Skip to comments.Boeing Signs $1B Outsourcing Agreement With India
Posted on 12/22/2007 10:48:10 PM PST by nwrep
New York, NY (AHN) - The Boeing Company announced on Thursday that it has signed a $1 billion agreement with Hindustan Aeronautics Limited (HAL) of India as a part of manufacturing outsourcing contract.
According to the 10-year pact, HAL will manufacture sub-systems of Boeing's fighter planes including F-18 Super Hornets and Apache Helicopters.
Initially, Boeing will invest around $20 million annually to increase its manufacturing unit size and complexity along with business opportunities in the sub-continent.
The Memorandum of Understanding (MOU) was signed between Jim Albaugh, President of Boeing Integrated Defense System and Chairman Ashok K Baweja, the Indian defense Public Sector Undertaking of HAL.
The Chicago-based Boeing said in a statement on Thursday that it will provide Bangalore-based HAL with its technology to develop manufacturing processes for the production of the sub-systems or hardware for Boeing.
"The agreement represents an important step in our efforts to build solid long-term partnerships in India to make Boeing products more globally competitive, while allowing HAL to grow and expand its potential market around the world," Jim Albaugh said in a statement.
HAL has 18 production units and nine research and design centers in India with 32,000 staff members.
The slow suicide continues
Just for scale:
Boeing, Air India Celebrate Order Agreement for 68 Jets; Largest Commercial Airplane Order in India’s Civil Aviation History (Jan. 11, 2006)
The order, placed with Boeing in December 2005, is valued at more than $11 billion at list prices and deliveries are scheduled to begin in November 2006.
So would you prefer Airbus to outsource to India and later sell Airbusses to airlines in India?
I don't have my ping list available. So I can't send out a ping.
Yes, it does...and it will continue until Americans realize that they can't expect to be paid way far above global market wages.
There's no reason Boeing should have to try to sell products that are far more expensive than competitors' just because Indians are willing to get educated and work for less than spoiled Americans. All that adamantly staying onshore does is put US companies out of business when they can't compete with those who do go to the best value in labor.
This is the second part of the anti-immigration fight...recognition that Americans will have to boost their productivity, creativity, efficiency, etc., or reduce wages to compete with countries that have lower wage expectations and other considerations (taxes, etc.)
Businesses have forgotten Bohpal. India does not have the same kind of value system we have in the U.S.
Union Carbide is still being sued by victims due to the laxity of one of its Indian workers, who left a valve open at its chemical plant in that city. The accident occurred in 1984. Americans are seen as having deep pockets. How foolish, to move business there.
Yeah, it will be great when you and your kids and grandkids are working for 33 cents an hour. Won’t that be wonderful?
Care to substantiate the claim that somebody left a valve opened???It’s commonly known that Union Carbide’s plant in India was based on a design which was considered obsolete & unsafe in the US.
Right! Let's keep those damn Indians locked into poverty and unrest. How dare we create more consumers around the world with demand for our goods and services!
When manufacturing moved the US from other nations, that was OK. Now that the shoe is on the other foot.....WAAAAGH!
This comment is obscene and disgusting. I understand that people try to put their own nation first. Most of us do. Nevertheless the absence of security arrangements in the Bophal Union Carbide installation was simply criminal. The managers of Union Carbide accepted the possibility that thousands of people die just to save a few fu*king dollars. I do not know what happened to them, but if a Indian manager would have done the same in the US you guys simply would have executed him. Therefore it is fair that Union Carbide is paying for the damage it left behind. If you are thinking that a Indian life is less worth than a life in the US you are wrong.
“... if a Indian manager would have done the same in the US you guys simply would have executed him.”
Since you are not a citizen of the USA, it appears that your view of the USA is colored by Hollywood. That is a serious mistake. If you were a citizen, you would know that exoneration, prison term, or execution would depend on what part of the USA he was in when the event occurred. If the Indian manager was in California or New Jersey, he would have been granted citizenship and a million dollar reward for working under hazardous conditions (the valve was obviously faulty). In the mid-west, prison time for stupidity.
