Hindustan Aeronautics Ltd. (HAL; India, state-run; website) revealed that nearly a third of its contract purchasing losses for 2007 are tied to improper acquisition of replacement engine bearings.
Founded in 1940 and now run by the Ministry of Defense, HAL is one of Asia's largest aerospace companies. It manufactures and assembles aircraft, helicopters, engines, power systems, and provides service and replacement parts. The company also services navigation and avionics, and even runs the Bangalore airport.
A recent audit report released by the Comptroller Auditor turned up the problem, triggering an inventory writeoff and loss report to India's Parliament.
The saga began in late 2000, when Hindustan Aeronautics sought and received approval to review alternative sources for bearings used in the widely-deployed Rolls-Royce Turbomeca Ardour engines ( R-R spec sheet: PDF format). Rolls-Royce had been the sole supplier of replacement bearings; HAL chose to evaluate ones manufactured French bearing manufacturer SNFA.
The Indian government's Center for Military Airworthiness within the Ministry of Defense instructed HAL to perform evaluations on SNFA test bearings run for 600 and 1,200 hours, then return those results to Air Headquarters and await approval to go ahead with sourcing the SNFA bearings.
Based on results from three test engines, Air Headquarters found the bearings, "did not achieve the prescribed specification," and withheld approval to purchase from SNFA.
But Hindustan Aeronautics instead went ahead without authorization and purchased 235 bearings from SNFA for Rs 51 million.
Hindustan Aeronautics' losses on the bearing inventory writeoff and other purchasing issues totaled Rs 164 million.
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