Raanan Horowitz, President and CEO, Elbit Systems of America, discusses the company’s latest defense projects and focus areas, what it means to return to great power competition and the current budget environment with Defense & Aerospace Report Editor Vago Muradian at the Air Force Association Air, Space and Cyber Conference held at the Gaylord National Harbor.
Our Air, Space and Cyber Conference coverage is sponsored Elbit Systems of America, L3 Technologies and Leonardo DRS.
Raanan Horowitz
President and CEO
Elbit Systems of America
AFA 2018 Air, Space, Cyber Conference
September 2018
Vago Muradian: Welcome to the Defense and Aerospace Report. I’m Vago Muradian here at the Air Force Association’s annual Air, Space and Cyber Conference and Trade Show, the Air Force’s leading flagship event every year, here at the Gaylord National Harbor just outside Washington, DC. Our coverage here is sponsored by Elbit Systems of America, L3 Technologies, and Leonardo DRS and we’re honored to have with us the Chief of Elbit Systems of America, Raanan Horowitz. Raanan, L’Shana Tova, Happy New Year.
Raanan Horowitz: To you as well.
Mr. Muradian: It’s good to see you. So big message from Air Force leadership about great power competition is back. The U.S. Air Force is going to get bigger in order to be able to do that mission. The Chief of Staff has been pushing forward his message of multi-domain command and control.
Talk to us across the piece, what are some of the things you’re highlighting this year given, you know, this sort of marked shift, or I would say an evolutionary step, right, in the messaging from the U.S. Air Force about what it needs for the future?
Mr. Horowitz: One of the key areas we’re focusing on is situational awareness. Everything a pilot needs in the cockpit to be able to understand the situation around him, identify threats, share information, data fusion and presentation. This includes, of course, our extended line of helmet monitor display systems, all the way through the F-35, larger displays in the [advanced] crew station that we’re putting right now on the F-15 and the F/A-18, and of course systems like that.
So we’re focusing on how do we bring all of that sensor information, multi-domain information into the cockpit, to the pilots in a way that they can use it effectively and understand how to employ what they need to employ to execute the mission.
Mr. Muradian: So that’s for the multi-domain command and control piece of it because on the Israeli side of the company you guys have been pioneers in a lot of that technology.
Talk to us a little bit also, you know, you guys have, there’s the new Seeker, a new head on the JDAM that’s behind us, as well as the GBU-39B, the small diameter bomb as well.
Talk to us a little bit on the kinetic side of things, some of the programs. And then I want to go back to the helmet mounted side because I want to ask you a couple of questions on the F-35.
But talk to us on the kinetic edge and some of the things that you guys are highlighting here.
Mr. Horowitz: Absolutely. You know that our helmet monitor display systems actually are the ones that are used to aim a [inaudible] missile off fighter aircraft, so we have a lot of experience in targeting and aiming and precision engagement.
In addition to that, when we look at what we’ve done on the JDAM, of course, as you know, we’ve added semi-active laser seeker. Very cost-effective. That provides the JDAM the ability to go after moving targets and not just static targets, which provides a great capability.
We’ve now worked with Boeing to adopt the same capability into the SDB-1, so now we have a laser SDB that is cost-effective, that’s already approved for carrying on multiple aircraft, and is going to provide that capability at a very affordable way to the SDB, a moving target capability on the SDB at a very affordable price.
Mr. Muradian: And you guys also have something, I’m always fascinated by the ultra-small munitions, and talk to us a little bit about Hatchet. Because that is, you know, we’ve seen the new generation Textron, also in the business, with a little, small guided munition. Talk to us a little bit about the capability that that brings, that folks don’t really have now.
Mr. Horowitz: So we’ve worked with ATK as a partner on the Hatchet. We’re providing, again, a very accurate and cost-effective laser seeker to provide for small munitions. And that basically provides ability for platforms such as UAS to carry an extended load of munitions with a high degree of accuracy and at a very affordable price. And we see that’s a market that’s really growing, it’s going to provide some great capabilities.
Mr. Muradian: And also, right, it minimizes collateral damage because that’s enough to take out a vehicle or a house or even a room in a house as opposed to knocking down the whole block.
Mr. Horowitz: Absolutely. And a good munition that we can talk about that’s been using that capability with our Seeker is the Raytheon Griffin missile that’s also using our laser, semi-active laser seeker and has proven very, very effective, exactly in the conditions you mentioned Vago. Very, very low patricide, very low collateral damage, and exceptional capability.
Mr. Muradian: And again, a little bit of the Israeli heritage coming over to this side, knowing how hard the Israel Air Force works to try to have that range of munitions. I remember many, many years ago, even non-kinetic stuff that’s been deployed in certain circumstances.
And of course Orbital ATK, now Northrop Grumman, right? Your partner.
