Offset Program brings succour to auto industry
The event is claimed as an important victory by Offset Program representatives, who have used it to counter months of political and media criticism that the deal is failing to materialise. Indeed, Lockheed Martin is looking forward to a decade of similar developments, and argues that the process is moving at a steady and methodical rate.
Philip Georgariou, Lockheed Martin's Offset Program Director for Poland, said at the ceremony where, on behalf of Lockheed Martin, he attached a brand badge to the first car to be made at Gliwice, that the plant "...is proof that our Offset program is working and bringing real jobs and exports to Poland." However, the zł.24 billion ($6 billion) Offset contract, in which Poland's purchase of 48 American F-16 fighter jets has been used to stimulate American investment into Poland, drew fire earlier this year from Science Minister Michał Kleiber, who said, "We are concerned that the pace of launching various projects is slower than we had expected."
Nominally at least, the contract is the biggest ever 'arms-for-investment' deal of its kind, according to specialists, rivalling even the economic and military arrangements between the USA and Israel. "Almost every month we have progress on another project," says Georgariou, "...and a minister makes a comment which is very often taken out of context."
Georgariou points out that the size of the program and the way in which it was represented by politicians and the media has created a set of unrealistic expectations. "There was an expectation that as soon as the contract was signed, great things would start flooding in," says Georgariou. "That reflects a lack of understanding that this is a ten-year contract that requires a lot of new business relationships to be made along the way, which does take time."
The Gliwice plant is to produce the 'Holden,' a variant of the Astra T-3000 produced by U.S. auto giant General Motors (GM), Opel's parent company. The Holden is destined for export to Australia, and GM hope the lower cost of production in Poland and continued world co-operation with Lockheed Martin will turn around a run of down years for the company.
While GM have several low-cost car plants closer to Australia, the decision to produce in Poland was based on the auto maker's relationship with Lockheed Martin in this country. Contrasting the Hyundai decision to invest in Slovakia rather than Poland, Georgariou recalls that Opel stated that its investment choice was based on the guarantee of a minimum four-year relationship with the defense producer.
"Lockheed Martin and GM are partners anywhere in the world it makes sense," says Georgariou, "and in this particular case, our agreement covers the first four years of production."
When Lockheed Martin was asked to provide a list of Offset projects it could offer Poland, an 'Offset Act' required the company to prioritize job creation, the promotion of new technology and exports. For Lockheed Martin, its greatest gain as an Offset host is the long-term relationships it can establish with firms that it introduces, in this case, to the Polish market.
Defense industry analysts notice that the signing of Offset contracts is often vaunted by governments as salvation from economic ruin. But, by definition, such deals cannot restart a creaking economy overnight, and its economic impact must be measured over a decade rather than just one year.
The sheer size of the record-breaking contract points to the strategic concerns of U.S. foreign policy, but Georgariou maintains that "the Pentagon and the U.S. government are forbidden by law to promote Offsets." The economic rationale behind this, Georgariou argues, is that Offset uses American industry to promote foreign jobs.
"We should see a significant increase in exports associated with the Offset Program," says Georgariou. For Poland, the most immediate impact of the success at Gliwice is the expected creation of 200 jobs directly associated with car construction, and several times more indirectly related to employment for services and accessories. According to a PAIZ (now re-named PAIiIZ) report, for every job created by direct foreign investment, four more indirect jobs are created.
Currently, the GM factory at Gliwice employs 2,000 workers whose jobs are secured for the foreseeable future. Around 40,000 Holdens are expected to be produced this year, while exports from Gliwice are hoped to be worth around zł.3.2 billion ($840 million) over the next four years.
U.S. officials maintain that 27 out of 44 Offset projects have been started, and that the Offset Program expects to make the most significant progress in the sphere of technology. At press time, Lockheed Martin had presented a report on the Offset Program to the Economy Ministry.
According to Puls Biznesu this has already created disagreement between the government and Lockheed Martin. The Polish Offset Committee maintains that only around one half of the projects that Lockheed Martin says have been committed have actually been begun. According to the publication, Deputy Economy Minister Jacek Piechota argues that the Offset Program has only started three projects, including the Gliwice investment. However, the Economy Ministry has yet to decide whether it will approve the report.
Lockheed Martin representatives have told the Business Journal that these comments are derived from a lack of understanding of the natural complexity and long-term nature of the Offset Program.
Lockheed Martin itself is looking to invest in aerospace technology, such as simulators, air traffic control and the next generation of radar systems, while other U.S. aerospace firms, including Raytheon and Boeing, are co-operating with the firm and Polish planners on a proposed 'aviation valley' to provide a regional network of air industry production.
