Strategic
Alliance
STRATEGIC ALLIANCES
Prof. Amita Mittal
BOEING-TASL
Contributors:
PGP 31129: Ajay Rathore
PGP 31327: Rachana Kanikarla
PGP 31389: Musadhiq Yavar
PGP 31395: Paridhi Shrimali
PGP 31405: Rohit Banka
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Table of Contents
BOEING Analysis of the organization .................................................................... 3
History ..................................................................................................................................................................... 3
SWOT Analysis ..................................................................................................................................................... 3
Strengths ................................................................................................................................................................ 3
Weakness ............................................................................................................................................................... 4
Opportunities ....................................................................................................................................................... 4
Threats .................................................................................................................................................................... 4
Favorability of Alliance ........................................................................................... 5
Environmental Characteristics ..................................................................................................................... 5
Strategic Uncertainty in current Boeing market & new markets ................................................. 5
Dispersion of Knowledge (Low) ............................................................................................................... 5
Company Characteristics ................................................................................................................................. 6
Resource Endowment ....................................................................................................................................... 6
Financial Strength ............................................................................................................................................. 6
Social Capital ....................................................................................................................................................... 6
III. Transaction Characteristics ................................................................................................................ 7
Behavioural Uncertainties ............................................................................................................................. 7
Economic Synergies ........................................................................................................................................... 7
Social Capital ....................................................................................................................................................... 7
Need Gap Analysis .................................................................................................. 7
Infrastructure ....................................................................................................................................................... 7
Human Resource and Technology ............................................................................................................... 8
Partner Selection .................................................................................................... 8
Scope of the Alliance .............................................................................................. 9
Environment Analysis ........................................................................................... 11
Political: ............................................................................................................................................................... 11
Economic: ............................................................................................................................................................ 12
Social: .................................................................................................................................................................... 12
Technology: ........................................................................................................................................................ 12
Legal: ..................................................................................................................................................................... 13
Negotiation & Implementation ............................................................................. 13
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BOEING Analysis of the organization
History
The founder of the company is William E. Boeing. He incorporated the company
in 1916 in Seattle as Pacific Aero Products Company.
There are two major aerospace companies in the world, Boeing being one of
them. 2016 is the 100th year of operations for Boeing. The strategic intent and
the direction of the company are headlined in its vision statement: People
working together as a global enterprise for aerospace industry leadership.
The company has five major business segments: commercial planes, network
and space systems, military aircraft, global services and support, and Boeing
Capital. The commercial aircraft business of Boeing involves developing,
manufacturing and marketing the various models, which includes 737, 747, 767,
787, and 777 aircraft. Boeing also provides support services worldwide to these
models as well as the models that are no longer in production but are still in
operation around the world.
In the 1960s, three of the US companies including Boeing had over 90% share of
the aggregate worldwide market. Two of these companies shut operations as a
result of competition by the end of the century. Boeing was the world leader in
the aircraft manufacturing industry since the 1960s. Boeing had the largest wide
body manufacturing building and at that time it was the largest exporter in the
United States. But since the beginning of the century, the company has constantly
lost the market share to the current world leader, the Airbus, which has more
than 50% of the World market share now.
There is fierce competition in the industry as other players from different
companies have joined the race. All of the firms have a different competitive
strategy, and so Boeing is forced to develop competitive advantages so that it can
stay in the competition.
SWOT Analysis
Strengths
Boeing has the history of having a strong market presence. Boeing has a leading
position in the aerospace and defense market. It is one of the two major
manufacturers of the airplanes with 100+ seating capacity and also one of the
largest defense contractors in the US. The company recorded a total of $96,114m
in Revenues during FY15, which was an increase of 5.9% over the previous year.
In the business segments, commercial airplanes segment contributed a total of
68.2% of the total revenues. The majority of the revenues (40.9%) came from the
US alone. China accounted for around 13.1% of the total revenues. Asia, other
than China accounted for 14% of the revenues and showed an increase of 12.9%
over the last year. In FY 15, the company added around $83b in new orders. The
company also received an order for 768 new commercial planes, which
increased its backlog to a record high of 5,800 planes valued at around $432b.
Apart from this Boeing maintained the defense backlog at $58b in FY15.
Boeing as a company always has had a strong focus on Research & Development
activities. The other business segments include Engineering, Operations, and
Technology. This segment provides technical and functional capabilities to the
company and also includes R&D, IT, test and evaluations and IPRs. Boeing has a
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focus on increasing the product and services offerings and to meet the demand
from the emerging markets like India. It is currently focusing on some
development efforts for enabling analytics-driven operations, advances in
natural laminar flow, which will help to improve the fuel efficiency and a
stronger and lightweight material that will reduce the airplane weight.
