Updated on May 5 to include figures for Raytheon Technologies’ payments to small suppliers.
The large defense firms getting early payments from the Pentagon need to provide information about how they’re passing the funds quickly to suppliers, particularly smaller ones at risk of going under during the coronavirus pandemic, the head of defense acquisition said Thursday morning.
“I believe that the major primes are flowing down — they have committed — but I always like to trust, yet verify,” Ellen Lord said. “I encourage all of those companies to be as transparent and forthcoming as they can be because we have a responsibility to the taxpayer as well as the mid-tiers and the small companies to make sure that actions we take at the prime level do go down all the way through the chain. However, I need to rely on CEOs of major primes to come forth with that data.”
Lockheed Martin, for example, has already sent more than $256 million in early payments to its suppliers, and has pledged to send a total of $450 million.
Here’s what else we know about some other big companies:
- BAE Systems: “From the outset, we’ve recognized that our supply chain would play a vital role in our ability to operate through this global pandemic,” Caitlin Hayden, a BAE Systems spokeswoman said in an emailed statement. “As we receive accelerated cash payments from our customers, we are directly flowing that cash to our suppliers. Based on the actions we’ve taken so far, we expect approximately $100 million of incremental cash is reaching our supply chain.”
- Boeing CEO David Calhoun said on Wednesday’s earnings call that the company is “accelerating some progress payment receipts with the help from our defense customers.” At press time, the company did not provide specifics about how much money it has accelerated to suppliers, but emailed this statement: “Boeing is working with suppliers to develop mitigation plans that can allow them to continue operations. Some steps include making adjustments to progress payments and allowing delivery in place and early delivery, among others.”
- General Dynamics CFO Jason Aiken said on the company’s quarterly earnings call Wednesday that “as of last week, we had received approximately $55 million in accelerated payments from our customers and advanced almost $300 million to our suppliers on an accelerated basis.
- Huntington Ingalls Industries: The company has accelerated roughly $55 million to its suppliers, spokeswoman Beci Brenton said in an email.
- L3Harris Technologies said it would accelerate “more than $100 million in payments to small business suppliers nationwide.”
- Northrop Grumman is accelerating about $30 million per week expecting its total “will exceed $200 million,” CEO Kathy Warden said on Wednesday’s earnings call.
- Raytheon Technologies: “We have already dispersed over $350 million in accelerated payments, which is the full amount that we’ve received to-date from the recent progress payment increase from our DoD customers,” spokeswoman Michele Quintaglie said in an email. “We have also partnered with the SBA to help suppliers to better understand how to access government stimulus programs, and we continue to evaluate on a case-by-case basis other support mechanisms to help our suppliers.”
- Textron: At press time, the company did not provide specifics about how much money it has accelerated to suppliers.
Should the companies send us the data, we’ll update tallies above.
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Lockheed, Northrop Hiring as Boeing Cuts Workers
While the coronavirus pandemic has affected every company in one way or another, each company has unique circumstances. Defense-heavy Lockheed Martin seems to have the least trouble of the big firms, although as we reported last week, supply chain issues are expected to delay F-35 Joint Strike Fighter deliveries. What’s amazing is the company has hired more than 1,700 employees at a time when U.S. unemployment has topped 30 million, and has help-wanted ads out for another 4,000 positions.
Northrop Grumman is also hiring. “We are actively recruiting for 10,000 open positions and we hired more than 3,500 people in the first quarter, which included more than 1,300 new hires in March,” CEO Warden said Wednesday during the company’s quarterly earnings call with Wall Street analysts. Meanwhile Boeing plans to cut 10 percent of its 160,000 person workforce as coronavirus has crippled the airlines and world travel.
Other COVID Effects on Business
Closed companies: Out of 10,509 companies tracked by the Defense Contract Management Agency, 93 are closed, down from 106 last week — “with 141 companies having closed and reopened, up 73 from last week’s number of 68,” Lord said Thursday. “This is the first time we have seen reopening numbers larger than the number of closures,” she said. Out of 11,413 companies tracked by the Defense Logistics Agency: “437 are closed with 237 having closed and reopened, up almost 100 companies from last week,” Lord said.
Sectors of concern: Aviation supply chain, shipbuilding and small space launch.
Global supply chain concerns: While she did mention suppliers by name, Lord said there have been “positive results” from the U.S. asking Mexico to reopen its defense suppliers. The Pentagon is also watching coronavirus-related developments in India. “”India has mandated closure of businesses, which is impacting defense sector primes. India is a major defense partner, and we hope they can all stay safe while transitioning back to an operational status,” Lord said.
Virtual SOF Conference Next Week
The National Defense Industrial Association has moved its weeklong SOFIC conference online, in what could become the norm for large defense conferences for the foreseeable future. Instead of just streaming speaker presentations, NDIA is trying to replicate many of the event’s valuable networking sessions by linking companies up with U.S. Special Operations Command program managers. “We’re going to learn from it,” Hawk Carlisle, the NDIA CEO and retired Air Force general, said in an interview this week. With large in-person events on hold indefinitely, NDIA, which holds dozens of defense-focused events around the country each year, is looking at ways to possibly hold hybrid events, with some people in attendance and others attending virtually.
Sen. Cotton Wants $42B to Counter China
The Arkansas Republican wants to buy more submarines, fighter jets, cruise and hypersonic missiles, armored vehicles and missile defenses. Cotton released a full wishlist here, under a statement that began: “This comprehensive package brings to bear the full resources of the federal government to ensure the Chinese Communist Party (CCP) pays a steep price for its criminal coverup of COVID-19. This package will help thwart CCP military aspirations to dominate the Indo-Pacific region and to intimidate its neighbors. The United States must dramatically step up investment for military infrastructure, weapons, and other assets in the Indo-Pacific region to further compete effectively with China.”
NGA Lists Tech Priorities
The National Geospatial-Intelligence Agency says it needs technology in these areas: advanced analytics and modeling; data management; modern software engineering; artificial intelligence and future of work. More here.
- Former U.S. Director of National Intelligence James Clapper has joined the executive board of the Center for Ethics and the Rule of Law at the University of Pennsylvania’s Carey Law School.
- Former principal deputy DNI Sue Gordon has been named a strategic advisor to AI firm Primer. Brett McGurk, former special presidential envoy for the global coalition to defeat ISIS, has also joined the company as an independent board director.