Let’s go to the helmet. There have been challenges, and you guys have been working it very, very hard, all the way from the JITR issue, now there’s the green glow issue which kind of came up when we were aboard Abraham Lincoln for operational evaluation of the F-35. We talked to Greg Ulmer, the General Manager for the program at Lockheed Martin.
Talk to us a little bit about how you’re working this, because the organic LED, the OLED looks like it’s the solution. Talk to us, this is a very tightly integrated package that you guys are working. Talk to us about the solution set and how quickly you guys are going to be able to get that out.
Mr. Horowitz: Absolutely. So as you know, the green glow is basically an inherent phenomena associated with the AMLCD displays basically that are being used currently in the helmet. In very low light conditions you have that effect, which was really bothering especially U.S. Navy pilots. We’ve worked an expedited program together with our partners from [Rockwell Collins] to introduce into the helmet, replace the AMLCD displays basically, and [inject] with an OLED, Organic LED that basically takes away that phenomena. We have helmets that are in testing. I think the solution looks very promising. We’re working to put it into production, and I believe this issue is going to be behind us pretty soon.
Mr. Muradian: How, you know, one of the things that reporters talk about a lot is well, you know, the military services now don’t communicate as much as they should. Secretary Mattis has made clear there’s stuff you should talk about, there’s a whole bunch of stuff we shouldn’t be talking about, particularly, as he likes to say, don’t keep talking about your readiness shortfall, just fix it. Because you’re transmitting to adversaries, you know, a deficiency. And there are those that say that that limits the ability of executives like you to make decision-making because they’re not communicating enough.
From your standpoint, you go to all the events, you go to events that are highly classified as well. Do you feel like you’re getting, you know, that at least the military services, even though they may not be speaking as much publicly, are still communicating effectively with industry?
Mr. Horowitz: I think the overall answer is yes. Look, communication is two-way. The Air Force, the military needs to communicate and is communicating. We in industry need to communicate as well.
This year we put a lot of emphasis on what we call outside in, on being able to be very connected to our customers, to their needs. We’re doing it here at AFA but we’re also doing it on many other events. There are actually smaller events taking place at different bases. If it’s the Worldwide Review for F-16 in Ogden, if it’s the Life Cycle Industry Days in Wright-Patterson Air Force Base which took place last week. We actually are putting a lot of emphasis on communicating with our customers. And again, it’s both ways. It’s industry communicating to the Air Force and the Air Force, of course, doing a lot to communicate with industry.
Mr. Muradian: Let me ask you about the [Mini-Bus]. The [Mini-Bus] is out, in terms of the spending package. Have you had a chance to take a look at it? What does it mean for you guys and your bottom line? Because, you know, all of these funding targets are shifting all the time. It looks like aircraft programs did well. Talk to us a little bit from a CEO’s perspective on what you saw in the document and how that’s going to affect you guys.
Mr. Horowitz: From our perspective, we’re very happy to see the Air Force getting the necessary funding to recapitalize the force, to make sure we not only buy new platforms like the F-35, upgrades of the F-16 and other capabilities. We’re excited. I think this is a good budget bill that will provide long-term stability. Of course, we need to see what’s going to happen with the next sequester and how we overcome that. But overall, I think it’s a good picture and a good news story for the industry and for us.
Mr. Muradian: Are you, I mean one of the things when we heard the Secretary’s announcement, and I know how proud she is of it and how Chief and how the leadership team is proud of it, but the consensus from a few people was like wow, okay, this message should have been delivered a few years ago as the funding cycle was peaking, as opposed to either flattening or maybe declining it.
You and I have talked about this. I’m sorry it’s like we’re getting old asking this question. But as you look forward, do you think consensus is wrong? Do you think that there may be actually much more money in this budget than some people think? You know, they keep saying flat to down. But some of these trends have defied gravity. Do you think that it’s going to be a little bit higher than people think?
Mr. Horowitz: You know, Vago, a company like us, we look not necessarily just to the total budget picture but also where the money is going, what’s the emphasis. From a perspective of where the money’s going, if it’s on situational awareness, multi-domain, connectivity, fusion, sensors and data, we think this is a good trend. Because the ability to introduce new systems, helmet-mounted display systems, large area displays, fusion capability, advanced threat detection, is built into the budget, so I think it’s going to be a positive story for us going forward.
Mr. Muradian: Everybody is talking about speed. Dr. Roper, who’s the Air Force Acquisition Executive has the century goal, right? Cut 100 years, God bless you if you can do that, out of acquisition. You know he wants certain small contractors and startups to get a one-day contract. You’ve been in this game for a long time, you’ve pushed a lot of very big balls up hills that have taken a long, many, many years to do. Do you notice a speed difference now in how you’re dealing with the customer?
