The Obama Administration’s fiscal 2011 defense request will exceed $700 billion. With $547 billion likely to be sought for regular defense spending and another $163 billion for overseas contingencies, 2011 looks like yet another year in which the long-predicted end of the post-9\/11 military buildup fails to materialize. But that doesn’t mean the nation’s biggest defense contractors will have an easy go of it. Money is migrating out of technology and into people accounts in response to the labor-intensive nature of current combat and seemingly inexorable increases in military benefits. Previously outsourced services are being pulled back into the government. Against that backdrop, each big company faces one key challenge in the year ahead that will have a major impact on how it fares in the marketplace.<\/p>\n
The biggest defense contractor,\u00a0Lockheed Martin<\/b>, seems to have more control over its fate than rivals. Over the last several years, the company has consolidated its lead as the top provider of aircraft, satellites and information services to the military. Also, newly appointed chief operating officer Chris Kubasik fixed problems in the company’s sprawling electronics and missile unit. But the big question is whether the company’s $300 billion F-35 joint strike fighter program will stay on track. The program seems to be progressing reasonably well. But it is such a big chunk of future revenues that analysts monitor it the way they follow Boeing’s Dreamliner, and any mis-steps will be magnified on Wall Street.<\/p>\n
Lockheed Martin’s rival for sector leadership,\u00a0Boeing<\/b>, has not fared as well. It lost an opportunity to displace Lockheed as the top provider of spy satellites, and its bid to be the Army’s top contractor is faltering in the wake of the Future Combat Systems cancellation. But the key challenge its defense unit faces is that Boeing is gradually being squeezed out of the military aircraft business. It lost a lucrative third of the F-22 fighter when that program was canceled, the Pentagon wants to kill its C-17 transport, and the F\/A-18 carrier-based fighter will have to exit the budget to make way for F-35. So it has to win the Air Force tanker competition to remain a first-tier player in its core military market.<\/p>\n
Boeing’s competitor for the tanker contract,\u00a0Northrop Grumman<\/b>, began the year under an aggressive new CEO named Wes Bush. Bush is just as brainy as predecessor Ron Sugar, but less patient with under-performing operations. That means his big challenge will be figuring out how to make the company’s naval shipbuilding unit function at the same level of proficiency as its electronics, aerospace and information services businesses. Perennial electronics rival\u00a0Raytheon<\/b>\u00a0has a different problem: it is performing better than ever before, but the Pentagon keeps rebuffing company efforts to show what it can do as a big-time system integrator. Insiders say it is beating the pants off of competitors in cyber security, but the key challenge is finding that breakthrough opportunity into the first tier of integrators.<\/p>\n
Northrop’s partner and competitor in the shipbuilding space,\u00a0General Dynamics<\/b>, is functioning so well under CEO Jay Johnson that you have to look hard to find problems. Its Gulfstream bizjet unit has disproved the notion that military contractors can’t succeed in commercial markets. Shipbuilding and information systems both look like growth stories going forward, but the looming issue for GD is how to maintain the impressive performance of its combat systems unit as the Army scales back vehicle purchases in the years ahead. That problem has already hit armored vehicle rival\u00a0BAE Systems<\/b>, which may be one reason why BAE’s board picked GD alumna Linda Hudson to run the company’s North American unit. She needs to balance hardware offerings with a broader mix of technical services.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Obama Administration’s fiscal 2011 defense request will exceed $700 billion. With $547 billion likely to be sought for regular defense spending and another $163 billion for overseas contingencies, . . . <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"yoast_head":"\n