Philip Georgariou, Lockheed Martin's Offset Program Director for Poland, said at the ceremony where, on behalf of Lockheed Martin, he attached a brand badge to the first car to be made at Gliwice, that the plant "...is proof that our Offset program is working and bringing real jobs and exports to Poland." However, the zł.24 billion ($6 billion) Offset contract, in which Poland's purchase of 48 American F-16 fighter jets has been used to stimulate American investment into Poland, drew fire earlier this year from Science Minister Michał Kleiber, who said, "We are concerned that the pace of launching various projects is slower than we had expected."
Nominally at least, the contract is the biggest ever 'arms-for-investment' deal of its kind, according to specialists, rivalling even the economic and military arrangements between the USA and Israel. "Almost every month we have progress on another project," says Georgariou, "...and a minister makes a comment which is very often taken out of context."
Georgariou points out that the size of the program and the way in which it was represented by politicians and the media has created a set of unrealistic expectations. "There was an expectation that as soon as the contract was signed, great things would start flooding in," says Georgariou. "That reflects a lack of understanding that this is a ten-year contract that requires a lot of new business relationships to be made along the way, which does take time."
The Gliwice plant is to produce the 'Holden,' a variant of the Astra T-3000 produced by U.S. auto giant General Motors (GM), Opel's parent company. The Holden is destined for export to Australia, and GM hope the lower cost of production in Poland and continued world co-operation with Lockheed Martin will turn around a run of down years for the company.
While GM have several low-cost car plants closer to Australia, the decision to produce in Poland was based on the auto maker's relationship with Lockheed Martin in this country. Contrasting the Hyundai decision to invest in Slovakia rather than Poland, Georgariou recalls that Opel stated that its investment choice was based on the guarantee of a minimum four-year relationship with the defense producer.
"Lockheed Martin and GM are partners anywhere in the world it makes sense," says Georgariou, "and in this particular case, our agreement covers the first four years of production."
When Lockheed Martin was asked to provide a list of Offset projects it could offer Poland, an 'Offset Act' required the company to prioritize job creation, the promotion of new technology and exports. For Lockheed Martin, its greatest gain as an Offset host is the long-term relationships it can establish with firms that it introduces, in this case, to the Polish market.
Defense industry analysts notice that the signing of Offset contracts is often vaunted by governments as salvation from economic ruin. But, by definition, such deals cannot restart a creaking economy overnight, and its economic impact must be measured over a decade rather than just one year.
The sheer size of the record-breaking contract points to the strategic concerns of U.S. foreign policy, but Georgariou maintains that "the Pentagon and the U.S. government are forbidden by law to promote Offsets." The economic rationale behind this, Georgariou argues, is that Offset uses American industry to promote foreign jobs.
"We should see a significant increase in exports associated with the Offset Program," says Georgariou. For Poland, the most immediate impact of the success at Gliwice is the expected creation of 200 jobs directly associated with car construction, and several times more indirectly related to employment for services and accessories. According to a PAIZ (now re-named PAIiIZ) report, for every job created by direct foreign investment, four more indirect jobs are created.
Currently, the GM factory at Gliwice employs 2,000 workers whose jobs are secured for the foreseeable future. Around 40,000 Holdens are expected to be produced this year, while exports from Gliwice are hoped to be worth around zł.3.2 billion ($840 million) over the next four years.
U.S. officials maintain that 27 out of 44 Offset projects have been started, and that the Offset Program expects to make the most significant progress in the sphere of technology. At press time, Lockheed Martin had presented a report on the Offset Program to the Economy Ministry.
According to Puls Biznesu this has already created disagreement between the government and Lockheed Martin. The Polish Offset Committee maintains that only around one half of the projects that Lockheed Martin says have been committed have actually been begun. According to the publication, Deputy Economy Minister Jacek Piechota argues that the Offset Program has only started three projects, including the Gliwice investment. However, the Economy Ministry has yet to decide whether it will approve the report.
Lockheed Martin representatives have told the Business Journal that these comments are derived from a lack of understanding of the natural complexity and long-term nature of the Offset Program.
Lockheed Martin itself is looking to invest in aerospace technology, such as simulators, air traffic control and the next generation of radar systems, while other U.S. aerospace firms, including Raytheon and Boeing, are co-operating with the firm and Polish planners on a proposed 'aviation valley' to provide a regional network of air industry production.
