F-35A versus Saab Gripen NG

[viper12]

There's an 8% cheaper figure for Slovakia's F-16V over the Gripen option : viewtopic.php?f=32&t=53541

[madrat]

Either Saab is shifting research & development costs onto the customer base or LM is providing significant reduced prices based upon realistic projections. I have a hard time believing in today's costs they will significantly undercut platforms that are significantly lighter than F-35 and that employ significantly far fewer of the gold plated materials used in the F-35 program. Sustained orders cannot drop prices by a 30% margin like LM would seem to be promising. And lifetime costs are not the numbers being floated, so it's not logical to believe this is any relation to purchase prices. Is LM underselling now in order to sting customers later? The numbers being touted in this forum just do not seem realistic when the Typhoon and Rafale new builds are north of $200 million apiece. I'm thinking there is a catch here somewhere, hence the artificially low numbers being claimed. A lesson that never seems to change is, if it sounds too good to be true then it probably is not true.

[citanon]

Either Saab is shifting research & development costs onto the customer base or LM is providing significant reduced prices based upon realistic projections. I have a hard time believing in today's costs they will significantly undercut platforms that are significantly lighter than F-35 and that employ significantly far fewer of the gold plated materials used in the F-35 program. Sustained orders cannot drop prices by a 30% margin like LM would seem to be promising. And lifetime costs are not the numbers being floated, so it's not logical to believe this is any relation to purchase prices. Is LM underselling now in order to sting customers later? The numbers being touted in this forum just do not seem realistic when the Typhoon and Rafale new builds are north of $200 million apiece. I'm thinking there is a catch here somewhere, hence the artificially low numbers being claimed. A lesson that never seems to change is, if it sounds too good to be true then it probably is not true.

The catch is that you are ignorant about the economics of manufacturing. The cost of an airplane, or any complicated manufactured product, is almost never actually set by the materials. It's by and large set by production processes and production scale.

For example, the stamping tool for producing the door on a Toyota Corolla costs about $35 million. In order to make a Toyota Corolla, you HAVE to have that tool. Now, once you purchase that tool, it's good for stamping out tens of thousands of car doors, so the tooling and investment costs can be amortized over tens or even hundreds of thousands of cars, making individual cars very cheap.

However, if you were to, say produce just 100 Toyota Corollas, you'd end up with $10 million dollar compact cars. They would be totally unaffordable.

That's impossible you say. How could a Toyota Corolla cost more than a Bugatti Veyron? That's because the Veyron was designed to be hand made at low volume. The Corolla was designed from the ground up to be made in large volumes using very very expensive tools. If you produced a million Bugatti Veyrons, they'd still cost about $1 million each, whereas the price of the Corolla would drop to $20 K.

Same thing with consumer devices like the iPhone. An iPhone, when produced in quantities of 10 million, is an $800 device with a profit margin of 30%. The very same iPhone, when produced in quantities of 10, is a $100 million dollar device with a profit margin of 0.

F35s are so cheap because LM and suppliers have gotten very good at making them and the investment into tooling and training can be amortized over comparatively many aircraft. This is only possible because F35s are produced at a scale 10X larger than any other fighter program on the planet. That production scale lets people make design decisions on every part of the aircraft that make them cheaper when you ramp up the production rate. It let's people figure out production processes that get dramatically cheaper once you reach a certain scale. It let's people create tools that are very expensive to build but great for lowering cost on large production runs. Those changes percolate throughout the entire program and the supply chain, and accumulate into massive cost savings.

There is nothing surprising or unprecedented about this. It literally happens ALL THE TIME in nearly every manufacturing activity.

[madrat]

Well, you're talking about stamping with a hydraulic press, a topic I do know quite a bit about. Yet you dismiss costs relative to material weight and supply costs. I'll wait around for someone with a little more insight to answer the question.

[kimjongnumbaun]

Well, you're talking about stamping with a hydraulic press, a topic I do know quite a bit about. Yet you dismiss costs relative to material weight and supply costs. I'll wait around for someone with a little more insight to answer the question.

Economies of scale. It was explained very clearly to you but here's another attempt.

