1. 1 Building the 21st Century National Aerospace Workforce ASME International, Congressional Briefing May 5, 2003 Presentation by: Joel Cutcher-Gershenfeld, MIT “Right Skills, Right Place, Right Time” For more information on aerospace workforce research at MIT, see the publications presented by MIT’s Labor Aerospace Research Agenda http://mit.edu/ctpid/lara and MIT’s Lean Aerospace Initiative http://web.mit.edu/lean. For more information on the IAM and High Performance Work Organizations, see http://www.goiam.org under “visit IAM Headquarters.”http://mit.edu/ctpid/larahttp://web.mit.edu/leanhttp://www.goiam.org

2. 2 Mission and Vision Overall Mission for the Aerospace Industry: –Enable the global movement of people and goods; –Enable the global acquisition and dissemination of information and data; –Advance national security interests; and –Provide a source of inspiration by pushing the boundaries of exploration and innovation Source: Lean Enterprise Value: Insights from MIT’s Lean Aerospace Initiative (Palgrave/MacMillan, 2002) 21 st Century Workforce Vision: –Attract and retain a 21 st Century aerospace workforce with the skills, capabilities and commitment to enable transformation and success in the aerospace industry

3. 3 Strategic Challenges in Aerospace Knowledge and Capability –Demographic “cliff” –Underutilization of women and minorities –Gaps in “pipelines” – skilled apprenticeships and aerospace engineering programs –Outsourcing knowledge and skills –New technologies and changing skill mix requirements Competitive Challenges –Global competition and organizational instability –Institutional barriers, monuments and gaps in the “social infrastructure” –Plummeting research and development spending –Reduced attractiveness of careers in aerospace

4. 4 A New Mindset is Required “Investing in R & D as a “pull” for the 21st Century workforce is not a new idea, but it gets to the root cause... How do we look at R & D from the point of view of building future capability – investing in human capital – not just completing a given project or program? This means that the definition of R & D priorities must be made with multiple stakeholders’ input to anticipate future needs – taking more of a long-term, strategic approach to such investments.” –Dr. Sheila Widnall, former Secretary of the U.S. Air Force and MIT Institute Professor (in forward to Developing a 21st Century Aerospace Workforce, Policy White Paper submitted to the Commission on the Future of the United States Aerospace Industry, 2002)

5. 5 Institutional Opportunities Aerospace Inter-Agency Task Force –Spanning the Department of Defense, NASA, FAA, Departments of Labor, Education, Commerce and Homeland Security – to coordinate government aerospace workforce initiatives Aerospace Capability Network –Public/private partnerships spanning all key stakeholders – business, labor, government, universities and community groups Industry Promotion and Development –National campaign on aerospace opportunities – primary schools, secondary schools, community colleges and universities

6. 6 Aerospace Workforce Knowledge, Skills and Abilities: A Conceptual Map Source: MIT’s Labor Aerospace Research Agenda Apprenticeships and OJT Initiatives Life-Long Learning Initiatives Curriculum Innovation University / Industry Displace Worker Initiatives Industry/Workforce Skills Assessment Industry/Workforce Retention Initiatives Knowledge Management School-to-Work Initiatives Skill Standards and Certification Government Policies and Initiatives (within and across agencies) on Aerospace Workforce National, Regional & Local Aerospace Workforce Initiatives (Industry / Labor / Government) Workplace-Specific Initiatives (public and private facilities) Knowledge-Driven Work Systems (Lean, Six Sigma, etc.) Industry/Workforce Needs Assessment Aerospace Programs in the K-12 Schools Knowledge Maintenance Knowledge Enhancement Knowledge Utilization Knowledge Acquisition Skill and Knowledge Initiatives Across Multiple Enterprise Value Streams Basic Science... Conception... Design/Development... Production... Sales/Sustainment Skill and Knowledge Initiatives Across Individual Careers/Lifecycles K-12... College & University... Early Career... Mid-Career... Retirement/Post-Retirement

7. 7 Application to House (H.586 and Senate (S.309) Aviation Revitalization Bills Focus of Funding: Environmental Aircraft R&D Initiative Rotorcraft Aircraft R&D Initiative Civil Supersonic Transport R&D Initiative University-Based Centers for Research on Aviation Training Aviation Weather Research Air Traffic Management R&D Initiative High Leverage Applications: Knowledge & the Demand for labor –Assessment of current and future R&D skill / knowledge requirements in each sector Knowledge & the Supply of labor –Assessment and action around demographics (current distribution, prospective restructuring / retirements, and anticipated flow of new entrants) Knowledge Across Value Streams –Projecting skill / knowledge implications of R&D investment forward across value streams... All broadening the focus beyond training to knowledge-driven, lean work systems ENVIRONMENTAL AIRCRAFT R&D INITIATIVEENVIRONMENTAL AIRCRAFT R&D INITIATIVE ROTORCRAFT R&D INITIATIVEROTORCRAFT R&D INITIATIVE CIVIL SUPERSONIC TRANSPORT R&D INITIATIVECIVIL SUPERSONIC TRANSPORT R&D INITIATIVE UNIVERSITY-BASED CENTERS FOR RESEARCH ON AVIATION TRAININGUNIVERSITY-BASED CENTERS FOR RESEARCH ON AVIATION TRAINING AIR TRAFFIC MANAGEMENT R&D INITIATIVE.AIR TRAFFIC MANAGEMENT R&D INITIATIVE.

