Why defense firms stayed silent after Charlottesville; Making weapons do more; Lockheed gets huge SOCOM deal. And more.
Will the leaders of some of the nation’s top defense firms quit President Trump’s manufacturing council? That was the question I got all week after the president’s Saturday statement that “many sides” were to blame for the violence at the previous day’s white supremacist rally in Charlottesville, Va. The question was answered Wednesday, when a quorum decided to quit, and then Trump himself dissolved the council — but it’s worth exploring just how and why things happened.
After the president’s various weekend statements about the deadly incident, heads of consumer firms began to resign from his council. The first to go was the CEO of Merck, followed by the leaders of Under Armour and Intel. With each CEO who quit, there was more chirping inside the Pentagon and defense community about whether their own industry heads would follow suit.
But most people I spoke with agreed that — from a business standpoint — the leaders were backed into a corner. First off, five of the business leaders on Trump’s manufacturing council — Dennis Muilenburg of Boeing; Marillyn Hewson of Lockheed Martin; Bill Brown of Harris Corp; Greg Hayes of United Technologies and Jeff Immelt of General Electric — have sizable government or defense business.
For Lockheed alone, U.S. government deals accounted for $33.5 billion, or 71 percent, of the firm’s 2016 revenue, according to data from our friends at Govini. For Boeing, the numbers were nearly $28.8 billion (23 percent); for Harris, $1.6 billion (22 percent); UTC, $5.6 billion (10 percent); and GE, $3.7 billion (3 percent). Collectively, these five firms made $66.2 billion from federal contracts last year.
Defense companies have seen the power of Trump’s opinion. Last year, anti-Boeing and -Lockheed Martin tweets sent both firm’s stocks tumbling, leading to unhappy shareholders. (Defense stocks have more than recovered since then; several have hit record highs.) Here’s how Trump responded to the first CEO to leave after Charlottesville: “Now that Ken Frazier of Merck Pharma has resigned from President's Manufacturing Council,he will have more time to LOWER RIPOFF DRUG PRICES!”
Speaking of social media, none of the companies have mentioned the Charlottesville violence. Or did they? On Wednesday morning — the day after President Trump again blamed both white nationalists and those who opposed them — Lockheed tweeted: “Diversity and inclusion are important to us.” The tweet included a link to the company’s most recent “Global Diversity and Inclusion” annual report, which was originally released on July 31.
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Doing More With the Weapons You Have
In recent years, the Pentagon has focused more intently on upgrades and modifications to equipment and weapons as a way to obtain “surprising new capabilities” faster and more cheaply than buying new ones. The Strategic Capabilities Office, the small cell at the Pentagon that quietly fosters such projects, has touted its work with Raytheon to modify the SM-6 anti-air missile to help Navy cruisers and destroyers sink other ships
Now the Pentagon is looking to extend the 500-plus-mile range of its stealthy JASSM cruise missiles. Last month, the Air Force awarded Lockheed $37.7 million to continue developing a new wing that’s been in the works since March 2016.
The 2,000-pound cruise missile has not been used in combat, but would be the weapon of choice against targets under defended airspace — say, China or Russia. Lockheed says it has already turned out more than 2,150 regular and long-range JASSMs, the latter of which can currently be dropped only by the B-1 bomber.
Lockheed is also working on another project: a deck-mounted launch canister for the LRASM anti-ship missile. Based on the JASSM, the LRASM was designed to fly from the vertical tubes under a warship’s deck. A canister launcher would allow the missile to be added relatively easily to VLS-less ships. Last month, the company successfully fired a missile from a canister at the White Sands Missile Range.
“[T]his topside canister with an angled launcher allows the LRASM surface-launch variant to be employed aboard various platforms in the Navy's surface fleet, providing the potential for a powerful new anti-ship role under the U.S. Navy's ‘Distributed Lethality’ concept of operations,” the company said in a statement.
The Navy ordered 21 air-launched versions of the missiles from Lockheed last month, part of an $86.5 million deal.
Tracking Saudi Arms Sales. Bill Hartung at the Center for International Policy has a new report that details four U.S. defense firms that provide the bulk of American-made arms to Saudi Arabia. Deals to Riyadh have garnered extra scrutiny of late, stemming from the vast number of civilian casualties reported from Saudi strikes against Iran-backed militants in Yemen. Since 2009, General Dynamics has been part of 25 deals, Raytheon, 24; Lockheed, 17; and Boeing, 14, Hartung reports.
Cash Expected to Flow to Contractors. The federal government is expected to spend money at record levels in the fourth quarter of fiscal 2017, according to a new report from Govini. Not a surprise, the bulk of that money will be spent by the military services and defense agencies. Spending slowed in the first three quarters due to federal budget uncertainty and the transition from Obama to Trump administrations.
Getting the Military Stuff, Quicker. Mitre reports: “Here’s the bad news: the US defense fielding enterprise — the combined efforts of Congress and the Executive Branch to field relevant defense capabilities — is not meeting our Nation’s needs. Here’s the good news: we can do something about it.” In its report, released earlier this summer, Mitre proposes “principles and recommendations to help improve defense fielding fundamentally, primarily by focusing authority, autonomy, and accountability at the point of execution in multiple mission-focused organizations.”
Tomahawk No. 4,000 Rolls Off the Line
The U.S. might soon stop buying them, but Raytheon has built the 4,000th Tomahawk Block IV cruise missile. The U.S. military used the missiles most recently to strike a Syrian airfield earlier this year. So what’s the future have in store? Per Raytheon: “Upgrades to the Tomahawk missile include enhancements to the weapon's communications and navigation capabilities, while adding a multi-mode seeker so it can hit moving targets at sea. Some of these enhancements will be implemented beginning in 2019. Other upgrades will be phased in over time. Modernized Tomahawk cruise missiles will be in the U.S. Navy's inventory beyond 2040.”
Lockheed Gets $8B SOCOM Deal
This eye-popping deal will put Lockheed in charge of much of U.S. Special Operations Command’s logistics for the next decade. Per a company statement: Under the deal, SOF “will receive a wide variety of advanced logistics, maintenance and sustainment services across aviation, ground and maritime platforms.”
- Bob Scher, the assistant secretary of defense for strategy plans and capabilities is now the head of international affairs at BP.
- Former Deputy Defense Secretary Bob Work has been elected to Raytheon’s board. Flashback: Work was very, very excited about the stuff Raytheon was doing at its Tucson missile factory when I went there with him last year.
- Speaking of boards, Caroline Kennedy was elected to Boeing’s board. The former U.S. ambassador to Japan and President John F. Kennedy’s daughter will serve on the board's Audit and Finance committees.
- Finally Matt Donovan, a former aide to Senate Armed Services Committee Chairman John McCain, R-Ariz., (and a former F-15C fighter pilot), was sworn in last week as Air Force undersecretary.
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