 2006, 8996 posts, RR: 75
Reply 10, posted (4 years 3 weeks 4 days 8 hours ago) and read 5042 times:

I suspect that the South African Government owes OCCAR more money than the deposits made to EADS. The A400M deal as far as I am aware hinged on South Africa getting large offsets in the form of work packages in order for them to sign up for the A400M. I understand that through the use of these manufacturing offsets, South Africa was able to purchase A400Ms with a lower change over cost than what they could purchase a "basic" C-130J outright.

I would see no reason why EADS would refund a deposit that was incumbent of OCCAR members giving South Africa work packages. OCCAR has held its end of the deal.

You can't eat your cake and have it too.



We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12134 posts, RR: 51
Reply 11, posted (4 years 3 weeks 4 days 4 hours ago) and read 4981 times:

Quoting Revelation (Reply 9):
Well apparently SA thinks there was a Jan deadline and are suing to get their deposit back:

Quote:
Last month, Sisulu acknowledged that Armscor had put Airbus on legal terms because it had still not paid back the R2.9bn deposit, despite a January deadline.

Do we know if the suit was filed in a SA Court, or an EU Court? That could make a difference in forcing EADS to return the refund should SA win their claim.


User currently offlineRevelation From United States of America, joined Feb 2005, 12417 posts, RR: 25
Reply 12, posted (4 years 3 weeks 4 days 3 hours ago) and read 4954 times:

Quoting zeke (Reply 10):
I suspect that the South African Government owes OCCAR more money than the deposits made to EADS. The A400M deal as far as I am aware hinged on South Africa getting large offsets in the form of work packages in order for them to sign up for the A400M. I understand that through the use of these manufacturing offsets, South Africa was able to purchase A400Ms with a lower change over cost than what they could purchase a "basic" C-130J outright.

I would see no reason why EADS would refund a deposit that was incumbent of OCCAR members giving South Africa work packages. OCCAR has held its end of the deal.

Thanks for sharing your suspicions regarding the situation.

I'm wondering why this type of info is not being discussed in the press?

Or if I missed it, I'd appreciate any links you may have to the articles.

Surely this situation is damaging to potential future sales of A400M so it'd be in OCCAR and EADS's best interest to get the word out there formally or informally.



Inspiration, move me brightly!
User currently offlinezeke From Hong Kong, joined Dec 2006, 8996 posts, RR: 75
Reply 13, posted (4 years 3 weeks 4 days 2 hours ago) and read 4934 times:

Quoting Revelation (Reply 12):

I'm wondering why this type of info is not being discussed in the press?

I think it has, however mainly in the South African press, not US, e.g.

"Nevertheless, the work packages mean that South Africa’s cancellation of the A400M is a complex issue. Further, it is now known that the cost increase for the aircraft for this country alleged by the then CEO of South Africa’s defence acquisition, sales and research and development agency Armscor, Sipho Thomo, last October – from R17-billion to R47-billion, or an increase of R30-billion (roughly €2,8-billion) for this country alone – was grossly exaggerated. In addition, the South African Air Force (SAAF) still needs new transport and tanker aircraft (for the available options, see Engineering News May 14, 2010). So the two parties are still talking to each other about the A400M."

http://www.engineeringnews.co.za/art...and-the-a400m-programme-2010-06-15

"Airbus Military, manufacturer of the A400M military transport and tanker aircraft, has told predominantly State-owned South African aerospace company Denel Saab Aerostructures (DSA) that, with immediate effect, it has withdrawn two small A400M work packages from the local company."

http://www.engineeringnews.co.za/art...relocate-work-to-europe-2010-05-03

"There are a number of South African participants in the A400M program, but the 2 biggest are the Denel Saab Aerostructures joint venture, and Aerosud.

DSA is the design authority for 2 of the A400M’s top shells, which sit in front of and behind the center wing box fuselage section, and for the aluminum/composites wing-fuselage fairings. They also contribute the ribs and spars for the tail fin, and center wing box structural components. The firm expected revenue of R 13 billion from its A400M activities over the next 15 years.

Aerosud is mainly responsible for secondary structures like linings for the nose fuselage, cargo hold, and cockpit, as well as the cockpit rigid bulkhead, nose fuselage galleys, and the wing tips which will contain some defensive systems. That workshare has been estimated at about R 1.5 billion."

"“Chapter 4 of South Africa’s Medium Term Budget Statement, released on Tuesday, under the heading “Revised expenditure estimates, 2009/10,” stated “R192-million for Airbus’s (sic) claim against Denel Saab Aerostructures, subject to verification, for DSA’s failure to meet performance targets as part of the 2004 acquisition of eight A400M aircraft”.