8. 8 Ensuring a Pivotal Impact of R&D Investment in Aerospace Attract next generation aerospace workforce – the best and brightest Maintain knowledge and capability in the context of the “demographic cliff” and other challenges Optimize the current mix of knowledge, skills and abilities Identify future skill requirements Dual bottom line: –A strong return on R&D investment –Reinvigorate the aerospace vision – A renewed sense of wonder and excitement! “Right Skills, Right Place, Right Time”

9. 9 Appendix Careers in aerospace – defense aerospace platforms by decade Individual survey data – next generation in aerospace Aerospace employment and sales data U.S. engines and parts imports as a share of total aircraft sales, 1981-2000 Instability and program cost/schedule performance National aerospace facility survey –Apprenticeship data –Global footprint data

10. 10 Careers in aerospace – lifetime defense aerospace platforms by entry decade Source: RAND Study (chart by Northrop Grumman) -- Vertical Bars: Military Aircraft Program Starts XP5Y XFY A2D F8U XC120 F6M1 F4D U2 F3H SY3 B52 F105 A3D X13 X3 C133 S2F F107 X2 B58 F10F F106 F2Y F5D F100 X14 B57 C140 F102 T2 R3Y1 F4 F104 A5 A4D T39 B66 T38 F11F AQ1 C130 X15 F101 F5A T37 X1B A6B52SR71SC4AX21X19C141B70XC142F111A7OV10X22X26BX5AX24 F14S8YA9A10F15F18YF-17B1YC15YC14AV8bF/A18 F117F20X29T46T45B2V22 F22 EMD YF22YF23 JSF X36 JSF X37 C17 JSF EMD UCAV BX Retired Retired 1950s1960s1970s1980s1990s2000s2010s2020s2030s Mid Career Mid Career Experience: 1 Program “We believe that a declining experience level has been a contributing factor to the problems we observe in many recent aircraft programs.” RAND Experience: 6+ Programs Retiring Retiring 40 Year Career Span Experience: 1-2 Programs

11. 11 Individual Survey Data – Next Generation in Aerospace “I would highly recommend that my children work in this industry” (Agree or Strongly Agree, n=482)

12. 12 Chart 1: US and EU Aerospace Employment since 1980

13. 13 Chart 2: Major Non-U.S. Aerospace Employer Countries since 1980 ( > 30,000 employees with time series data available)

14. 14 Chart 3: Sales and Employment for U.S. Aerospace Industry (SIC 372 and 376) since 1980

15. 15 Chart 4: Sales and Employment SIC 372 - Aircraft and Part since 1980

16. 16 Chart 5: Sales and Employment SIC 376 - Guided Missiles, Space Vehicles, and Parts since 1980

17. 17 Chart 6: Sales and Employment for EU Aerospace Industry since 1980

18. 18 Chart 7: Sales and Employment for Canadian Aerospace Industry since 1984

19. 19 Chart 8: Sales and Employment for Brazilian Aerospace Industry since 1995

20. 20 Chart 9: Sales and Employment for Japanese Aerospace Industry since 1988

21. 21 U.S. engines and parts imports as a share of total aircraft sales, 1981-2000

22. 22 Instability and program cost/schedule performance Table 1. Average Annual Program Cost Growth and Its Sources Source of Program Cost Growth Government Sample Average Annual Cost Growth (N=101) Contractor Sample Average Annual Cost Growth (N=80) Budget or Funding Instability 2.3%1.8% Technical Difficulties2.4%2.7% Requirements Changes2.5%2.7% Other0.1%0.8% Total7.3%8.0% Source of Program Schedule SlipGovernment Sample Average Schedule Slip (N= 76) Contractor Sample Average Schedule Slip (N= 66) Budget or Funding Instability8.2%7.8% Technical Difficulties6.3%5.8% Requirements Changes5.0%3.4% Other4.2%4.0% Total23.7%21.0% Mean Baseline (months)8570 Table 2. Sources of Program Schedule Slip Source: Eric Rebentisch, MIT Lean Aerospace Initiative, 1996

