25 October 2014

Saab Gripen Deal Pending Between Brazil and Argentina

It appears that SAAB wasn't kidding when they promised that the Brazilians could involve their defense industry more heavily with the Gripen than with competing platforms.

It appears that non only are the Brazilians going to manufacture their own fighters, but they will be manufacturing Gripens for Argentina as well:
Saab AB (SAABB) said it’s close to sealing a contract with Brazil that will secure 36 export orders valued at $4.5 billion for the Swedish company’s Gripen jet-fighter while establishing production in the South American country.

Negotiations on the deal are moving forward according to plan and the ambition is to reach an agreement “in the near future,” Saab said today in a statement.

Saab signed a memorandum of understanding with Embraer SA (EMBR3) in July granting the Brazilian planemaker a leading role in Gripen production tied to the signing of an order. According to that deal, Embraer will share joint responsibility for developing a two-seat version of the latest upgrade of the jet and lead marketing efforts to sell it in Latin America.

Partnering with Brazil could give the Gripen a new lease of life after the program suffered a blow in May when Swiss voters rejected a 3.1 billion franc ($3.3 billion) order for 22 fighters that had been awarded 2 1/2 years previously.

Saab, where third-quarter operating profit of 258 million kronor ($35 million) fell short of the 300 million kronor expected by analysts, is pushing the Gripen against rival offerings from companies including Lockheed Martin Corp. (LMT:US), the No. 1 defense contractor, just as tighter military spending makes U.S. and European orders harder to come by.

Argentina Interest

A bridgehead in Brazil, where local firms may build as much as 80 percent of the Gripen E model and take on the bulk of development on the two-seat Gripen F, could open up sales to markets where defense budgets are under less pressure. A carrier version of the plane may be an option for Brazil, with Argentina, Ecuador and Mexico among possible export targets.

Brazil is already poised to discuss a possible deal to sell the Gripen to Argentina as part of a plan to boost aerospace cooperation, the defense ministry said this week, adding that terms could include some production component for its neighbor. Brazil’s own contract should be signed by December, it said.

Saab was chosen to fill Brazil’s F-X2 fighter requirement last December, fending off the Boeing Co. (BA:US) F/A-18 Super Hornet after allegations that the U.S. spied on President Dilma Rousseff. Paris-based Dassault Aviation SA (AM)’s Rafale also lost.
The Gripen is cheaper to own, and cheaper to operate than the competition, even platforms that are a half generation older like the F-16 and F-18.

If Saab can keep the line open until the true cost of the F-35 becomes clear to potential customers, and this is by no means a sure thing, they could have the Mirage III of this generation.


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