4 Capturing the Direct and the Serendipitous Spillovers:
4.3 The Cloud of Spillovers
4.3.2 Related Technologies (Case 3)
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critical for the engine’s fuel economy, noise and environmental performance, Volvo Aero Corporation has developed lightweight structures, manufacturing process technology and lifelong product support as their core specialties. These are compe-tence areas currently much in demand internationally that have broad applicability outside aircraft and space industry.
While military aircraft R&D amounts to almost 50% of VAC’s total R&D invest-ment, it is a critical contributor to civilian technological proficiency. Similarly 20%
of total VAC R&D goes into space-related projects, the turnover of which is only 2–3% of total VAC sales. There are large synergies between space and military and civilian technology development which makes VAC management worry about a decline in public military and space procurement. The decision in July 2009 of the Swedish Government to continue participating in the European Ariane 5 space rocket project and the European Space Agency (ESA) program was therefore wel-come (DI July 16. 2009).
Participation in global, notably European military engine and space programs has been one way of compensating for declining Swedish military procurement.
The intimate cooperation between a competent domestic user and both Saab and Volvo Aero Corporation is however difficult to compensate for internationally.
Volvo Aero Corporation, furthermore, is still developing and producing gas turbines for a variety of civilian applications, for instance auxiliary power plants to hospitals. Energy-efficient gas turbines are expected to capture new markets, for instance home heating and automobiles. VAC has spun off six firms, three of them being started by former VAC employees. The six firms currently employ more than 1,000 people in Sweden. Three of the firms, VOAC (owned by US Parker Hannifin since 1996), Trestad Svets (acquired by Siemens), and an automobile heater activity (acquired by German Ebersprächer in 1996) will be presented in more detail as secondary spillovers under general engineering below.11
Above all, however, the early military engine experience of Volvo Aero Corporation has been the stepping board for advanced engine subsystems devel-opment and production for the three large aircraft engine producers in the world, and for ventures into the engine services, maintenance, and upgrading markets (see below).
The civilian aircraft project could only be realized on the basis of technology and experience from Saab’s earlier military production. Some aircraft technology links exist, but not to the same extent, to the automobile manufacturing that Saab began already in 1946. One innovative spillover from Saab was the early concern with automotive safety in both Saab Automobile and Volvo Car. The efficient cockpit design of the military aircraft was in part transferred to the Saab automobile and the need to press together the legs and arms of the pilot when catapulted out of a crashing aircraft13 led to the develop-ment of a primitive airbag based on Saab sensor technology that was later, in part, transferred to the Swedish automobile safety firm Autoliv (see further Sect. 5.6).
During the years from 1969 to 1996 Saab and the heavy truck manufacturer Scania were merged into one company Saab Scania with Swedish Investor as the main owner. Even though this arrangement was more financial than industrial and tech-nological, a frequent exchange of experience between development and production took place where the two business areas could benefit from each other. For example, Scania took advantage of the knowledge and experience of the aircraft division to design trucks with reduced drag. Scania claims that this corresponds to 10 years of engine design when it comes to reducing fuel consumption. After many ups and downs Saab Automobile was sold to US GM in two stages in 1990 and 1999, and Saab Automobile is suffering from the current (December 2009) distress of US General Motors. When my text is being finalized discussions are going on about whether to sell Saab Automobile, or shut it down.
Saab Aerostructures, as mentioned, has been successfully building up a presence as a specialized systems supplier to the large civilian aircraft manufacturers, and Saab has recently decided to use its military technology as the base for a move into the rapidly expanding civilian security market (see further Sect. 5.8.3). One difficult management problem, however, has been to identify and nurse radically different tech-nologies spilled from the military aircraft business to profitable industrial production and distribution within the parent’s management umbrella, eventually to be sold off.
While military aircraft are sold to the government through its technically very com-petent procurement arm (The FMV), civilian aircraft subsystems and the products from the many firms earlier organized under the Saab Combitech umbrella are designed for and sold in civilian markets that demand a different kind of commercial attention.