23. 23 National Facility Survey: Overview and Process Overview: –A nationally representative sample of aerospace facilities to examine instability, new work systems, skills & capability, intellectual capital, and related matters Process: –Sample drawn from national aerospace directory –Mailed survey to approximately 2500 facilities –Special panel established for respondents to 1999 National Facility Survey – drawn from same source –Second mailing and follow-up telephone calls –Data presented based on 362 responses Note: Over 200 returned as “not in the aerospace industry” or returned to sender as bad addresses CAUTION Cross-sectional data – longitudinal results in some cases Single respondents from facilities Post 9/11– current data but a major discontinuity Analysis just beginning Causality not always clear

24. 24 Profile Data on Facilities and Respondents Facility Profile Average Number of Employees: –558 employees Average Year Began Operations: –1976 Average % Sales to Largest Customer: –30% Average Number of Major Government Programs: –5.4 Programs Average Number of Major Commercial Programs: –8.9 Programs Product Volume – Primary Product: –Low: 60% Med: 32% High: 8% Unionization Among Respondents: –15% Industry Sector Distribution Aircraft Frames/Structures:24% Aircraft Engines:13% Avionics:15% Spacecraft and Missiles: 6% Other (mostly suppliers):42% Respondent Profile Average Years of Experience in Aerospace: –24 years Average Age Range: –46-55 years Average Education Level: –Undergraduate Degree and some Graduate Education

25. 25 Recent Changes in Employment: 1999 and 2002 Survey Data More than half of aerospace facilities report a decrease in employment over the past three years – a deterioration from the employment picture in 1998.

26. 26 Recent and Prospective Retirements: 2002 Survey Data The proportion of the workforce eligible to retire in next three years is substantially higher than the past three years – with the greatest impact on large employers.

27. 27 US DoL and Other Apprenticeship Programs: 2002 Survey The vast majority (85%) of aerospace facilities do not have apprenticeship programs and of those that do, approximately 2/3 have had no graduates over the past three years and have no one in the programs.

28. 28 Percent of US Respondents Reporting Suppliers in Each Location US: 95% Canada, Mexico: 23% Japan, China, Korea: 22% Europe: 35% Russia, CIS: 4% South America: 3% Other: 3% Key: Blue: Under 25%; Red: 25-50%; Green: Over 50%

29. 29 Percent of US Respondents Reporting Customers in Each Location US: 98% Canada, Mexico: 56% Japan, China, Korea: 50% Europe: 75% Russia, CIS: 5% South America: 29% Other: 18% Key: Blue: Under 25%; Red: 25-50%; Green: Over 50%

30. 30 Percent of US Respondents Reporting Joint Ventures in Each Location US: 40% Canada, Mexico: 7% Japan, China, Korea: 11% Europe: 18% Russia, CIS: 1% South America: 1% Other: 3% Key: Blue: Under 25%; Red: 25-50%; Green: Over 50%

31. 31 Percent of US Respondents Reporting Strategic Partners in Each Location US: 50% Canada, Mexico: 10% Japan, China, Korea: 11% Europe: 22% Russia, CIS: 6% South America: 1% Other: 5% Key: Blue: Under 25%; Red: 25-50%; Green: Over 50%

32. 32 Percent of US Respondents Reporting Current Competitors in Each Location US: 92% Canada, Mexico: 25% Japan, China, Korea: 31% Europe: 66% Russia, CIS: 6% South America: 5% Other: 5% Key: Blue: Under 25%; Red: 25-50%; Green: Over 50%

33. 33 Percent of US Respondents Projecting Future Competitors in Each Location US: 73% Canada, Mexico: 33% Japan, China, Korea: 68% Europe: 58% Russia, CIS: 20% South America: 13% Other: 10% Key: Blue: Under 25%; Red: 25-50%; Green: Over 50%

34. 34 Selected Written Comments on 2002 Surveys September 11 has had a severe impact on our industry which has influenced this survey. Airlines have received government support, however none of these funds have provided GSE manufacturers stability or longevity. Over the last two years we have been working very hard on upgrading Quality Systems (AS9000), implementing LEAN manufacturing, training, while at the same time diversifying the business and trying to penetrate new markets. Our products (cargo systems) are installed on older aircraft and those were affected heavily by the down turn in the economy as well as the events of sept. 11. Can't get domestic labor - skilled or otherwise. HELP! Since September 11, 2001, there has been a significant downturn in the volume of our business. I know for a fact that our facility and at least three of our most valued suppliers face an almost insurmountable challenge to stay afloat over the next 90 - 120 days if something doesn't change. We withdrew from the aerospace markets in 1997 and moved our manufacturing capabilities to the energy equipment markets. OEM's are using DOD funding to develop new technologies, practices & procedures and then turnaround and subcontract work overseas to the lowest bidder. They also utilize these advances on their commercial products which are primarily subcontracted to Asia & Mexico under the guise of mandatory offsets.