“Airbus can confirm that there are definitely no penalties being invoked against DSA, or against Aerosud for that matter,” states European group local spokesperson Linden Birns. “On the contrary, we’ve made more resources available to both companies, to help them meet their performance targets.”... Further, the Department of Public Enterprises (DPE) and DSA have jointly issued a statement affirming that “DSA has met its targets in terms of its contracts” for the A400M.”"

from http://www.defenseindustrydaily.com/...a-to-Cancel-its-A400M-Order-05919/

and an interesting collection of various sources that have contradicted each other in the past in this "fact file" http://www.defenceweb.co.za/index.ph...rt-&catid=79:fact-files&Itemid=159

"Contrary to popular belief, fostered somewhat by government and the SAAF, the A400M was not a replacement for the 47-year-old Lockheed Martin C130BZ Hercules aircraft operated by 28 Squadron. It was meant to replace expensive Ilyushin Il-76 “Candid” charter flights as well as the Boeing 707 airborne refuellers/electronic warfare aircraft, the last of which retired in July 2007."

"There is a school of thought that the South African government was more interested in the advantages associated with being risk-sharing partner in the programme than in the aircraft themselves."

“And finally the economic/industrial cost. Not just that Denel Saab Aerostructures may find itself on the skids and that others might be in trouble or at least have to lay off people,”Heitman insists. “What we have done is demonstrate conclusively that we are not reliable business partners for a complex development. When the going gets tough, the South Africans get going – for the door. That does not bode well for future investment. We could and should have negotiated on the deal, not pulled out.

South Africa may yet find the only replacement for the A400M is the A400M. The cost escalation from €20 billion to €31 billion implies a cost increase of some 50%, with Airbus and its parent EADS to absorb about half. As a rule-of-thumb this would have increased the SA cost 25% from €837 million to some €1.046 billion. In February 2009 that was just over R11 billion, quite lose to the R9.6 billion originally budgeted. As it stands the SAAF now have to soldier on without an aerial refueller and long-range transport while DSA faces a crisis and its staff retrenchment. It is the worst of all worlds. In retrospect Cabinet may well be been as pennywise and pound foolish, substituting sound strategy for fleeting popularity.”



We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12134 posts, RR: 51
Reply 14, posted (4 years 3 weeks 3 days 21 hours ago) and read 4860 times:

How would a new agreement on export sales of the A-400 effect the price? I though EADS and the EU customers were talking about some 150B Euros being loaned.

User currently offlineRevelation From United States of America, joined Feb 2005, 12417 posts, RR: 25
Reply 15, posted (4 years 3 weeks 3 days 20 hours ago) and read 4835 times:

Thanks, Zeke, for the information.

I am trying to learn more about this part:

Quoting zeke (Reply 10):
I suspect that the South African Government owes OCCAR more money than the deposits made to EADS.

The part of your post that most addresses your comment seems to be:

Quoting zeke (Reply 13):
"“Chapter 4 of South Africa’s Medium Term Budget Statement, released on Tuesday, under the heading “Revised expenditure estimates, 2009/10,” stated “R192-million for Airbus’s (sic) claim against Denel Saab Aerostructures, subject to verification, for DSA’s failure to meet performance targets as part of the 2004 acquisition of eight A400M aircraft”.

This potentially seems to be a place where SA could owe OCCAR money, if we presume the SA government and DSA are one and the same, or very strongly linked via the contract with OCCAR.

But shortly thereafter in your informative post we see Airbus is not claming that DSA owes any penalties:

Quoting zeke (Reply 13):
“Airbus can confirm that there are definitely no penalties being invoked against DSA, or against Aerosud for that matter,” states European group local spokesperson Linden Birns. “On the contrary, we’ve made more resources available to both companies, to help them meet their performance targets.”... Further, the Department of Public Enterprises (DPE) and DSA have jointly issued a statement affirming that “DSA has met its targets in terms of its contracts” for the A400M.”"

So I still don't see where SA and/or DSA owe OCCAR more money than OCCAR owes SA.

And I'm still not seeing a clear explanation from OCCAR/EADS as to why they are not paying back the deposits like the SA defense minister is publicly demanding.



Inspiration, move me brightly!
User currently offlinezeke From Hong Kong, joined Dec 2006, 8996 posts, RR: 75
Reply 16, posted (4 years 3 weeks 3 days 16 hours ago) and read 4792 times:

Quoting Revelation (Reply 15):

But shortly thereafter in your informative post we see Airbus is not claming that DSA owes any penalties:

It does not say that, it says they are not invoking the penalties. That would indicate to me that penalties could be owing but they have decided not to make a claim for penalties under the contract.

Quoting Revelation (Reply 15):
So I still don't see where SA and/or DSA owe OCCAR more money than OCCAR owes SA.

The value of the deposit made according to your article in reply 1 is "R2.9 billion", value of the contract they signed for was R17 billion. The work packages according to the articles I linked were worth R13 billion + R1.5 billion. Therefore it would follow that the value of the work packages far exceeds the value of the deposits. The articles also clearly link the work packages with the contract.



We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 17, posted (4 years 3 weeks 3 days 8 hours ago) and read 4742 times:

Seems like other players are circling....

Boeing remains in talks with South Africa on potential C-17 deal

Quote:
Paul Oliver, vice-president, Middle East and Africa, international business development, at Boeing Defense, Space & Security (BDS), said: "We have had discussions, and South Africa is looking at its requirements."

The talks are "very much in the early phase", said Oliver. "We're telling them about the product."