Mr. Horowitz: I think what we’re seeing is a genuine effort to use OTAs and other tools to really speed up the process. I think where I’m still waiting to see what’s going to happen is whether the Air Force is going to be able to introduce those capabilities into programs of record. That’s a challenge. You can do an OTA, you can investigate technology, but how are you going to incorporate this into an ongoing program of record, an aircraft, where you don’t want to disrupt the production line and so forth. I think that’s the challenge.
The other challenge, which I’m talking to Air Force executives on, is with regards to working with partners and allies. I think there’s more potential that the Air Force can gain by working with trusted allies and partners. Not just Israel. It can be other people that have innovative solution and technologies, and that’s another way that the Air Force can speed up introducing new capabilities with sharing and leveraging international investment from trusted allies and partners.
Mr. Muradian: And do you see there still being a lot of openness on the part of the Pentagon? You know, during the height of the wars there was a lot of allied technology that made it into the inventory. Every now and then you hear some rhetoric that’s a little bit, obviously, a lot of folks are concerned about Buy American and what the new industrial strategy is going to look like that the administration’s going to roll out, that Peter Navarro’s going to be rolling out.
But you know, talk to us a little bit. Do you still see that kind of openness when you come in with a good idea?
Mr. Horowitz: I think at the official level, the higher-level official levels, there is great openness and willingness to talk about that. The challenge is at the working level, the mid-level. They are confronted with different issues. Cybersecurity, information assurance, supply chain resiliency, and their ability to discern between a real threat and a trusted partner and ally is more of a problem. We’re working with DoD. We’re working with the Air Force, with DoD, with all the services on how to help them make it happen because we think it’s possible to balance these requirements for supply chain resilience, security and so forth, with collaboration and close cooperation with trusted allies and partners. But it’s clearly a challenge, Vago, it’s not as simple as it sounds.
Mr. Muradian: Let me take you because I know your time is tight. Two last questions. One, you mentioned cyber. You guys have, I mean before it was cyber you guys were actually involved in that field as doing some of the most sensitive work for Israel, as well as involved in the U.S.
How are the new cybersecurity standards that the department wants to institute, Secretary Mattis has put emphasis on this. It’s come from the White House as well. The last White House tried as well, but it didn’t work, in part because everybody was like well, you know, you shouldn’t be that proscriptive and you shouldn’t be limiting, and now everybody’s realizing it just has to change.
So from your perspective, what is that going to do? What’s it going to do for the cost of business? How much do they reimburse for you? How much, how is this going to work? Because every single thing you’re touching will require now more effort, more activity, more documentation, more certification?
Mr. Horowitz: Well, I think we’re separating this between security for IT and computer systems which we’ve invested in the last few years heavily and we’ll continue to invest like any other corporation. It’s just part of doing business.
The other side is what’s called uncompromised delivery. The ability to deliver a combat system, either a system in an aircraft or an aircraft such that it will not be compromised in the future. It’s critical. It’s necessary. It’s just like needing to protect that aircraft against missiles. You have to protect it against cyber intrusion and security issues.
So we see this part of doing business. Yeah, it’s going to cause some increase in some requirements and probably some costs, but at the same time, it’s essential. It’s part of doing business these days.
Mr. Muradian: Israel Military Industries, a legendary company, if I read the newspapers correctly is being acquired by Elbit. Congratulations. First, when is the bouncing baby going to be arriving in full? That’s the first question. Then talk to us a little bit, if we talk to [Bootsy] he would talk about the cultural difference. Both very capable, iconic Israeli companies, but one purely private, historically private, and the other one a state-owned company with its own culture. So talk to us about when it all happens and then the integration challenge, given that both sides of the company have so much to offer.
Mr. Horowitz: Well, from a milestone perspective, I understand that this is going to happen in early October. The closing is going to happen and IMI is going to become [Power Development].
There’s going to be challenges. We will assess the portfolio, we will look at how we will integrate it. I think we’re focusing on the fact that IMI has some very good core technologies that Elbit, as you know with our history, can take, integrate, assimilate into our portfolio and provide our customers better solutions.
One of the first ones is actually going to be in the ground systems. You know that IMI is a producer of Iron Fist, which is one of the premier Active Protection Systems for ground vehicles. We’re doing some testing in the U.S. on that. I definitely see in the future how we bring the same kind of technology potential to aircraft platforms as well. But there’s lots of potential. We are just in the beginning of assessing that, and of course, we will talk more after the acquisition closes.
Mr. Muradian: That’s right. We’re at a trade show. Raanan Horowitz, President and CEO of Elbit Systems of America. Thanks very much. It’s always a treat, and if only the IMI guys could give me a good deal on a used super Sherman, I’d be a very happy guy.
Mr. Horowitz: Thank you, Vago. Again, L’Shana Tova.
Mr. Muradian: L’Shana Tova. Thank you.
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