The importance of this; Pakistani leader Nawaz Sharif, who wanted to strengthen his helicopter fleet, after America grumbled when our "Atak" brand military helicopter was introduced in detail[1], actually the engine of our national helicopter is not indigenous; US objection [2]to the award of the Long Range Missile Defense System procurement tender to China, which is licensed by the American company LHTEC, which is a joint company of British Rolls Royce and American Honeywell companies (on the grounds that it is incompatible with NATO Defense Systems), which has made a commitment to transfer technology once again, it has become clear with these events.
These and similar examples show that the domestic defense industry is the first indicator of the independence of countries.
Defense Industry Investment in Terms of Profitability
While the Defense Industry is of such great importance, why do the domestic industrialists take a cold turn to invest in this matter and why the rate of closure of the investing companies in the first 5 years is 65%[3] in other sectors, while this rate is higher in the defense industry. In order to comprehend this better, it is useful to examine some technical details over an example;
The price of Billet Iron Block is around 500 USD / Ton. The price of an average family car is around 15,000 USD. Considering that the automobile is around 1 ton, when we process iron which is 500 dollars per ton, a car with a ton of 15.000 dollars is produced. The price of a main battle tank starts at $ 1.5 million. If we consider that a tank is 50 tons on average; ton price is 30,000 dollars.
When you switch from civilian light helicopters, which cost around 1.5 million dollars, to military helicopters, the numbers rise to over 20 million dollars.
The size of the sales prices does not bring along the profitability of the defense industry investment. For example, while the number of tanks in the inventory of the Turkish Armed Forces is around 4000, the number of vehicles on the highways are millions. Considering that the average tank age in the inventory is 39, the severity in terms of Defense Industry investment becomes more apparent. Roughly, it seems more profitable to produce cars than to produce tanks (from an investor's point of view). Because it will be possible to gain profit in a much shorter term.
As a result of an evaluation to be made on the annual sales figures for the industrial investor, the fact that the Defense Industry Investment is extremely costly due to the necessity of high-skilled labor due to the need for advanced technology, R&D investment and modern technological machinery park, causes an escape from the investment in the Defense Industry for the industrialists.
When we look at the world's giant Defense Industry companies, it will be seen that these companies have great investments other than Defense Industry productions. The main reason for this is that the demand for Defense Industry products is limited to the number of Armed Forces in the world and these buyers do not regularly buy aircraft, helicopters, tanks, submarines and warships every year. The producer must first prove its quality and then wait for the demand to occur, and when the demand occurs, it must win the tender by competing with other producers. Any company that fails to win has to wait for a new demand for a few years.
These difficult conditions require the defense industrialists to be supported by the state and to create financing that will continue to exist with alternative products.
Let us leave the necessity of the state supporting the defense industry as the subject of another article and take a look at the vital steps investors should take in defense industry investment.
Main Defense Industry Products? or Sub-industry Products?
If the investment in the defense industry takes such a long time to make a profit and many factors such as the political structures of the states affect the issue, is it reasonable and logical for the industrialist to invest in defense industry production?
If the right policies are followed, Yes! If you want, let's look at the subject from a different point of view, for example, the production of tank parts.
The main features we look at when buying a car are the engine power and cylinder volume of the vehicle. We want the engine power to be high, the cylinder volume to be low and the fuel consumption to be at the lowest level. Because the larger the cylinder volume, the higher tax of the vehicle. An average family car has 90-100 horsepower.
When we talk about engine power in the tank, instead of the only horsepower, the engine power per ton comes out. New generation main battle tanks have 1000 horsepower. The figure looks very large in its plain form, but when we calculate per ton, considering that a tank weighs an average of 50 tons, the engine power of the tank is
1000 Horsepower/50 Ton = 20 Horsepower/Ton.
However, in automobile engines, we encounter a ratio of about 100 horsepower/ton. It means that the cars we use daily have 4 to 5 times more engine power (per ton) than the combat vehicle tank. Today, 2000 horsepower tank engine technologies are being studied, but also which is very insufficient.
It is beneficial to improve engine production technologies and to develop new technologies with superior performance by producing high-quality spare parts for the revision of existing engines.
Such an approach will enable the industrialist to lay the foundation of his company. The biggest problem in tanks with 20 horsepower/ton engine power is that if the tank travels a long distance, it easily causes engine failure. Therefore, the engines of the tanks require much more frequent and costly maintenance and repair operations than automobiles. Most countries' tanks are inoperable in warehouses, only a demonstration amount of tanks are kept active and used in demonstrations and drills.
Conclusion
Today, having the original technology that can produce Tanks, Helicopters, Fighter Jets, Submarines and Warships is a very important issue for the independence of the country. The most important factor that will ensure the investment in this technology to hold on to life is that the industrialists are guided by the state.
The relevant state institutions should coordinate the defense industry production needed in our country by analyzing the defense industry inventory, installed production capacities, investments and short, medium, long-term weapons and ammunition needs of all friendly and allied countries, not only Turkey. On the other hand, for example, the companies producing automobile engine pistons should prompt one to produce pistons for military vehicles of American origin, while the other should be prompted to produce spare parts for Russian vehicles, another to produce parts of German-origin vehicles and another to manufacture parts of Far Eastern-origin vehicles.
In this way, companies will have the opportunity to finance R&D activities for military-purpose products while maintaining their vitality with their production for civilian purposes under normal conditions.
[1]Presentation of the National Helicopter “Atak” to the Prime Minister of Pakistan, Mr. Nawaz SHARIF (September 18, 2013), http://www.ssm.gov.tr/anasayfa/hizli/duyurular/etkinlikler/ziyaretler/Sayfalar/20130918_PkstnBsbknAtakTakdimi.aspx (Access Date February 3, 2014)
[2]Kerry echoes our concerns, http://www.trthaber.com/haber/dunya/kerry-kaygilarimizi-tekrarladi-109179.html (Access Date February 3, 2014)
[3]Companies' first 5 years 'nightmare', http://www.hurriyet.com.tr/ekonomi/23431671.asp (Access Date April 19, 2014)