However, in the South, you would probably be right. But it would take 12 years to get it done.
I worked for a company that "went Indian". True, they work for less. We did a productivity study, and found out that 1 American engineer produced the work of 20 of our Indian staff, but since the Indians were paid 1/20 of the American worker, it was a wash. But factoring in the re-work the Americans had to do for the shoddy Indian work, we found it was cheaper to have "spoiled Americans" doing the work. Unfortunately, our new Indian VP saw it otherwise.
Monday, December 10, 2007 at 0000 hrs
NEW YORK:: Betting big on the India advantage, IBM, one of the worlds biggest information technology (IT) companies, eyes India as its hub for global delivery, providing research software, besides contributing significantly to the companys revenue. Talking about its road map for 2010, IBM vice- president (financial management) Jesse Green said, We think of India as a support to IBM. The country will be a hub of global delivery which will help us improve margin components and growth initiatives.
The IT giant, which is already working with local telecom major Bharti Enterprises and has entered into pacts with some other Indian corporates, expects its revenue from the country to touch the $1 billion-mark by the end of the year. We expect our revenues to reach $1 billion by the end of this calendar year, up from $700 million in 2006, driven by strong factors. In the first three quarters of the current financial year, our revenue has grown by over 39 per cent, Green said. The recent deals with some of Indias big corporates are likely to contribute a good chunk to IBMs revenues. Besides Bharti Enterprises, the IT behemoth has also entered into agreements with BSNL and Idea. Other big names to have inked pacts with IBM include realty major DLF, Central Board of Direct Taxes, Delhi International Airport, Financial Information Network and Operations and Apollo.
The $1 billion would include revenues from services and solutions provided by IBM to local clients and other global corporates operating in India, along with total revenues of IBM Daksh its business process outsourcing unit. Green said factors such as competitive offerings, effective sales force, strong brand name, and technology base along with the ability to offer hardware and software combination would contribute to the expected figure.
Last year the companys India revenue grew by 37 per cent against the same in 2005, while the compound annual growth rate from 2002 to 2006 is over 49 per cent. The company experienced broad-base growth during 2002-2006 in telecom, financial services and small and medium businesses, growing at 58 per cent, 34 per cent and 35 per cent respectively, Green said.
IBM brings worlds fastest chip to India
BANGALORE: IBM has launched the worlds fastest computer processor chip, called the dual-core POWER6, in India. With this launch, the companys System p570 which the company says is the worlds most powerful midrange consolidation machine and bladeCenter JS22 servers, both powered by the new chip, would be available in the country, said IBM India and South Asia director (systems and technology group) Shashi B Mal. The POWER6 features virtualisation capabilities a means of server consolidation and is also the latest addition to IBMs Project Big Green initiative. It allows unparalleled power savings on mid-range servers, Mal said.
A 4-plus-year 'hype' is a wee bit too long for it to be one, wouldn't you say?
Boeing is not doing this for good will. They are doing this to increase their profits! Cheap labor.
This is not commercial work, this is defense work—which is supposed to be done by US citizens. We will rue the day if we ever have to go to war against China and our supply lines stretch all the way to India. Free traders love to worship the almighty dollar, but there are real consequences to going cheap on national security. The problem with many Americans is lack of foresight: if you don’t see it happening right now, we dismiss the possibility. Unfortunately, we will likely learn that less too late and find out that the “bargain” we thought we got was prohibitively expensive.
How dare a company make a profit. If they have no profits, the company goes by by...
We been through these discussions for years. These third world countries have cheap labor and very few safety and environmental laws. Boeing is taking advantage of this.
The competition is not fair..period.
