FORT WORTH, Texas – Last October, officials from Bell Helicopter Textron Inc. gathered at the Begumpet Airport in Hyderabad, India, to deliver a new Bell 412 EP utility helicopter to K. Gnyandeep, managing director of the New Delhi-based construction firm ABIR Infrastructure Pvt. Ltd.
In choosing Begumpet Airport as the setting for the delivery, Bell Helicopter ensured that it would receive maximum exposure from the Indian press and other, potential customers. On Oct. 15, the same day that Gnyandeep received the keys to the gleaming chopper from Jon Rudy, Bell’s director of business development for Asia, the now-closed airfield welcomed the inaugural Indian Civil Aviation Airshow for a four-day run.
It was a seminal moment for Bell Helicopter, the 74-year-old Texas aerospace firm that developed the Vietnam War-icon UH-1 “Huey” – perhaps the most famous helicopter in aviation history. The 412 model that the company – which is a subsidiary of Textron Inc., a Fort Worth-based, $13.2 billion multi-industry company – delivered to ABIR Infrastructure was the 100th commercial helicopter that it has sold in India. And it came some 52 years after the then-Bell Helicopter Co. sold its first chopper in India. Bell officials marked the occasion by throwing a party underneath a tent on the Begumpet Airport tarmac.
"The combined team of Bell Helicopter, Edwards & Associates (a Bell parts supplier), Bell Helicopter Finance Group, and our [Noida, India-based independent representative, Jubilant Empro Pvt. Ltd.], are proud to deliver our 100th commercial helicopter into the Indian market,” Rudy said. “We have a winning team and are looking forward to achieving the next 100 deliveries in India."
Indeed, the South Asian nation now ranks among Bell Helicopter’s fastest-growing markets; the company sold 17 helicopters in India in 2008, and it expects to deliver another 22 choppers to Indian customers in 2009, according to Bell communications director Greg Hubbard, who added that the company now commands a 50-percent share of India’s commercial market.
But while Bell Helicopter has enjoyed considerable success in its dealings with the country’s private sector, the company has found that doing business with the Indian government – particularly the military – can be very difficult. In mid-November, Bell withdrew a proposal to sell the Indian Ministry of Defense 197 of its 407-model, light-utility helicopters because it considered governmental requirements for industrial offsets – essentially, work for Indian companies – as too onerous and expensive.
The Bell 407 is a four-rotor-bladed, single-engine, civil-utility helicopter; it is frequently used for corporate and offshore transport, and is a favorite of air-ambulance services, law-enforcement departments and news-gathering organizations around the world. The decision ended a nine-year effort by Bell Helicopter to sell choppers to the Indian government.
Bell Helicopter recently delivered its 100th commercial helicopter in India, a Bell 412 EP, example shown above, to ABIR Infrastructure in New Delhi. Photo courtesy of LA City Fire Department
“The more our leadership team looked at what the Indian government had asked of [the winning bidder] – particularly the 50 percent offsets – the more they felt that satisfying them was it was simply not the direction that Bell Helicopter should head in,” Hubbard said. “The requirements were a really high threshold, and given our long-term strategy of ramping up production the way we wanted to, it presented an increased financial risk to the company to the point that it didn’t make sense for us to pursue this opportunity.”
Bell Helicopter cited the Indian defense ministry’s decision in late 2007 to issue a new request for proposals that contained clauses requiring the winning bidder to reinvest 50 percent of the contract value back into India by sourcing parts and labor from subcontinent-based firms as the reason for its decision.
Indian defense officials anticipate these requirements will generate approximately $30 billion in lucrative offset-work partnerships with local companies in 2008. Currently, foreign companies investing over $60.3 million in an Indian defense project are required to source 30 percent of the business from within the South Asian nation.
Bell’s frustrations with the Indian government boiled over in early 2007, when officials at the Ministry of Defense ruled that Eurocopter SAS – a French helicopter manufacturing and support company that was competing against Bell and other companies for the contract – be declared the winner of the competition. The government had disqualified Bell’s proposal on a technicality, but Bell protested the decision and enlisted the assistance of U.S. government officials. The ploy worked – in December 2007, the Indian government overturned the ruling and said it would hold a new competition, which had come down to militarized versions of the Eurocopter AS350 Squirrel single-engine helicopter and the Bell 407. Bell eventually withdrew from the competition when it became clear that the industrial-offset requirements would negate any financial benefits that the company might have gained from winning the contract.
Slightly more than a month earlier, Bell Helicopter withdrew from a $500 million competition to supply the Indian Air Force with 22 attack helicopters because of similar requirements. Bell officials said later that the company pulled its bid because the Indian government insisted on purchasing the Bell AH-1Z Viper – a twin-engine, four-rotor-blade chopper based on Bell’s famed AH-1W SuperCobra attack helicopter – which would have violated the U.S. government’s Foreign Military Sales program. Foreign governments that wish to purchase American-made weapons and military hardware do not deal directly with the companies that make them; instead, they must deal with the U.S. Department of Defense, acts as an intermediary, usually handling procurement, logistics and delivery and often providing product support and training.
Bell wasn’t the only U.S.-based defense contractor to withdraw from the competition; Chicago-headquartered aerospace giant Boeing Co. yanked its bid after the Indian government refused to grant it more time to prepare a formal bid. "The company studied the government's request seriously and thoroughly, and Boeing executives participated in a pre-bidder's conference in New Delhi," Boeing said in an Oct. 15 statement. "However, following this review of the Indian Air Force’s attack helicopter program request for proposals, Boeing regretfully concluded that it will not be able to prepare in the time allotted a fully compliant proposal that addresses India's unique requirements. This was a difficult but necessary decision.”
The Indian defense ministry issued a request for proposals for 22 helicopters last May, and officials publicly stated they hoped to evaluate a half-dozen proposals: the AW129, a multi-role combat helicopter developed by Italian-British joint-venture company AugustaWestland NV; Boeing’s AH-64D Apache Longbow; the Bell AH-1Z SuperCobra; the Eurocopter Tiger; the Russian-built Kamov Ka-50 Black Shark; and the Mil Mi-28 attack helicopter, which is also built in Russia.
Indian defense officials originally gave the six companies 90 days to respond to the request for proposals, but Boeing asked for an eight-week extension to prepare a fully compliant proposal. The ministry countered with an offer to extend the preparation time by one month, which prompted Boeing to withdraw.
It was another black mark for India’s defense-procurement process, which has gained a dubious reputation among foreign suppliers and contractors as a slow-moving bureaucracy prone to “decision paralysis.” This indecisiveness has become a major issue for foreign-based companies wishing to penetrate the Indian defense market, and is perhaps best exemplified by a request sent by the Indian army in 1990 to the federal government to upgrade its aging, 130-millimeter artillery guns to 155-millimeter cannons. A year later, New Delhi approved the request, and the Ministry of Defense picked Yokneam, Islrael-based contractor Soltam Systems Ltd. from a group of five bidders. Soltam carried out trials in 1993, but the defense ministry took another five years to approve the bid and fulfill the army’s requirement.
These delays have also jeopardized a number of vital purchases, such as the Israel Aircraft Industries Heron unmanned aerial vehicle, the Russian Smerch multiple-launch rocket system and the Bhim self-propelled howitzer.
What’s more, over the last five years, the Indian government’s inability to make timely decisions has forced the Ministry of Defense to refund almost $7.3 billion that it had earmarked for new equipment and to modernize the Indian military.