"BREAKING DOWN 'Economies of Scale'
Economies of scale give rise to lower per-unit costs for several reasons. First, specialization of labor and more integrated technology boost production volumes. Second, lower per-unit costs can come from bulk orders from suppliers, larger advertising buys or lower cost of capital. Third, spreading internal function costs across more units produced and sold helps to reduce costs. "Internal functions" include accounting, information technology, and marketing. The first two reasons are also considered operational efficiencies and synergies. The second two reasons are cited as benefits of mergers and acquisitions. "

An easy example to explain material weight and supply costs would be your order from Amazon. A package may cost $5 to deliver, but three packages also cost $5 to deliver as well since it's being transported on the same platform.

https://www.investopedia.com/terms/e/ec ... fscale.asp

[fbw]

Either Saab is shifting research & development costs onto the customer base or LM is providing significant reduced prices based upon realistic projections. I have a hard time believing in today's costs they will significantly undercut platforms that are significantly lighter than F-35 and that employ significantly far fewer of the gold plated materials used in the F-35 program. Sustained orders cannot drop prices by a 30% margin like LM would seem to be promising. And lifetime costs are not the numbers being floated, so it's not logical to believe this is any relation to purchase prices. Is LM underselling now in order to sting customers later? The numbers being touted in this forum just do not seem realistic when the Typhoon and Rafale new builds are north of $200 million apiece. I'm thinking there is a catch here somewhere, hence the artificially low numbers being claimed. A lesson that never seems to change is, if it sounds too good to be true then it probably is not true.

No, it depends on “costing” calculations. In the F-35 they are referring to URF by full rate production. Neither the Rafale or Typhoon are close to 200 million in “flyaway cost” either. Based on Fr. Senat figures circa 2014 the flyaway is 72 million euro (prob closer to 80 million now), or roughly 91 million for export aircraft based on India contract. The Typhoon is similar, a roughly 95-100 million euro flyaway.

The Gripen E, based on Swedish contracts at the time were around 72 million USD at the time of contract announcement, IIRC. While II haven’t followed any recent contracts, ~80 million US is a reasonable estimate.

Lifetime and O&S costs are a moving target, good luck with those estimates. Program costs? I believe I calculated it as 213 million PAUC equivalent for the Rafale, just south of 190 million for the UK Typhoon program costs per unit. Gripen E I forget but likely cheapest of the bunch as it leverages design and software upgrades from Gripen C, COTS technology. But, export contracts for those aircraft don’t necessarily include program costs, though Brazil’s contract does, as well as ToT and some local manufacturing (US FMS contracts do include a % of program dev costs).

Foreign contracts are not a good “apples to apples” comparison as each has different weapons, support, spare and training packages. US FMS sales are generally comprehensive and as they are estimated, usually on the high side. Interestingly, France is instituting a weapons export system similar to FMS now, so we will see what future Rafale contracts entail.

[madrat]

Thanks, fbw, you understood the question and touched on the crux of comparing costs.

I appreciate your answer whereas the previous two were trying to go all Captain Obvious speaking at an elementary school. I know I'm guilty of the same behavior at times and have to suppress some snide remarks at their answers. I know a few members here really take an honest analysis of costs whereas we seem to have an Orwellian wave of two legs bad, four legs good reaction to all things F-35 cost-related, I'm an F-35 fan, but I'm not going to pretend its $80 million an order. Economy of scale adjusted to inflation might reach that number in 2011 dollars, but not in 2019 dollars.

[marsavian]

The F-16V was estimated to be cheaper on lifecycle costs not unit costs.

https://tinyurl.com/y8vmkddx

Slovakia will purchase 14 US F-16 Block 70/72 tactical fighter jets and will sign the relevant contracts with the US government, Prime Minister Peter Pellegrini (the ruling Smer party) said on July 11, after a cabinet session. He added, as quoted by the TASR newswire, that for the package of 14 US fighters, training, ammunition and logistics, Slovakia will pay €1.589 billion over the following years.

Director of the Value for Money Unit (SVK Ministry of Finance) Štefan Kišš confirmed that the bids were compared and evaluated by the Value for Money Unit, he said: “Our task along with the Minister of Defence was to put the bids on the same scales and the outcome is that if we compare the comparable, the entire life cycle of the American F16s is 8% cheaper [than the Gripens’].”

On behalf of the Slovak Armed Forces, Commander SVK Air Force Maj Gen Ľubomír Svoboda expressed his satisfaction with the Cabinet’s decision: “In analysing the bids we did not work with the marketing data supplied by the manufacturer, but we worked with facts and communicated with the countries that operate both types of aircraft. The facts were put on the table and used in the subsequent analysis.”

In considering all parameters of the bids, the US bid was evaluated more advantageous in terms of money. The MOD compared the package of 14 F-16 Block 70/72 fighter jets, ammunition, training for pilots and ground personnel, logistics, airfield infrastructure development, dates of deliveries, and other operational costs with the Gripen package beyond 2040.

