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Larry TrowelGeneral Manager, Government Business Practices & ProcessesGE

July 26, 2007 9:30 a.m. – 10:30 a.m.

Common Ground: The New Specialty Metals Rules and How Government and Industry Can Work Together

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“Defense” Industry has Multiple Business Models

• Defense-focused Facilities– Build-to-DOD-order; supply chain responds to DOD orders with serial

processes– No need to segregate materials

• Integrated Commercial-Military Facilities– Build-to-DOD-order with common components and integrated

production lines– Segregated materials impractical

• Commercial Facilities– “Off-the-shelf” products and components; global supply chain driven by

forecast, not individual orders– No opportunity to segregate

Business Model Drives Impact of Restrictions

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Integrated Production - Example

Efficient Production Drives Common Processes

COMMON PART NUMBER

COMMON DESIGN – DIFFERENT PART NUMBER

TitaniumBar Stock

CommonAirfoil

Forging

Final PartNumber

Common Inventory

CF34 Comm’lApplication

TF34 Military Application

TitaniumBar Stock

CommonAirfoil

Forging

In-processDifferentiation

of Part Numbers(usually minor differences)

Final Part -Number

CF34 Comm’l Application

Final Part -Number

TF34 MilitaryApplication

Jet Engine Airfoils

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Commercial Off-the-Shelf Item - Example

Commercial Market Drives Production, Support – DOD Benefits

Commercial Applications

Boeing 747-300, -400, -400ER767-200, -300, -400MD–11

Airbus A300–600A310–200, -300A330-200, -300

Engines in Commercial Operations = 6641+Commercial Operators = 249

US Military Applications

VC-25 (Air Force One) E-4 KC-10 Air Borne Laser C-5M (re-engining in process)

Engines in Military Operations = 225

Spare Parts

Commercial Operators Consume 99% of Spare Parts

DOD procures its spares directly from commercial warehouse in same manner as other commercial

customers

CF6 Engine

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Commercial Conundrum – Specialty Metals

• End items and components forecasted and manufactured for commercial market – DOD participates, but does not drive

• Materials typically procured well in advance of customer orders– Little opportunity to impact basic materials

• Segregation in production impractical, costly, disruptive– Requires “job order” processes

• Commercial products focus on material properties, not country of origin– Some exceptions for special applications

• Unreasonable choices . . . – Compliance across all products – commercial and DOD?– Segregate DOD materials, production, inventory?– Do not sell to DOD or its suppliers?

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Summary

• OSD, DCMA, Contractors working well together to make current policy work

• Statutory and policy flexibility are warranted… specialty metal industry is healthy now and in foreseeable future

• Policy flexibility especially important where DOD relies on commercial market place