The CAGR for Boeings revenue has been around 5% for 2013-15 periods. The
primary reason for this growth has been the number of new plane deliveries
across different segments. The operating profits CAGR is around 7%.
Weakness
Boeing is largely dependent on the US government for the majority of its sales.
27% of the contracts were through the US government. Long-term government
contracts are subject to modification or cancellation due to changes in the
government policies.
Boeing also relies on other companies, subcontractors as well as suppliers to
provide raw materials, sub-components. If one of them faces issues related to the
delivery delays or any performance problems, it will also flow to Boeing as well.
Opportunities
The current prospects of the global aerospace and defense market are growing
strong. The global market is growing at a CAGR of 3%.
The demand for the commercial planes is also increasing because of increasing
market opportunities and challenges. Commercial airplanes fleet of the world is
expected to double in the next 20 years. The company has forecasted that the
strong economic growth in the Asia-Pacific region would be the key driver for
the growth of this demand. Similar opportunities are also expected to be present
in the Middle East and Latin American region.
Boeing has also been witnessing a growth in its backlog orders. It set a record of
762 commercial airplane deliveries during FY14. During FY15, the total backlog
of the company was $489.3b. This enhances the incremental growth of its
production, which in future will boost the revenue and profitability.
Boeing has expanded a lot in the recent years and also acquired many
businesses. In July 2015, an alliance was announced between Boeing and VietJet
Air to expand the fleet. In May 2015, the company expanded a new avionics
center in the Daegu-Gyeongbuk Free Economic Zone. In April 2015, Boeing also
acquired 2d3 Sensing for motion imagery processing.
Threats
The commercial market remains competitive as the growth rate is increasing.
The company is facing competition from international competitors like Airbus,
E&B, and several other entrants from Russia and China. The markets where
Boeing operates are also highly competitive.
Boeing also faces issues from its fixed price contracts. More than 72% of its
revenues come from fixed price contracts. Hence there are risks of reduced
margins if the company is not able to meet its cost and revenues.
The company has plans for the next 100 years to build the worlds largest
aerospace company. To achieve this the company has two strategies: first to
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accelerate the pace of growth to achieve full potential. And second to deliver on
existing commitments and improving them.
Favorability of Alliance
Figure 1: Favorability of Alliance
Environmental Characteristics
Strategic Uncertainty in current Boeing market & new markets
Risk of reduced margins if manufacturing costs increase
Fixed Price Contracts account for 72% of Boeing revenue. Hence these long
term contracts would not be able to sustain increased manufacturing costs,
increasing the need of reducing costs by either improving processes or
exploring new manufacturing hubs.
Risk of Adhering to Delivery of existing commitments
During FY15, the total backlog of Boeing was $489.3bn. It is already lagging
on current commitments and requires to rapidly scale up capacity.
High growth & demand in developing countries uncaptured.
Being the global market leader, Boeing needs to feature in the developing
markets to sustain its competitive advantage.
Dispersion of Knowledge (Low)
The technology and expertise in aviation manufacturing is non- existent in
developing countries like India.
The India Advantage
#5 in Defence Spending - $53.2 bn annual spend by Indian Govt
Low cost of manufacturing
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More than 30% of Defence budget spend on asset acquisition
Investment Allowance 15% deduction on new manufacturing plants;
weighted Tax deduction of 200% under Section 35(2AB) under Make in
India initiative
Government is also in favour of in-house manufacturing to curb big ticket
corruption existing in current contractual processes
Company Characteristics
Resource Endowment
Functional & Technical expertise in the domain along with the product and
the process patent provide Boeing the competitive advantage along with the
intangible assets like brand value in aviation industry.
Firm resources are
Tangible
Intangible
Capital
Product patents
Process Innovation
Lean Manufacturing
High Quality
Low transaction costs
Technology
Research & development systems
Brand value
Organisational culture
Financial Strength
Capital is one of the key resources available to the firm, stated by its highest
Arms sales profit in the industry ($4.5 mn annually). Further presence of Boeing
Capital Corporation with $3.4 bn portfolio adds to the financial muscle power of
Boeing to help its expansion. Supporting 1,5 mn supplier related jobs further
adds to the social capital of the firm increasing the trust in the partners about
resource and capital commitment. It has till date paid $50 bn to support 13,600
auxillary businesses of the firm.