This is an ‘all things are equal’ argument. However all things are NOT equal. If India wants a Boeing it has to pay Boeing. Boeing is a product of the most efficient, productive, creative and economically aggressive Nation on the planet. Nobody overlooks us with respect to those traits—NOBODY. Americans have uplifted themselves and their society with blood, sweat, tears and a HELL of a lot of self deprivation over the years with the result that we occupy a high place that we have EARNED and have every right to maintain.
Indeed Boeing itself is an excellent example of traditional American capital ingenuity. Boeing is a private Co. going against statist entities, it takes a hell of a lot of prowess in the areas of ‘productivity, creativity, and efficiency’ to do that.
Boeing is not equal with Airbus. American society is not equal with Indian society. The Indians don’t have anything over us except their dirt-cheap on account of living-in-some-hell-hole lifestyles. If Americans have to tighten their belts and work harder, fine. But equating them with and putting them head to head with every peon class on the globe is going to lead to grief.
No, YOUR comments are obscene and disgusting. Your ignorance of America is tremendous. You really ought drop in sometime and get educated.
Most of us would prefer that American corporations invest in America. Otherwise they should just incorporate somewhere else, so there is no mistaking where their loyalites lie.
The new way to say CHEAP
Personally, I would prefer that the components of advanced weapons of the United States military be made...........in the United States.
Just a thought.
I could be wrong.
Loyalties are to the investors.
"So would you prefer Airbus to outsource to India and later sell Airbusses to airlines in India?"
I can ping it for you, PC.
You are correct about that. A lot of outsourced work is coming back to the U.S. for those and other reasons.
Right, so when Saudi Arabia invests in Citibank, people with Mastercards are now funding terrorism and Islamic monarchies.
A big BUMP for this much-needed dose of common sense!
As an IT project person for a Fortune 500 company that does a lot of business with IBM, and who has first hand knowledge of IBM’s offshoring and deals with them on a daily basis, let me just tell you this; you get what you pay for.
The work we get from offshore development is about 1/10 of the quality that we used to get from in-house developers. This may save money on the actual man hour to produce a segment of code, but in the long run, it costs more to go through 5x as many testing, shakedown, and patching cycles than it does when you get it right the first time.
randog is 100% spot on - it is a myth. You may show a return on a bottom line in one focused area, but the shoddy quality of work spills over into costing more in others, which by the way, aren’t offshored.
I hope Boeing has some good QC procedures in place, for their own sake.
If you think so...
That's a very prejudicial statement against Americans.
All that adamantly staying onshore does is put US companies out of business when they can't compete with those who do go to the best value in labor.
It's a better value mainly because of the difference in the standard of living.
Sure it makes sense to make advanced stuff back home.But if you insist on such things while wanting to export weaponry,it’s not going to be easy.Every major arms buyer-be it the UAE,Japan,South Korea,India,Turkey etc all want offsets from arms contracts to go back to their economies.This maybe in various forms like forming new companies,outsourcing contracts for spares,transfer of technologies.No major ‘wannabe’ will buy from you,if you don’t give them back something in return-that’s the name of the game.
Just because Boeing is sourcing components from an Indian company doesn’t mean that classified technology is passed on to the new manufacturers.If anything this contract gives Boeing an advantage given that it is seeking to sell the Super Hornet & Apache to India.
I forgot the sarcasm tag in my "execution" comment. Of course I know that nobody is executed in America for an accident. Anyway I am convinced that acting that negligent the managers of Union Carbide did in Bophal would cause a severe prison term. A part of my work is being a security engineer for industrial facilities in Germany. If anyone would do the things in Europe they did in Bophal we Germans would throw him into a prison for a comparatively long time. Not to speak about claims for indemnification. Union Carbide would pay until the last of the victims died.
Uh, no. Managers were worried about profit. They didn't want to move the plant from a populated area. They cut training, pay and maintenance and ordered employees to ignore safety procedures. They also decided to use a cheaper but far more dangerous chemical, the one that escaped. Due to the management-ordered maintenance laxity, the cyanide tank built up dangerous levels of pressure. Due to management cuts in personnel, nobody was around who might have known of the danger and stopped it.
