Latest Dubai Takeover

Congressional Recoil From Latest Dubai Takeover
By Diane M. Grassi

The silence on Capitol Hill has been deafening. On April 28, 2006 the White House announced the approval by President George Bush regarding the Committee on Foreign Investments in the United States (CFIUS) of its recommendation that Dubai International Capital LLC (DIC), a subsidiary of Dubai Holding and a Dubai government owned conglomerate, to assume the U.S. operations of Doncasters Group Ltd.

Just seven weeks prior, there was political posturing, grandstanding and outrage expressed by both political parties in the U.S. Congress when it was revealed, through the U.S. media, that Dubai Ports World, also of Dubai Holding, would takeover the United Kingdom company, Pinisular and Oriental Steam Navigation Co. (P&O), and its port operations of six major East Coast ports. It too had been approved by CFIUS. But now, the American public has heard nary a discouraging word, following this latest transaction.

On December 14, 2005, DIC purchased Doncasters, a privately held United Kingdom-based company, for US$1.24 billion. Doncasters is a leader in international engineering, manufacturing precision components and assemblies for the aerospace industry and military aircraft, components for industrial gas turbine engines used in military tanks, in addition to automotive turbochargers and medical orthopaedic devices. Also, DIC manufactures precision parts for defense contractors such as Boeing, Honeywell, Pratt & Whitney and General Electric.

Presently, Doncasters operates 9 industrial plants located in the U.S., which includes manufacture of turbine fan parts for the U.S. Abrams Battle Tank, and sensitive components for the new F-35 Joint Strike Fighter jet. The plants are based in Connecticut which has two factories and two in Alabama, with one each in Georgia, Massachusetts, California, Oregon, and South Carolina.

Connecticut and Georgia, however, are locations where manufacture of most of the sensitive technologies takes place. Georgia is home to Ross Catherall U.S. Holdings Inc., owned by Doncasters, which now must divest its interest to DIC. Ross Catherall supplies turbine engine blades for the U.S. Department of Defense and the military’s tanks. In Connecticut, New England Airfoil Products and Doncasters Precision Castings, manufacture precision alloy parts for both aircraft and tank engine parts.

But the national security implications of a foreign entity operating key factories that are Department of Defense suppliers might well have demanded the same call for scrutiny from the Congress as the P&O deal. According to Senator Charles Schumer, (D-NY), who launched the immediate outcry for the lack of disclosure from both the Bush administration and CFIUS on the ports deal, stated on April 28th that “There are two differences between this deal and the Dubai ports deal. First, this went through the process in a careful, thoughtful way, and second, this is a product not a service and the opportunity to infiltrate and sabotage is both more difficult and more detectable.”