Key financial indices of the firm are
Liquidity Ratios
Profitability Ratio
Cash Ratio 22.42%
Gross Profit Margin 14.6%
D/E ratio 1.4x
Social Capital
# 87 Forbes Global, 2016
#1 Aerospace 25, 2015,16
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#40 US 500, 2016
#43 Brand Finance, 2014
#89 Worlds Most Valuable Brand, 2016
Strong Global Alliance History - 10+ International alliances
Recent focus on emerging economies like China & Brazil
III. Transaction Characteristics
Behavioural Uncertainties
Social Capital is very high for Tatas & Boeing, which increases trust
Resource complementarity exists between the firms
Spill-over effect from existing supplier contract further strengthens the
relationship
Adoption of processes & systems in JV to increase Behavioural
transparency
Economic Synergies
Transaction costs for Contracts will reduce for Boeing will Tatas bringing
in local expertise
Strong connections with Indian Bureaucracy will facilitate speeding up of
processes
Cost efficient manufacturing facilities & manpower
Social Capital
Social Networking Theory Repeat partnering with Tatas a strong
indicator of trust, to make processes smoother.
Need Gap Analysis
Infrastructure
Required Capabilities
Manufacturing
Technology
Design Capabilities
Local manufacturing
facility
Maintenance, Repair
and Overhaul (MRO)
Gap
Local manufacturing
facility
Current Capabilities
Manufacturing
Technology
Design Capabilities
Maintenance, Repair
and Overhaul (MRO)
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Human Resource and Technology
Required Capabilities
Technical skills
Industry expertise
Local skilled Labor
Strong R&D and IP
Cheap Labor
Gap
Cheap Labor
Local skilled Labor
Current Capabilities
Technical skills
Industry expertise
Strong R&D and IP
Financial Resources
Required Capabilities
Gap
Capital
Current Capabilities
Capital
Market Strengths
Required Capabilities
Global presence
Innovation
Industry Relationships
Timely Delivery
Strong ties with
supplier base
Strong ties with Indian
government
Gap
Strong ties with Indian
government
Current Capabilities
Global presence
Innovation
Industry Relationships
Timely Delivery
Strong ties with
supplier base
Others
Required Capabilities
Experience in alliances
Low cost production
Local Suppliers
Gap
Low cost production
Local Suppliers
Current Capabilities
Experience in alliances
We have identified the following six gaps based on Need Gap Analysis:
1. Local manufacturing facility
2. Low cost production
3. Local Suppliers
4. Cheap Labor
5. Local skilled Labor
6. Strong ties with Indian government
Partner Selection
We have zeroed in on 3 potential partners based on the gaps
Mahindra
Major player in defence
sector
TASL
Most trusted brand in
India
Existing supplier
contract
Reliance
Presence in defence
sector
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Existing alliance with
Airbus
History of alliances
Existing alliance with
Lockheed Martin
Relatively new and
small player
Mahindra has a strong alliance with Airbus as its first alliance partner in India.
This leads to a conflict of interest with Mahindra. Reliance is a relatively new and
small player. Pipavav was acquired by Reliance Infra Ltd on 5 March 2015 and
was later renamed as Reliance Defence and Engineering Limited.
TASL, on the other hand, is globally renowned for its integrity and
trustworthiness. We also have an existing supplier contract with TASL and are
well versed with the functioning of the TATA group. Hence, we choose TASL as
the alliance partner.
Scope of the Alliance
The scope of the agreement with TASL needs to be clearly defined in order to
ensure proper understanding and coordination between the two partners.
For the same, we first need to assess what complementary capabilities exist
between the two companies. The following table lists down the key success
factors required for manufacturing aircrafts for defense purposes and whether
Boeing and TASL possess the same or not.
KEY SUCCESS FACTORS
TATA
BOEING
Technology
Efficient and Cheap Labour
Extensive Local Suppliers
Manufacturing Facilities
Brand Value
Government Contacts
Capital
Research & Development
On an assessment of the Key Success Factors, we identify that most of the
capabilities of the two companies are complementary. While Boeing has a
strong Technological base and a strong brand value, along with high capital and
strong research and development capabilities, TASL on the other hand has better
knowledge about the local markets which become =s key in getting defense
contracts. The strong relationship with the Government can help us to foray into
this sector. Moreover, the availability of cheap labor in developing countries like
India, can help us to substantially reduce costs and at the same time allow Boeing
to increase their operating margins. We have observed that Boeing has an
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operating margin of 8%, while TASL has an operating margin of 22%. Thus an
alliance between TASL and Boeing can help to benefit both the companies
substantially. Advanced systems has a strong network of suppliers which can be
leveraged upon.
