US embassy cable - 05PARIS3485

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 003485 
 
SIPDIS 
 
STATE FOR EB/CBA (MERMOUD) 
STATE ALSO FOR EUR/WE 
COMMERCE FOR 534 BIS, MAC/EUR, AND USFCS/ADVOCACY 
 
E.O. 12958: DECL: 05/20/2015 
TAGS: BEXP, ETRD, PREL, FR 
SUBJECT: (C) REQUEST FOR SECDEF ADVOCACY ON GE PROPULSION 
OFFER FOR FRENCH-ITALIAN SHIP PROJECT 
 
REF: PARIS 2902 
 
Classified By: Charge Alex Wolff as confidential for reasons 1.5 (b) an 
d (d). 
 
1.  (C) SUMMARY AND ACTION REQUEST:  Embassy Paris believes 
that Secretary Rice's and Secretary Gutierrez' advocacy 
letters in support of General Electric's bid to provide gas 
turbines to equip the join French-Italian Multi-Mission 
Frigates (known as FREMM) were useful in signaling high-level 
USG interest in this issue and perhaps in postponing the 
decision for several weeks.  However, given PM Blair's 
intervention in support of a competing Rolls-Royce bid 
(reftel), we believe an additional high-level USG 
intervention is needed.  Since this decision will proceed 
through French Ministry of Defense channels, Charge requests 
that agencies consider preparing an advocacy letter from 
Secretary of Defense Rumsfeld to Minister of Defense 
 
SIPDIS 
Alliot-Marie.  Embassy Rome may wish to advise whether a 
similar letter to Secretary Rumsfeld's Italian counterpart 
would be equally useful.  End Summary and Action Request. 
 
2.  (C) Embassy's latest information indicates that the joint 
French/Italian FREMM Steering Committee has decided to 
postpone engine selection until just after the Paris Air Show 
(June 13-19).  Earlier information had indicated that a 
decision would be made by May 17.  We believe that this delay 
may mean that the letters from Secretaries Rice and Gutierrez 
were (at least partially) successful.  We understand also 
that the Steering Committee has asked both French and Italian 
shipyards to review technical specifications for the engine 
component.  This is of concern to GE, as previously the 
shipyards had indicated a desire to upgrade engine power 
specifications above the specified power listed in the 
overall technical specification.  GE notes that their gas 
turbines meet the original technical specifications and have 
the added benefit of lower cost.  GE would not compete as 
favorably with Rolls Royce if engine power requirements are 
increased, which we understand would not be consistent with 
overall frigate desi 
gn in any event. 
 
3.  (C) The anticipated value of the FREMM propulsion 
contract alone is approximately $250 million.  However, GE 
reps have told Embassy officials that the long-term 
partnership proposed by GE to DCN (Naval Construction 
Directorate - the facility that will build these ships for 
the French navy) that would result from the selection of GE 
engines, could result in business in excess of a billion 
dollars.  The FREMM contract is important to the future of 
GE's military gas turbine business.  Without this contract, 
we are told that GE's ability to continue to produce gas 
turbines beyond 2006 is questionable, which could leave Rolls 
Royce as the sole supplier in this market segment. 
 
4. (SBU) We believe this transaction holds symbolic and 
political significance in furthering the transatlantic 
partnership.  It also makes good business sense for the 
French and Italians, both for their shipbuilding industry and 
for the interoperability of their naval forces with the U.S. 
Navy.  GE systems have a long history of satisfactory 
performance in both the U.S. and Italian fleets.  Similarly, 
GE has been a faithful partner for many years as an investor 
in Italy and France and as a partner of French jet-engine 
manufacturer, SNECMA. 
 
5.  (U) As we noted reftel, given the level of UK advocacy, 
failure by the USG to advocate at a similar level may lead 
French (and Italian) officials to conclude that the UK places 
more importance on this decision than the USG.  Given that 
this decision will be taken through defense channels, we 
believe that a letter from Secretary of Defense Rumsfeld to 
his French (and perhaps his Italian) counterpart would be 
extremely helpful.  In our assessment, having contacted the 
Finance Minister and the Foreign Minister while ignoring the 
Minister of Defense may in fact complicate our efforts. 
 
6.  (SBU) ACTION REQUEST:  Embassy requests that the 
Department, in conjunction with Commerce, support this 
request to DOD to ensure that USG interests in this tender 
have been communicated directly to French Defense Minister 
Alliot-Marie by Defense Secretary Rumsfeld. 
 
 
WOLFF