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February 2007 edition

Strategic destruction of the North American and European commercial aircraft industry; implications of the system integration business model

By David Pritchard and Alan MacPherson, Canada-United States Trade Center

Critical perspectives highlight technology transfer downside

This article is an edited version of a paper that explores the role of systems integration based on risk sharing partnerships for new aircraft programmes. It is the latest in a series by the authors that raises concerns about the longer term downside of practices such as systems integration.

The commercial aircraft industry has long been a cornerstone of Western export leadership in product markets requiring high levels of design, engineering and manufacturing expertise. This industry has been one of the most propulsive North American and European export sectors for more than 20 years, and many of the advanced production procedures developed by this sector have been successfully transferred to other industries.

In future years, however, Western manufacturers of commercial aircraft (e.g. Boeing, Airbus and Bombardier) will likely opt for a systems integration mode of production. Under this system, key components and subassemblies will be designed and manufactured by external suppliers. While this represents a logical strategy from a financial standpoint, a potential downside is that foreign subcontractors and risk sharing partners must receive direct infusions of tacit scientific and technical knowledge from Western manufacturers.

Without these infusions, the systems integration strategy would not be effective because risk sharing agreements typically entail much more than build-to-print subcontracting relat....

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