Saab was intimately involved in the launch of the first Swedish communications satellite Tele-X during the 1980s. This kick-started Saab’s use of light weight com-posites and the development of new antennae technology, the latter being a parallel development with Gripen antennae technology that was later transferred to Ericsson mobile antennae development (see Transfer, No. 4, 2003 and below). These and other space-related activities were combined with Saab Space that was sold to Swiss Ruag Holding in 2008 for 335 million SEK.
In 1999, Saab and Celsius (since 2000 within Saab) acquired the transponder activity within the Swedish Space Corporation (Rymdbolaget). The acquired activity was merged with the existing transponder activity within Saab and a new company Saab Transpondertech was formed. Its GPS-based technology is used to monitor marine traffic and has been the base for a successful expansion into the marine security market (Transfer, No. 4, 2003). The product of Transpondertech is based
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on a patent by Håkan Lans which combines GPS-based satellite navigation, air radio technology, and time division multiple access (TDMA) wireless communica-tions technology, the latter being the same technology as that used for a long time in Ericsson mobile telephony (see further Sect. 4.4 below).
4.3.2.2 Case 4: Secondary-Related Industrial Spillovers
from the Development and Modification of Aircraft Engines
Aircraft engine development and modification have generated many secondary spillovers several of which have diffused into general engineering production, some of them becoming automotive companies, others being acquired by foreign companies and one being temporarily successful, but later shut down. Six firms spun off from VAC currently employ some 1,000 people in Sweden. They are VOAC that develops and produces hydraulic engines or pumps (now US-owned);
a company producing automotive heaters (now German-owned Ebersprecher Nordic), diesel engine component firm Finnveden Powertrain; Toltec which was started by a group of engineers that left VAC and that has become one of the world’s largest suppliers of specialty tools for the tire industry; and Trestad Svets AB. To this group once belonged Volvo Aero Engine Services (VAES) that was for some time very successful but then suffered the fate of improved maintenance technology as new generations of aircraft engines that needed much less mainte-nance than before were introduced (see Sect. 5.7.2 on “maintemainte-nance-free” engines).
VAES was shutdown in 2007. There is also the important general manufacturing knowledge designing and manufacturing complex light weight structures using welding simulation and high-speed machining technology that is directly related to the JAS 39 Gripen project, that I will return to in the next chapter.
Engine Services
As with aircraft, also aircraft engines are complex machines with a very long service life. This means that service, maintenance, and modernization costs figure impor-tantly in the economics of aircraft engines. Over the expected service life of 25 or more years of the jet engine for a large passenger aircraft the total cost can be divided into three equally large parts for (1) engine purchase, (2) spare parts, and (3) maintenance, repair, and servicing, respectively.14 Volvo Aero Engine Services (VAES) therefore was a direct spillover from the licensed manufacturing of a modi-fied version of the Pratt & Whitney civilian JT8D engine for the military jet fighter Viggen (see further Eliasson 1995:93ff). JT8D was one of the most used civilian jet engines. It was mounted on all DC9s (and all MD 80s) and Boeing 727s. Modifying and manufacturing a military version of this jet engine on license meant that VAC
“learned the engine” and hence became both an efficient modifier (first for Swedish military applications) and maintenance operator, serving also civilian jet engines.15
At the end of 1992, furthermore, VAC (then still Volvo Flygmotor) had become a partner in the US AGES group. AGES was one of the world’s largest trading
companies in aircraft/engine components and in engine leasing and maintenance.
In 1996, Volvo Aero raised its stake in AGES to a majority holding. In 1999 the company was granted exclusive rights for the sale and distribution of both new and used spares/parts for Boeing’s passenger aircraft. In 2001, Volvo Aero owned 95%
of the company and changed its name to Volvo Aero Services (VAS). The company is now one of the world’s leading providers of services in the aircraft industry (Widfeldt and Fryklund 2005:138). The parallel rapid development of increasingly robust and “maintenance-free” (see below) engines associated with the JAS Gripen development has however undermined the market for VAES. What was soon left was only the too unsophisticated and not very profitable servicing of engines.
VAES was therefore shutdown in 2007.