Tata Advanced Systems can also help supply cheap labor.
Tata group can also help Boeing in Indias defence procurement system for
future purchases.
Partnered with Indias armed forces for over half a century
Lack of domestic capability to cater to the demand from global primes
Limitation of liability
Restrictions of DPP 2016
Using the scope adjacency model, we identify the following scope for the joint
venture:
Geography
Business
Customer
Core
Channels
Products
Value
Chain
Figure 2: Scope Adjacency Model
1. Business: The scope of the business shall be limited to Integrated Defence
Systems (IDS) which contribute to almost 32% of Boeings total revenue
for the initial period. The same could be extended to assembly for aviation
vehicles upon a successful Joint Venture. The scope of the alliance could
also be expanded to include manufacturing of commercial aircraft
fuselages.
2. Geography: The Joint Venture shall operate for manufacturing for the
Indian government. Boeing has had significant presence in India in terms
of supply of commercial aircrafts, yet its relationship with the Defence has
been fairly limited till now. India is the largest importer of military
equipment with a military budget of ~$52 Billion, the 5th largest in the
world. Furthermore, expanding in India in the defence sector will enable
Boeing to diversify its geographies, as the scope could be increased for
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3.
4.
5.
6.
supply to other South Asian markets. This would enable Boeing to reduce
its dependence on US for its top line, as approximately 27% of Boeings
current
contracts
are
from
the
US
Government.
Customer: The primary target customer shall be the Indian Air Force.
Products: The current scope is for the Apache AH-64 aircraft. The
product scope could be widened with future requirements to include
products
like
Unmanned
Ariel
Vehicle.
Value Chain: The scope of the alliance shall be limited to manufacturing of
aircrafts. Boeing wishes to manufacture aircraft parts in India, which has
huge opportunities in the field of aerospace manufacturing. Further,
Boeing can take advantage of the Make in India Initiative. The alliance
shall enable Boeing to learn about the development of a robust vendor
eco system, while staying within a competitive cost structure due to
reduced labour costs etc. At a later stage, Boeing could also set up a joint
R&D facility to take advantage of the tax deduction benefits granted under
the Income Tax Act, 1961. Section 35 (2AB) legislates that companies
engaged in the manufacture of an in-house R&D centre shall receive a
weighted tax deduction of 200% or both capital and revenue expenditure
incurred
on
scientific
research
and
development.
Channels: Direct selling conforming to the Defense procurement
procedure of the Indian Military shall be undertaken.
Environment Analysis
Political:
India is the biggest democracy in the World. The government type is a federal
republic. The political Situation in the India is relatively stable with no military
coup in its existence. But the current political party ruling the country is BJP-led
by Narendra Modi. The BJP is perceived to be center of left in its stance on a
majority of Issues. State politics dominated by several national parties including
the Bharatiya Janata Party (BJP), INC, TMC, AIDMK, CPI, and various regional
parties. India has a well-developed tax structure with a three-tier federal system,
comprising of the Central Government, the State Governments and the Urban &
Rural Local Bodies. The power to levy taxes and duties are distributed among
these three tiers of Governments, in accordance with the provisions of the Indian
Constitution.
India in the past has engaged its neighbors like Pakistan and China in armed
conflicts. The major wars that India has participated with Pakistan were in
1947,1965,1971,1999. Three of the 4 wars was on the disputed territory of
Kashmir and the 1971 war was with respect to the East Pakistan. India had lost
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the war with China in the Indo-Sino war of 1962 after which it pursued close
military and economic ties with Soviet Union which was the largest provider of
Arms to India for a very long time. The presence of such hostile neighbors and
the fact that India has a very weak industry-military complex provides the global
defense Industry with a unique opportunity in pursuing close ties the Indian
Government. The present government led by the Prime Minister Narendra Modi
have vowed to bring structural reforms to the functioning of the government and
improve the ease of doing business in India. They have also started a campaign
to attract global players in various fields of the manufacturing to set shop in
India under the Make in India initiative. Under the initiative the government
will provide significant support in setting up of Manufacturing plants and also
tax incentives. Defense procurement in India is perceived to lack transparency.
The evidence lies in the occurrence of scams like Augusta Westland Chopper
scam, Bofors scam. But there have been no major scams under the present
regime which provides us hope that the things might have changed.
