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Defense Industry
The defense sector has become a tale of two cities -- or at least, two zip codes. If you live on Main Street where the defense plants and depots are located, things are looking rather bleak. Contracts are being delayed, capital investments are being slashed, and workers are being furloughed.
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Date:
5/22/2013
Defense contractor Northrop Grumman announced a major expansion of its ongoing share repurchase program yesterday, signaling that the company's earnings per share (E.P.S.) are likely to increase for years to come despite softening demand from its federal customer. The company disclosed that its
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Date:
5/17/2013
For nearly 20 years, the federal government has used a formula to determine how much executive compensation it is willing to cover at its leading contractors. The ceiling is adjusted each year, and currently stands at $763,000. But critics of the defense industry in Congress say that number is
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Date:
5/15/2013
After a dozen years of robust demand for their skills, companies providing technical services to the military are facing shrinking markets. One reason is the winding down of overseas wars, and another is deficit-reduction measures. Production of military hardware is expected to generate stronger
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Date:
4/24/2013
The popular stereotype of the defense industry is big industrial companies making billion-dollar weapon systems. Over the last dozen years, though, it is the Pentagon's providers of technical services who have seen the greatest growth. The defense department spends over $100 billion annually on
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Date:
4/15/2013
Many experts believe that the Pentagon has entered a prolonged period of declining budgets. If that proves true, it will only be the third major downturn in military demand since the modern defense industry emerged during the 1950s in response to the security challenge posed by the Soviet Union.
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Date:
4/9/2013
Last August, the board of Science Applications International Corporation (SAIC) voted to split the company into two separate businesses, spinning off much of its government-services work. Management argues that organizational conflict-of-interest rules in the Federal Acquisition Regulation have
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Date:
4/8/2013
The Pentagon’s program manager for the F-35, Lieutenant General Christopher Bogdan (USAF), has a well-deserved reputation for speaking his mind. This is a good thing, assuming you know what you are talking about. However, his latest criticisms of the two companies leading the program, suggest that
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Date:
2/27/2013
The market for military goods and services appears to have entered a prolonged downturn. Although the earnings of defense contractors remain strong, revenues have begun to weaken. If demand continues on its current vector, then eventually the softness at the top line will begin impacting the bottom
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Date:
2/22/2013
When the Soviet Union went out of business in 1991, many defense-industry executives feared their companies might suffer the same fate. What followed was the biggest fire sale in the history of the defense sector, as some companies sought to exit the business before valuations collapsed while others
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Date:
2/13/2013
The Budget Control Act of 2011 mandates $600 billion in spending cuts at the Pentagon over the next nine years, which minus an assumed 18% savings in interest payments from a smaller federal budget means an actual reduction of $492 billion -- $55 billion per year. That's on top of similarly-sized
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Date:
1/4/2013
Over the last two weeks, several reporters have asked me why I thought the defense industry's efforts to head off sequestration had not succeeded. In light of the last-minute decision to delay implementation by two months, it seems that the premise behind the queries may have been wrong. Congress
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Date:
1/3/2013
One of the most pervasive myths in modern economics is the belief that the free interplay of supply and demand will always produce optimum results. The reality is that government intervention in the functioning of so-called market forces often accelerates progress and prevents excesses. That isn't
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Date:
12/12/2012
Senior defense officials like to claim that they see their relationship with private industry as a partnership. If this is true it is the most dysfunctional partnership since Shakespeare's The Taming of the Shrew. Outside the marriage counselor's office or The Jerry Springer Show it is rare
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Date:
12/4/2012
Mitt Romney's election defeat signaled the defense industry has missed the last opportunity it had to avoid the kind of downturn that followed the end of the Vietnam War and the Cold War. When your main customer is a political system, who's in power determines how business is likely to fare. In
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Date:
11/9/2012
Defense executives in the nation's capital are less worried about Hurricane Sandy than they are about the budgetary storm that will befall federal spending at year's end, but if Mitt Romney is elected president their fears are likely to dissipate quickly. The Obama Administration has set defense
