Honeywell Aero to develop more defense products for Europe outside US export controls

By Allison Lampert

July 9 (Reuters) - U.S. supplier Honeywell Aerospace is looking to add more products designed without restricted U.S. technologies as mounting European defense spending drives demand for parts free from possible export roadblocks.

NATO leaders have unveiled arms deals worth tens of billions of dollars at a gathering in Turkey this week, as they face U.S. demands to spend more to defend Europe and due to pressure from Russia's war in Ukraine.

Some European defense companies and North American suppliers are also expected to discuss demand for parts not governed by U.S. International Traffic in Arms Regulations (ITAR) at the world's largest air show later this month.

There is increasing demand among European countries for ITAR-free systems due to concerns over Washington potentially blocking the re-export of sensitive U.S. components embedded in foreign weapons, according to defense officials and industry executives.

Honeywell Aerospace is set to announce a new ITAR-free product for the international defense sector at the Farnborough Airshow in Britain later this month, a source told Reuters. 

The Arizona-based company declined to comment on an announcement. But it has tasked a combined 1,000 engineers in Poland and the Czech Republic to design ITAR-free technologies, its CEO Jim Currier told Reuters in an interview in late June.

"Part of it is looking, acting, feeling and speaking like a European company," he said of doing business in Europe.

"Their main mantra, and drive and edict is to design non-ITAR technology for ... local strategy," Currier said of the engineers at the company's European subsidiary.

It comes as U.S. companies such as dronemakers have been expanding in Europe, while the U.S. this week floated a new missile maintenance facility on the continent and two defense contractors discussed building ATACMS ballistic missiles for the first time in Germany.

INTERNATIONAL EXPANSION

Honeywell Aerospace sees international exposure growing for its defense business, which accounts for about 40% of company revenue and includes navigation systems and actuators for missiles. Last year, international sales accounted for about 30% of the company's defense business, up from around 18% in 2020, Honeywell Aerospace said.

Currier said Honeywell Aerospace was using the company's global presence to scale ITAR-free navigational technology from its 2024 acquisition of Italy's Civitanavi.

"That has been the playbook. We are developing non-ITAR technologies for use in the EU and overseas for our partners in the Asia-Pacific region, like Japan and Korea," he said.

While European demand for ITAR-free components and parts has existed for years, geopolitical tensions between the U.S. and its NATO allies are underpinning greater calls for the technology.

The Canadian government has said it was made aware during last year's Paris Air Show of greater demand from European defense firms for North American suppliers free from U.S. ITAR restrictions, and such demand has led Canada to attempt further integration into European supply chains.

Michael Iacovelli, CEO of Toronto-area aerospace and defense components supplier Ben Machine Products, said more than half of its work is now required by clients to be ITAR-free. In contrast, none of its work needed to be ITAR-free in 2018, he said.

(Reporting by Allison Lampert in Montreal; Editing by Jamie Freed)