Economic:
Indias GDP as of 2015 is around $2.08 trillion dollars which is 7th in the world in
the nominal terms. Its growth rate ~ 7%-8% is one of the highest for a large
economy. Indias defense budget is around $52 billion dollars which is 6th in the
world. India ranks 10th worldwide and 4th in Asia for the amount of FDI inflows
($44 billion in 2015, $35 billion in 2014). India is the largest importer of military
equipment. This provides global military equipment manufacturers to look at
India as the drivers for future growth. The current government is increasingly
looking at private players to fill in the void for its requirements by
manufacturing in India under the Make in India initiative. The FDI in defense is
approved through 2 routes. One is the automatic route for all FDI up to 49%. For
FDI above 49% the approval of the government is necessary.
The government has recently announced 100% FDI in defense with the
covenant that they should share their state of the art technology. India has also
improved its rankings in the ease of doing business from 134 last year to 130
this year. Indian Rupee is the official currency of India (20th most traded
currency in the world). It is managed by the Reserve bank of India through its
monetary policy. Rupee is relatively stable currency and has shown less volatility
in the recent past as it has been professionally managed by some very able
people like Dr. Raghu ram Rajan.
Social:
India has a population of over 1.1billion people which is the 2nd largest in the
world. This population is divided in the following age structure: 0-14 y 28.5%,
15-24 y 28.1% and 25-54y :40.6% ,55-64y :7%and 65 y above 5.8%. Hence it
has a relatively young population. India also has a huge supply of young
workforce which can be leverage by such global manufacturing firms.
Technology:
India has a vibrant IT industry which is its largest export sector. India has a
telecom penetration of ~82% which is very high for an emerging market. India is
at a brink of massive digitization movement thanks in part to the government
initiatives.
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Legal:
In this section we will concentrate on the legal framework and regulation with
respect to the defense sector. Defense procurement in India is governed by the
Defense procurement procedure (DPP) which was first enumerated in 2006 with
revisions in 2011. The government has decided to revisit the DPP every year to
factor in the changing business environment.
The categories of defense procurement are
- Buy: (Global): Outright purchase of equipment from a foreign vendor (Indian):
Outright purchase of equipment from Indian vendor with minimum local content
of 30% -
-Buy and make: Purchase from a foreign vendor followed by licensed domestic
manufacture through transfer of technology (ToT)
-Buy and make (Indian): Purchase from an Indian company or Indian JV with
minimum local content of 50%
- Make: Indigenous design, development and production of equipment
The TAS-BOEING JV comes under the 3rd category which is the Buy and
Make(Indian). The other regulations that are relevant in the context of the JV is
Benefits in-house manufacturing -
Investment allowance (additional depreciation) at the rate of 15% to
manufacturing companies Deduction of 15% of the cost of new plants and
machinery, exceeding INR 250 Million, acquired and installed during any
previous year until 31.3.2017
For companies engaged in the manufacture of an in-house R&D center, a
weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act
for both capital and revenue expenditure incurred on scientific research and
development.
The above regulation provides the JV a platform for future expansion.
Negotiation & Implementation
Boeing-TASL JV will be a 50-50 equity partnership with debt being raised by the
JV to reduce behavioural uncertainty. The cost and revenue sharing will be 50-50
as both the partners have capital as their strong point. The initial JV duration will
be 15 years with JV scope negotiations set every 5 years. The contract exit
clauses are clearly stated with the Jurisdiction disputes to be settled in High
court of Hyderabad and internal disputes and arbitration to be decided in
International Court of Arbitration, Paris.
The JV in initial stage will limit its scope to manufacturing AH64 Apache
Helicopter fuselages. The manufacturing facilities for the same will be setup by
TASL. Owing to its strong supplier relations & raw material procurement, Tatas
will supply the land and the required work force to start the manufacturing
operations. To facilitate the same we will provide workforce training by sending
operation executives and technical experts. They will also facilitate the setting up
of the manufacturing facilities and set in best practices.
Overall the Structure of JV will look like the following
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6 Member Board of Directors
3 Boeing | 3 Tatas
3 - Boeing
3 - Tatas
Joint CEOs
President
Chairman
CFO
COO
CTO
IR
Sourcing &
Procurement
Besides following the above structure, appropriate processes will be put in place
to reduce the Behavioral uncertainty and facilitate the successful
implementation of Boeing-TSALs strategies
Alliance Specific Investments Manufacturing facilities will be funded by
both TSAL and Boeing. The proposed Hyderabad facility has equal
investments by both the partners.