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Date:
10/29/2012
Over the past four years, the relationship between the Department of Defense (DoD) and the industrial base that exists to serve it has devolved into something akin to a Cold War. What began as an effort by the Obama Administration to rationalize DoD’s modernization program, rein in the costs of
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Date:
10/18/2012
The prevailing view among defense investors these days is that talk of budget sequestration is going to weigh down share prices until after the November election, and maybe longer. But a catalyst for re-evaluating sector equities has begun to appear on the horizon: the possibility that Israel will
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Date:
9/5/2012
The defense industry has become the backbone of what's left of manufacturing in the Northeast. But don't take my word for it, just look out the window of your car as you drive from D.C. to Cape Cod. From the sprawling Northrop Grumman electronics plant near Baltimore to the Boeing helicopter factory
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Date:
8/15/2012
Supporters of President Obama's reelection apparently have decided that when it comes to discussing his record as commander in chief, Exhibit A has to be the takedown of Al Qaeda kingpin Osama Bin Laden in Pakistan last year. A coterie of current and former Pentagon officials has been making the
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Date:
6/25/2012
With demand for weapons headed downward in the Obama Administration's proposed five-year spending plan, now would seem like a good time for defense companies to consider diversifying into commercial work. Many of them have technology skills that seem fungible beyond defense, and the outlook for
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Date:
3/12/2012
The Holy Grail of defense acquisition reform is a methodology, system, approach -- something -- that will enable the Department of Defense to procure equipment, platforms and services of quality relatively cheaply and quickly. Over the recent decades, DoD has careened from one fashion to another
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Date:
3/8/2012
The Obama Administration is forecasting that the Pentagon's purchasing power will decline by 22 percent between the recent peak year of 2010 and 2017 (the last year of the latest five-year spending plan). It is already clear that a disproportionate amount of the cuts will come in technology accounts,
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Date:
2/28/2012
The Obama Administration’s new defense strategy envisions the reshaping of the U.S. military to reflect changing geostrategic challenges, emerging threats and new technologies. It will not be enough for the Department of Defense merely to shed irrelevant, excess and obsolescent systems and organizations.
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Date:
1/12/2012
In a recent conversation with David Ignatius before a prestigious audience at the Atlantic Council, the new Chairman of the Joint Chiefs of Staff (CJCS), General Martin Dempsey, spoke at length about defense budget issues, international partnerships and future military requirements.* Among the topics
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Date:
12/12/2011
Over the past several years, the relationship between the Department of Defense (DoD) and private industry has grown increasingly strained. In part, this is a consequence of efforts by the Pentagon to control the rising costs associated with the acquisition of new weapons systems and the sustainment
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Date:
12/9/2011
For nearly a decade now, diversification has been the "D" word in the defense industry -- the strategy that dare not speak its name. But conditions have deteriorated so badly in military markets that companies are contemplating expansion into adjacent areas, and even further afield. It's not just
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Date:
11/8/2011
Consider the challenge faced by ITT Defense as it prepares to become independent from the conglomerate that currently owns it. Anywhere else in the world, ITT would be a national gem -- the most accomplished player in military electronics and related fields within several time zones. But in the
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Date:
3/18/2011
On February 9, Pentagon acquisition chief Ashton Carter delivered some friendly remarks to an audience of investors about how the Pentagon would view proposed mergers in the defense sector. Carter acknowledged that the defense marketplace is changing, and many participants will want to adjust by
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Date:
2/10/2011
I argued in a posting here last Friday that recent overseas surprises are likely to shift the vector of demand for defense goods. My reasoning was that unrest in the Middle East will make it harder to sell weapons there, but China's military buildup will force policymakers in Washington to pour
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Date:
2/8/2011
For all its supposed influence in Washington, the defense industry has a remarkably hard time finding friends. When Dick Cheney was defense secretary, he killed a hundred major weapons programs in a mere four years. Bill Perry told defense executives that two-thirds of their companies needed to
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Date:
5/24/2010