The US government’s bid was evaluated as the most advantageous in terms of money and as the best solution in technical terms, according to Prime Minister Pellegrini. Given the over 30-year life cycle of the American fighters, the US bid is 8 percent cheaper than Sweden’s, the premier added. However, the initial investment in the US machines alone is several hundred million euros higher compared to the Swedish Gripen jets.

[madrat]

That last line speaks volumes. Can they float it with cash or is it a loan? Because if they borrow the money and that wasn't factored in then you really have a guessing game being played. I cannot imagine the lending rate for such a small country will be so cheap as to be insignificant.

[wrightwing]

The URF is in current year dollars (i.e. $80 million in FY2019 dollars.) The DOD doesn't buy aircraft in FY2011 dollars.

[magitsu]

That last line speaks volumes. Can they float it with cash or is it a loan? Because if they borrow the money and that wasn't factored in then you really have a guessing game being played. I cannot imagine the lending rate for such a small country will be so cheap as to be insignificant.

Sweden did the same with Brazil. Cheap financing wins deals... or in this case keeps them from collapsing/getting reduced.

https://www.flightglobal.com/news/artic ... ce-415483/
https://www.reuters.com/article/brazil- ... UT20150729

The Brazilian Air Force is a step closer to securing 36 Saab Gripen NG fighter aircraft with the federal senate approving a renegotiated financing agreement with Sweden this week that lowers the interest rate on the $4.6 billion loan from 2.54% to 2.19%.

[spazsinbad]

Either Saab is shifting research & development costs onto the customer base or LM is providing significant reduced prices based upon realistic projections. I have a hard time believing in today's costs they will significantly undercut platforms that are significantly lighter than F-35 and that employ significantly far fewer of the gold plated materials used in the F-35 program. Sustained orders cannot drop prices by a 30% margin like LM would seem to be promising. And lifetime costs are not the numbers being floated, so it's not logical to believe this is any relation to purchase prices. Is LM underselling now in order to sting customers later? The numbers being touted in this forum just do not seem realistic when the Typhoon and Rafale new builds are north of $200 million apiece. I'm thinking there is a catch here somewhere, hence the artificially low numbers being claimed. A lesson that never seems to change is, if it sounds too good to be true then it probably is not true.

Perhaps this recent video posted by 'citanon' goes some way to be convincing about LM reducing 'cost' of the airyplane?

viewtopic.php?f=60&t=53711&p=399255&hilit=cool#p399255

[citanon]

Now that Madrat unpacked his Yoda like original comment I think I know better what he was trying to say.

He thinks that all things being equal, costs should scale roughly as weight of components for two similar items. While LM may be able to reduce things like assembly costs with economies of scale, he doesn't believe they can reduce the costs of subassemblies and components so far down into their supply chain that they get such a whopping low price when the EF2000s of the world are going for $200 million. He thinks LM is compressing the up front costs to a degree the supply base can't sustain and then there might be sticker shock when the replacement parts roll in at real costs during sustainment.

FBW partly answered his question by showing him that the unit flyaway cost of the Rafale and the EF2K aren't nearly as bad as the headline price of $200 million once you strip away the amortization of the investment in development and manufacturing (which they get screwed on for every tranche because of their small production scales, it's like they are perpetually in LRIP).

Then of course, the gains in economies of scale are real and percolates throughout the supply chain. You then factor in ongoing revolutions in digital manufacturing and advanced manufacturing techniques and one can see much of the entire supply chain upping their kung fu to extract impressive and cumulative gains in efficiency, cost, and performance.

Lastly, Uncle Sam has already made the massive decades long investments starting from the F117 to the B2 and F22 to the painful initial phase of JSF to produce the "gold-plated" components of the F35 at reasonable cost. Those costs were amortized into $2 billion dollar B2s and $200 million dollar F22s, and $200 million dollar F35 prototypes. Now that those investments have already been paid production of additional planes on maturing lines is much cheaper.

BTW Madrat, sorry not sorry for going all captain obvious on you. I like to spell out exactly what I mean by nice simple examples garnished with a sprinkling of extra sarcasm. That's just how I roll and the internets can afford to carry the extra trons.

[madrat]

No worries. Its a pretty interesting subject - costs. So many ways to skin a cat.

[loke]

Grippen is getting its AESA radar from Thales, which is a French company.

Wrong. The Gripen E AESA radar is developed by Leonardo.


http://www.leonardocompany.com/en/-/raven-1