Systems
to
measure
behavioural
transparency
-
Quarterly JV performance meetings at management level
Monthly Operational effectiveness review Boeing Operation experts &
Tata-workers
Feedback mechanism at shop floors weekly review by Tata managers
Feature
Description
Nature
Duration
50 50 Equity Joint Venture
15 years with 5 years lock in period and a periodic review
every 5 year
50 50 equity capital + debt to be raised by the JV
50 50 cost and revenue sharing by TASL and Boeing
Capital: Both TASL and Boeing shall put in equal capital in
the Joint Venture as equity to create a 50 50 JV. This
equity capital along with debt financing would be used for
securing required land, machinery, facilities and other
necessary permits.
Permits: TASL will lead the negotiations with the Indian
Capital
Financial
TASL
Contribution
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Boeing
Contribution
Central and State governments to secure necessary permits
to buy land, setup factory, import equipment and operate.
TASL shall also look after any legal formalities that need to
be completed with respect to the formation and setup of
the JV.
Land: TASL shall use its resources to scout for and identify
potential land for setting up the manufacturing plant. After
the identification and confirmation from Boeing, TASL shall
move ahead to purchase the land and start developing it for
setting up the manufacturing facility
Manufacturing Facilities: TASL shall in coordination with
Boeing as advisor shall source and procure all relevant
machines and equipment for the manufacturing of the
fuselages. TASL shall also select the contractor in
agreement with Boeing to build and develop the facility.
TASL shall also leverage the manufacturing capabilities of
its sister firm Tata Manufacturing Systems Limited, a Tata
Group subsidiary.
Man Power: TASL shall provide and manage skilled labour
force required for the manufacturing plant. TASL will
handle all recruitments in agreement with Boeing for the
plant. TASL shall also look after the day to day operations
and management of the plant through a management team
composed of managers and executives acceptable to both
the parties.
Raw Materials: TASL shall be responsible for sourcing and
procuring the required raw materials for the
manufacturing of the fuselages. TASL would be able to
leverage the capabilities of its sister companies in the Tata
Group like Tata Steel, Tata Advanced Materials Ltd.
Capital: Boeing shall put in 50% as equity capital in the JV
to be used for purchasing of land, equipment and other
permits and legislations.
Design Expertise: Boeing shall provide the necessary
blueprints, design and manufacturing technology for
efficient production of the AH64 helicopter fuselages.
Product and Process Patents: Boeing shall provide the
necessary product and process patents required for the
manufacture of the fuselages.
Workforce Training: Boeing shall provide a few engineers
and managers to train the initial recruits and later lead the
overall production and manufacturing processes on the
shop floor.
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Organizational
Structure
Current Scope
Exit Clauses
Court of
Arbitration
Future Scope
Preferred Supplier Status: Boeing shall grant TASL a
preferred or exclusive supplier status for the AH64
helicopter fuselages.
New Markets: Boeing shall bring in new market
opportunities to expand into other products and
geographies over the course of the alliance
6 member Board of Directors 3 appointed by TASL and 3
by Boeing
President TASL and Chairman Boeing
President and Chairman to double up as Joint CEOs
CFO to be appointed by Boeing
COO to be appointed by TASL
Procurement & Sourcing Head to be appointed by TASL
International Relations Head to be appointed by Boeing
Primary objective of the JV is to manufacture high quality
low cost AH64 Apache helicopter fuselages.
TASL and Boeing will together set up a manufacturing
facility at Hyderabad
JV will bid for GoI defence contracts for the manufacture of
helicopters and other aircrafts
5 years of lock-in period with option to renegotiate
contract at end
If Boeing withdraws, Boeing cannot withdraw any capital
investment
If TASL withdraws, TASL is liable to compensate Boeing for
their capital
Local supplier and contract disputes to be settled in High
Court of Hyderabad
Internal disputes to be settle in the International Court of
Arbitration, Paris
Increasing scope of alliance to include manufacturing of
commercial aircraft fuselages
Increasing scope to assembly for aviation vehicles for
Indian and South East Asian market
Setting up of Research and Development facility at India to
make use of the following regulation For companies
engaged in the manufacture of an in-house R&D centre, a
weighted tax deduction of 200% under Section 35 (2AB) of
the Income Tax Act for both capital and revenue expenditure
incurred on scientific research and development
Exclusive supplier status for AH64 Apache Helicopters and
Preferred Supplier status for products in Indian and South
East Asian markets
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