With Osama bin Laden now gone to his reward — probably not the place where 72 virgins await him — defense contractors must confront the possibility of a major downturn in military demand over the coming years. The Obama Administration has already canceled four of the top twelve weapons programs it inherited from the Bush years, and Pentagon acquisition chief Ashton Carter says more program kills are coming. So is now the time for defense companies to reduce their reliance on the federal customer by diversifying? Lockheed Martin CEO Robert Stevens said “no” last week, which is just what you’d expect from the best-run company in the sector. But other companies aren’t as well positioned or managed, so diversification is likely to get a hearing. I have written an essay on the feasibility of defense-industry diversification for this week’s Forbes that can be found here.
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