Early stages, but talking nonetheless....

P.S.

Quote:
In addition to a potential deal in South Africa, Boeing has indicated that it is maintaining a dialogue with the UK Ministry of Defence (MoD) with a view to offering additional C-17s should the UK opt to scale back its involvement in the A400M programme.



"When all is said and done, more will be said than done".
User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12134 posts, RR: 51
Reply 18, posted (4 years 3 weeks 3 days 6 hours ago) and read 4715 times:

Quoting Lumberton (Reply 17):
Seems like other players are circling....

In addition to Boeing, LM, and the US Government, I understand EADS is also talking to the SAAF about another order for their aircraft.

But, it would be interesting to see a C-17 with WARPs and additional fuel tanks in the cargo hold.   


User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 19, posted (4 years 3 weeks 3 days 6 hours ago) and read 4708 times:

Quoting KC135TopBoom (Reply 18):
In addition to Boeing, LM, and the US Government, I understand EADS is also talking to the SAAF about another order for their aircraft.

For sure. I posted this because its pretty much standard practice for the contenders to inundate potential buyers with info & sales pitches--especially now given the defense market, with few exceptions, is likely to slow down for years to come. Frankly, I wouldn't read too much into this, any more that I'd start hyperventilating everytime a USAF officer tours an A400 at an airshow, (to "gather information" or "express interest") enroute to the free food and booze at the EADS chalet.  

To me, what is hugely interesting from that article is the sales pitch to the UK for more C-17s.

[Edited 2010-07-28 05:32:37]


"When all is said and done, more will be said than done".
User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12134 posts, RR: 51
Reply 20, posted (4 years 3 weeks 2 days 21 hours ago) and read 4597 times:

Quoting Lumberton (Reply 19):
To me, what is hugely interesting from that article is the sales pitch to the UK for more C-17s.

It would be nice for the RAF to increase their C-17 fleet from 8 (including orders) to 12-15.


User currently offlinekanban From United States of America, joined Jan 2008, 3473 posts, RR: 27
Reply 21, posted (4 years 3 weeks 2 days 20 hours ago) and read 4579 times:
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question on the offsets... was the hardware to be produced only for the SA aircraft or are they supplying hardware for all A400m aircraft... if the latter and here are no other suppliers, what's the beef unless some better or traditional European supplier was excluded and even that is just business.

User currently offlinezeke From Hong Kong, joined Dec 2006, 8996 posts, RR: 75
Reply 22, posted (4 years 3 weeks 2 days 17 hours ago) and read 4545 times:

Quoting kanban (Reply 21):
was the hardware to be produced only for the SA aircraft or are they supplying hardware for all A400m aircraft... if the latter and here are no other suppliers, what's the beef unless some better or traditional European supplier was excluded and even that is just business.

South Africa was not one of the founding members of the A400M, the hardware being manufacturer is being made under subcontract to other vendors. They new clipping to date indicate that they only received that work as an offset to their order.

No order, no offset. South Africa cannot have their cake and eat it, they cannot realistically think they will get R14 billion worth of work on their own merits, Europe invested a lot into South Africa for them to come up to where they are now with composite manufacturing.



We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
User currently offlinekanban From United States of America, joined Jan 2008, 3473 posts, RR: 27
Reply 23, posted (4 years 3 weeks 2 days 16 hours ago) and read 4536 times:
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Quoting zeke (Reply 22):
No order, no offset. South Africa cannot have their cake and eat it, they cannot realistically think they will get R14 billion worth of work on their own merits, Europe invested a lot into South Africa for them to come up to where they are now with composite manufacturing.

while I understand the sentiment, if the SA work is sole source even as a subcontractor, EADS is getting value for their investment and could continue to get value. the companies involved could start making parts for EADS commercial models as well.... maybe not R14 million but value.. so there could be some trade offs and then those contracts cease to be offsets

I believe Boeing has set up offsets that later became stand alone sub contractors. However in SA's case they are a pea under EADS's mattress and national pride won't let the settle easily


User currently offlinezeke From Hong Kong, joined Dec 2006, 8996 posts, RR: 75
Reply 24, posted (4 years 3 weeks 2 days 12 hours ago) and read 4509 times:

Quoting kanban (Reply 23):
if the SA work is sole source even as a subcontractor, EADS is getting value for their investment and could continue to get value

I do not agree, South Africa performs no work directly for EADS (all via OCCAM members), they add no value directly, only by way of sales dd EADS gain value.



We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
25 Revelation : Note the article in the thread starter is from the SA press, not the US. Ok, SA has said it wants its R2.9B deposit back on its order of R17B. The de
26 KC135TopBoom : Is it possible that EADS is refusing to refund the SA deposit of R2.9B in hopes of preventing that money from being used for a deposit on C-17s or C-1
27 XT6Wagon : No, They are refusing to refund it as they are tight on resources and keeping the required minimum for cash on hand is critical. With credit tight, a
28 Post contains links lUMBERTON : News report stating that SA is "close" to getting some money back from EADS. They still might buy the aircraft "at a later date". http://www.sabcnews.
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