As the days tick down to Congress’ August recess, Treasury Secretary Steven Mnuchin said Thursday morning that talks between the Trump administration and the Republican-controlled Senate and Democrat-controlled house on a budget deal to raise the debt ceiling are advancing.
Mnuchin told CNBC that the sides are talking about a two-year agreement on topline spending. “We’re now discussing offsets as well as certain structural issues,” he said. “And we’ve agreed as part of that deal there would be a long-term, two-year debt ceiling increase.”
While this sounds promising, the Washington Post reports that the White House is seeking $150 billion in cuts to offset spending increases. Democrats have often supported defense increases as long as domestic programs get equal increases. Republicans have often called for cuts to these programs to offset defense increases.
Should lawmakers and the administration reach a budget deal, it would mean an early end to the limits sent by the 2011 Budget Control Act, which expires in 2021. That would be welcomed by the Pentagon, many lawmakers, and certainly the defense industry.
You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. Send along your tips and feedback to firstname.lastname@example.org or @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!
From Defense One
Ejecting Turkey from the F-35 Effort Will Cost At Least Half a Billion Dollars // Marcus Weisgerber
That’s the Pentagon’s low estimate for replacing Turkish suppliers of more than 900 parts.
Inside the Pentagon’s Game of Musical Chairs // Marcus Weisgerber
Richard V. Spencer is the year’s third acting defense secretary — but there are a lot more moving pieces than that.
Sen. Warren Spars with Defense Secretary Nominee Over His Lobbyist Work // Marcus Weisgerber
The Democratic presidential candidate said that Mark Esper, who has declined to recuse himself from Raytheon-related decisions, should not lead the Pentagon.
F-35s Won’t Make Readiness Goals
Buried in SecDef nominee Mark Esper’s 117 pages of written answers to questions from the Senate Armed Services Committee is a statement that the F-35 Joint Strike Fighter won’t reach the Pentagon’s 80 percent readiness goals for combat fighters, largely due to supply shortages involving the jet’s cockpit canopy. Also short of that goal is the Air Force’s F-22 Raptors — largely due to stealth-related maintenance damage to planes based at Tyndall Air Force Base from Hurricane Michael last year. The Air Force’s F-16s and Navy F/A-18s Super Hornets are expected to reach that goal.
RFP Issued for New ICBM
The Air Force on Tuesday began soliciting bids to build new intercontinental ballistic missiles. The plan is to choose a winner by the end of fiscal 2020. Right now, Boeing and Northrop Grumman are under contract for “technology maturation and risk reduction” work. The entire effort of developing and fielding a replacement for the Minuteman III is expected to cost between $50 billion and $85 billion.
Most and Least Transparent DOD Offices
The Military Retirement Fund, Defense Health Agency, Defense Finances and Accounting Service and Army Corps of Engineers “have some of the most transparent accounting standards” in the Defense Department, according to the nonpartisan, non-profit Truth in Accounting organization, which has some new analysis of the Pentagon’s 2018 audit.
But “most transparent” is relative. “Overall, financial transparency within the Pentagon is tremendously bad. It is the principal factor leading to a disclaimer of opinion (an auditing flunk) on the financial report for the entire federal government,” the watchdog organization said in a statement.
The worst of the “tremendously bad”? The Defense Logistics Agency and Air Force. Read the full report.
Wanted: Medium-Sized Drone Boats
The Navy on Tuesday began soliciting bids for a Medium Unmanned Surface Vehicle, part of an effort to speed up bringing unmanned vessels into the fleet. “The MUSV will be a pier-launched, self-deploying modular, open architecture surface vehicle capable of autonomous navigation and mission execution,” the Navy said in a statement. “Accelerating Unmanned Surface Vehicle (USV) and payload development and warfighting integration will provide an inflection point in delivering a more distributed force in support of the National Defense Strategy.” The service plans to award a contract fiscal 2020.
Portugal Buys Brazilian KC-390
Portugal will become the first international customer for the KC-390, placing an order for five cargo planes this week to replace old C-130s, according to planemaker Embraer. Until now, Brazil’s air force had been the only customer. For years, Embraer has been showing off the plane at international air shows, pitching it as an alternative to the C-130. Portugal’s first KC-390 is scheduled to arrive in 2023, according to Embraer. The five-plane deal is worth $932.6 million, according to AIN.
US Firms Could Face Chinese Tariffs
China said it would cut ties with the U.S. companies involved in the recently approved sales of Abrams tanks and Stinger missiles to Taiwan. Those firms include Honeywell, maker of the Abrams tank engine; and Gulfstream, which is owned by tank-maker General Dynamics. More from Reuters, here.
On Wall Street
Most of the big defense companies report second-quarter earnings next week, but Textron was first out of the gate this week. Asked the future of Bell’s military business on a Wednesday call with investors, CEO Scott Donnelly said the company is seeking foreign sales of its UH-1 helicopter and V-22 tiltrotor, plus planned U.S. military buys and upgrade work.
“There’s upgrades and enhancement programs which are typical of any large defense platform, which we expect we will continue to see in the future,” Donnelly said. So I think Bell on the military side, just around V-22 and H-1 can sustain and be a nice healthy business.”
Donnelly also mentioned that the company is building the V-280 tiltrotor prototype for the Army’s Future Vertical Lift demonstration; two other Army projects: Future Long-Range Assault Aircraft and the Future Attack Reconnaissance Aircraft; and lastly the Marine Corps MUX drone — MUX as a welcome stand-in for “Marine Air-Ground Task Force Unmanned Aerial System Expeditionary.”
“I think we’re very well-positioned on several of those programs,” Donnelly said. “Will we win them all? Probably not. But these are, these are very large programs and so winning one or two of those is what would drive significant growth for Bell on top of the ongoing sustaining of the V-22 and H-1 programs.”
Earnings next week: Lockheed Martin reports on Tuesday; General Dynamics, Boeing and Northrop Grumman on Wednesday; and Raytheon on Thursday.
Bow Lifted onto Future USS JFK
The flight deck of the aircraft carrier that will become the next USS John. F. Kennedy is complete as the ship continues to come together at Huntington Ingalls Newport News Shipbuilding. Here’s a video of the upper bow being lifted into place. Back in May during a visit to the shipyard, I watched workers maneuver one of the ship’s propeller shafts into place.
Russia To Start 3D-Printing Helicopter Parts
Russian Helicopters will start building about 30 parts using additive manufacturing in 2020, the company said in a July 15 statement. “We are talking about serious, power elements of the structures, units and systems of our helicopters, Andrey Shibitov, innovation director at Russian Helicopters said in the statement. “By the end of the year, we will decide whether we are ready to put these parts on serial production.” The company said a high-speed light helicopter it’s developing could benefit from 3D-printed parts.
- Top of the list was Trump’s Monday nomination of Army Secretary Mark Esper to be defense secretary.
- Also on Monday, the White House said Trump intends to nominate Lisa Hershman, the Pentagon’s deputy chief management officer, to be chief management officer.
- Air Force Lt. Gen. Eric Fick became the F-35 program executive officer on June 11, taking over for Vice Adm. Mat Winter.
- Peter Cannito, former CEO of Polaris Alpha, has joined aerospace and defense private equity firm, AE Industrial Partners as an operating partner and member of its board.
- Former National Geospatial-Intelligence Agency Director Robert Cardillo joined the board of Cesium, a geospatial platform.