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The Singapore Technologies Engineering (ST Engg) group is slated to more than double its revenue in the next five to 10 years to about $10 billion if its growth strategy in the United States pans out.
"The whole idea is to operate as a US company and leverage on brand names that are familiar to the US market," said ST Engg's President and CEO Tan Pheng Hock, in a recent interview with Today in the US.
To avoid controversies that have dogged some government-linked corporations, ST Engg made a strategic decision to grow in areas where policies are clear and consistent.
The game plan is simple enough: Tap into the lucrative US market by attacking both the commercial and highly-regulated defence sector, with retired four-star US General John Coburn at the helm of its US operations as chairman and CEO.
ST Engg made its first foray into the US in 1991 by acquiring Mobile Aerospace Engineering to bolster its aerospace operations. Ten years were to pass before the group made a broad-based push into the country.
In 2001, after creating VT Systems (VTS), a holding company for all of ST Engg's US interests, the group went on a buying spree. The result is speciality companies such as San Antonio Aerospace, VT Halter Marine, VT Miltope, VT SVC (Specialised Vehicles Corporation), iDirect Technologies, VT LeeBoy and MAK Technologies now fly the Singapore flag.
Investment in these companies, which mirror ST Engg's expertise in the aerospace, electronics, speciality land systems and ship-building sectors, paid off handsomely. VTS' contribution to the group's global revenue more than doubled from 11.3 per cent in 2005 to 27.7 per cent last year.
Now, the biggest challenge facing the group's US operations is sustaining this growth.
"In years past, Halter Marine was the leader in the Coast Guard market. They got out of that market," said Mr Coburn of VT Halter Marine's strategy. "In years past, Halter Marine was the leader for the Special Operations Command market — small boats. They got out of that."
But now "we're now getting back into those markets, keep what we have, do more FMS (Foreign Military Sale) if we can, do a bit more commercial as well, so there's a strategy associated with each company", he added. "But it's a combination of organic growth and acquisition."
With the retired general and his team's contacts, VTS has won government projects listed with the US General Services Administration (GSA), including providing additional patrol crafts for the US Coast Guards.
This is an important gateway for any company that wants a share of the federal government's project-spending, which amount to hundreds of billions of dollars tendered out through the GSA.
VTS also managed to expand on the Special Security Agreement granted by the US Defense Security Agency to VT Halter Marine.
Its other outfits such as VT Miltope are now able to engage in more top-secret defence-related projects and sell to the Department of Defense, as well as to US-friendly countries listed under the FMS programme.
Mr Coburn's immediate focus is to grow the recently-acquired specialty vehicle businesses. "I'm very excited about getting VT SVC into Kuwait and we're on the verge of doing that."
The retired general also said: "If we can get refrigerated trucks into a country that's 120°F (49°C), that works out! But I really want to get them into the FMS business. Now that they are on the GSA schedule as well, magic things will happen."
For VT LeeBoy, a company that specialises in manufacturing small- to mid-sized road-paving machinery, VTS hopes to expand on its product offerings by collaborating with GJK — ST Engg's recent acquisition in China specialising in construction equipment such as excavators.
These projects include the introduction of GJK excavators under the LeeBoy brand name to the US market and sourcing of cheaper parts for its US-made pavers from China.
With all pistons firing, Mr Coburn, whose last command was with the US Army Material Command, is confident about growing VTS to a US$3 billion ($4.57 billion) to US$5 billion company in the next five to ten years. This would be roughly equal to 1 per cent of the current US$470 billion US defence budget.
"I think the first billion is the hardest," said the VTS CEO.
"Once you make the first billion, you can achieve incremental growth a lot easier and a lot faster. So I don't see that as an unrealistic target at all. In fact, we have significant additions to the revenue within the next six to eight months this year … the company is doing very well." - TODAY/sh
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