GE Reports

With the news that GE is close to wrapping up its deal to create a new civilian avionics joint venture with China’s AVIC, we asked Lorraine Bolsinger, president and CEO for GE’s Aviation Systems, to explain key portions of the deal and what steps are being taken to prevent unauthorized technology transfer.

GEReports: What is the JV?

Lorraine Bolsinger: It’s a brand new business being created by GE Aviation and AVIC that will create and market commercial integrated avionics systems around the world to such aircraft manufacturers as Boeing, Airbus, China’s COMAC — which is the launch customer with its C919 narrow body jetliner — Bombardier and Embraer. The integrated avioincs system combines technologies in the aircraft that include navigation, cockpit displays, communications, and surveillance, to name a few. The joint venture’s initial focus is to provide integrated avionics system for the C919 aircraft now under development, and to build a global customer and product support infrastructure. Think of the integrated avionics system for an aircraft as much like the operating system on your computer.

GER: Why do a JV?

LB: GE Aviation is the world’s leading jet engine producer, but the company became a significant avionics supplier through the 2007 purchase of Smiths Aerospace. The teaming between AVIC and GE is the result of both companies desiring to become a tier-one, commercial avionics supplier globally, and we are thrilled to have launched our first products and services for the C919 program. GE Aviation has a tremendous relationship with the Chinese aviation industry. GE Aviation already generated revenues of $778 million in 2010 from sales and services in China alone. That figure is expected to grow to $1 billion in 2011. With COMAC anticipating the delivery of more than 2,300 C919 aircraft over the 20-year life of the program, the JV is already off to a strong start.

We also have a history of successful JVs, as this one with AVIC will be the fourth 50/50 joint partnership company for GE Aviation. The other three are CFM International (producer of the most popular jet engine in aviation history), GE Honda Aero Engines (producer of jet engines for small corporate jets), and The Engine Alliance (a JV between GE and Pratt & Whitney which produces engines for the A380.)

Lorraine Bolsinger

GER: What protections are in place to safeguard the technologies?

LB: GE and AVIC are technology companies and place a high value on protecting technology. The JV will be creating new technologies and GE, AVIC and the JV have every interest in protecting intellectual property, which will be a key asset of the venture. GE and AVIC have agreed to ensure the GE AVIC JV establishes a robust compliance plan to guard the technology and ensure that it is used solely for civilian applications.

Importantly, only approved personnel will be employed by the JV and there are strict security measures outlined in our technology control plan, or TCP, such as physically separating the JV from the parent companies and separating the information technology side of the JV from the parents. We’ll also have third party compliance audits conducted at least once a year.

GER: How do you know your safeguards are enough?

LB: During the two and half years we’ve worked on the formation of this JV, we’ve been consulting with the leading experts in global trade and business to ensure full government compliance and the highest level of security with regards to intellectual property and export controls. And we have continued to consult with relevant U.S. government agencies during this process.

GER: Does the US government provide any oversight to this transaction, now or ongoing?

LB: GE’s main contribution to the JV will be what’s called commercial IMA technology, which stands for integrated modular avionics – basically the computing system for the aircraft. Commercial IMA and IMA technology doesn’t require a license for export to most countries, including China. The JV will also supply onboard maintenance systems and display systems to COMAC, but it’s likely that much of this content will be made by the parent companies.

GER: How will you make sure that sensitive technology does not get transferred to the military?

LB: We’ve kept it very clear: No AVIC or person in China who retains military-related responsibilities will be given access to technical data from GE or the JV – and there’s no cross-employment allowed with military or intelligence departments – or with their suppliers. To make sure there is no gray area, AVIC personnel are not allowed to work for the military or be put on a military assignment for two years after leaving the JV.

GER: What does it mean for U.S. jobs?

LB: Even though the JV will be headquartered in Shanghai, the JV will support and maintain at least 300 high-tech jobs each in the US and China as well as a significant number of jobs in the U.K. — and that number is expected to grow. In the U.S, the majority of the jobs supporting the JV will be in Grand Rapids, Michigan; and Clearwater, Florida. In all, GE Aviation’s work in China translates into about 1,800 GE high-technology jobs in the U.S. They involve producing and supporting jet engines for China, as well as developing the new engine and avionics system for the C919.

* Watch a video featuring new employees working on the JV in our Grand Rapids, Michigan facility