2 Larry Trowel General Manager, Government Business Practices & Processes GE July 26, :30 a.m. – 10:30 a.m. Common Ground: The New Specialty Metals Rules and How Government and Industry Can Work Together

3 “Defense” Industry has Multiple Business Models Defense-focused Facilities –Build-to-DOD-order; supply chain responds to DOD orders with serial processes –No need to segregate materials Integrated Commercial-Military Facilities –Build-to-DOD-order with common components and integrated production lines –Segregated materials impractical Commercial Facilities –“Off-the-shelf” products and components; global supply chain driven by forecast, not individual orders –No opportunity to segregate Business Model Drives Impact of Restrictions

4 Integrated Production - Example Efficient Production Drives Common Processes COMMON PART NUMBER COMMON DESIGN – DIFFERENT PART NUMBER Titanium Bar Stock Common Airfoil Forging Final Part Number Common Inventory CF34 Comm’l Application TF34 Military Application Titanium Bar Stock Common Airfoil Forging In-process Differentiation of Part Numbers (usually minor differences) Final Part - Number CF34 Comm’l Application Final Part - Number TF34 Military Application Jet Engine Airfoils

5 Commercial Off-the-Shelf Item - Example Commercial Market Drives Production, Support – DOD Benefits Commercial Applications Boeing , -400, -400ER , -300, -400 MD–11 AirbusA300–600 A310–200, -300 A , -300 Engines in Commercial Operations = Commercial Operators = 249 US Military Applications VC-25 (Air Force One) E-4 KC-10 Air Borne Laser C-5M (re-engining in process) Engines in Military Operations = 225 Spare Parts Commercial Operators Consume 99% of Spare Parts DOD procures its spares directly from commercial warehouse in same manner as other commercial customers CF6 Engine

6 Commercial Conundrum – Specialty Metals End items and components forecasted and manufactured for commercial market –DOD participates, but does not drive Materials typically procured well in advance of customer orders –Little opportunity to impact basic materials Segregation in production impractical, costly, disruptive –Requires “job order” processes Commercial products focus on material properties, not country of origin –Some exceptions for special applications Unreasonable choices... –Compliance across all products – commercial and DOD? –Segregate DOD materials, production, inventory? –Do not sell to DOD or its suppliers?

7 Summary OSD, DCMA, Contractors working well together to make current policy work Statutory and policy flexibility are warranted… specialty metal industry is healthy now and in foreseeable future Policy flexibility especially important where DOD relies on commercial market place