It was flat-out criminal. The responsible management should never see the light of day again.
Sometimes reality can be very funny.
Not at all! I'm the one arguing for changing how things are--to return to the point where "American" means quality, innovation, or something else that allows us to charge 10x what others are willing to work for.
As it is, we keep pumping out "Millenials" who have a low education with a rotten attitude and wonder why they can't compete with hungry Indians who are eager to become educated and work hard.
Unfortunately, executive idiocy is rampant everywhere.
But factoring in the re-work the Americans had to do for the shoddy Indian work, we found it was cheaper to have "spoiled Americans" doing the work.
Doesn't sound like the Americans at your place were spoiled Americans, if they were able to compete--you see, that's exactly my point. It sounds like management goofed there....just like those employers who think they are saving so much by using slow computers or offshored tech support but don't consider the lost time for their highly paid professionals.
One of my clients had a reverse problem, though. They have fought to keep operations American, despite a long downward slide as German and other companies have taken away their dominance. At one point, they had to send some production over to China because American plants couldn't keep up with demand or something (sorry, don't recall details). They found that their return rate on products plummeted, as there were fewer defects from the Chinese-made products than there were from their American plants.
Now, what should the company do? Pay more for shoddy manufacturing, or go overseas?
It is not uncommon for such arms sales deals to include provisions for manufacturing some portion of arms in the destination country. There is nothing funny about it. Arms sales from USSR to India, for example, in the 1980s routinely included such arrangements.
The Western companies look to the Orient and see vast new markets for their products; the governments in the East insist on being given the latest technology and trade secrets for pennies on the dollar as a "condition" of opening up their markets; and in the future, after the intellectual knowledge has been taken, the factories and other offshore assets will be either nationalized or undercut by copy-cat competitors.
The fallacy of course is that the societies of China and India have never been historically favorably to a large, enduring middle class, which is the target market of the large corporations. The question is whether the sudden influx of Western wealth will continue to be absorbed by a small coterie of robber barons, or enough of the wealth will spill over to create middle classes, or whether the increasing chasm between the haves and have-nots will lead to a second wave of Marxist revolutions: and resultant Communist countries having both a marked population advantage *and* technological parity, and economic superiority (for the time being) with an aging West.
The achilles heel of China will be its environmental disasters and the one-child policy; the achilles heel of India will be its abysmal bureacracy and fourth-world infrastructure (the roads don't suck, they Lewinsky.)
(The problems of the West are well-known on FR, and need not be described in detail here.)
And the Western CEO's who were behind it all with either be retired, or come crying to the US government for help.
I applaud India for the organic growth, as in Mittal Steel and Tata Motors, for example. But the outsourcing of key components of the US defence industry should be punishable as treason.
As one humorist put it, the entire history of the human race can be summarized by the following two questions:
1. What could possibly go wrong?!
followed shortly by... Cheers!
...oh, and Merry Christmas.
You voluntarily start working for a dime a day, bud.
Just to "compete".
Better yet, you move to India and do it there. After all, shouldn't labor be mobile just like capital?
See ya in Mumbai. PS, they don't have affirmative action for palefaces there, and dysentery treatment is still far more expensive than the average wage.
You first, Chester.
Merey Christmas to you too!
As for the robber-barrons, the wealth is spilling over, too.
Like the CEO of United Health who tried to award himself $1 billion in stock options?
Like the ousted head of the Wall Street firm who wrote off $8 billion due to subprime-backed securities, who got to walk off with a bonus of $160 million (more than most surgeons will make in their lifetime of productive service?
I'd get fired for costing my company $50,000...
...oh, and Merry Christmas.
...oh, and Merry Christmas.
Oops, make that ‘meRRy’!
1) What could possibly go wrong?
followed shortly by
2) But how was I supposed to know?
No thanks! I chose to make myself valuable in the USA, more valuable than can be had by offshoring.
What path are you taking? Trying to play King Canute? Voo-Doo?