Price break on export fees; New missile interceptor project; COVID, oil & international arms sales, and more.

The U.S. State Department is lowering the registration fees that companies pay to export weapons. Officials say the move will largely benefit small and medium-sized firms that are cash-strapped amid the coronavirus pandemic.

The fee depends on how many export licenses a company applies for in a given year, but typically is at least $2,250 apiece. That has been reduced to $500 for so-called first- and second-tier companies that seek a relatively small number of licenses.

“Many of the registrants who fall into those categories are small- and medium-sized enterprises,” a senior administration official said during a background call Thursday. “So it was our intent to give them a considerable price break of up to 80%.”

Large companies such as Lockheed Martin, Raytheon Technologies, and Boeing, which fall into the so-called “third tier” of registrants, will get no price break, the official said.

In all, State expects these fee reductions to collectively save companies $20 million over the next year.

Even amid the pandemic with more government and industry employees working from home, the senior administration official said the registration application rate has “been surprisingly healthy.” 

Welcome

You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. Send along your tips and feedback to mweisgerber@defenseone.com or @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!


From Defense One

Navy Picks Wisconsin's Fincantieri Marinette Marine to Build New Frigate // Marcus Weisgerber

Awarded months ahead of schedule, the contract further solidifies the shipbuilder's U.S. foothold.

The High-Tech Gear That's Helping the US Military Decide Where to Send Medical Troops Next // Marcus Weisgerber

An iPhone app and predictive analytics tell the four-star what's going on right now.

States' 'Reopening' Might Not Apply to Troops, Military Families // Katie Bo Williams

Georgia is opening up. Fort Benning may not.


Esper Thanks Industrial Workforce

“Your commitment has allowed the Department of Defense to not only sustain readiness, but also move forward with modernization,” Defense Secretary Mark Esper wrote in a May 4 letter to the millions of defense contractors around the country.

Will Fincantieri’s Frigate Victory Be Protested?

It’s been a week since the Navy chose the U.S. arm of the Italian shipmaker to build up to 10 FREMM frigates in a deal that could be worth $5.6 billion, not including all of the government-furnished equipment installed on warships. While the Navy said it would immediately begin detailed design of the new ship, General Dynamics, Austal, or Huntington Ingalls could contest the deal, which usually leads to a work stoppage while the Government Accountability Office evaluates a protest.

Fincantieri builds ships in Wisconsin, considered a swing state in November’s 2020 election. “So the implications around the award mean we’re likely to see a protest which ultimately can change the outcome,” Citi analyst Jon Raviv wrote in an April 30 note to investors.

For now, the Navy plans to buy 20 ships, including a second batch of 10 to be awarded in an upcoming competition. But observers say that number could grow. “The Navy could increase the size of the program (maybe by double) in its new Force Structure Analysis,” Cowen & Company analyst Roman Schweizer wrote in a May 1 note to investors. “In the future, we might anticipate an industrial base equilibrium where large combatant builders GD and Huntington build the new large combatants, Marinette builds frigates and Austal builds fast amphibs/logistics ships.”

Coronavirus’ Impact on Foreign Military Sales

With foreign sales accounting for roughly one-quarter of many U.S. arms makers’ revenues, companies have been closely watching how the pandemic, coupled with low oil prices, will affect international defense spending. The State Department went about four weeks in March — the month the federal government started shifting employees to telework — without approving a foreign arms deal. Since March 30, it has approved nine deals worth $3.2 billion.

For the fiscal year, which began in October 2019, State has approved foreign military sales worth a potential $27.3 billion, up from $24.2 billion at this point in fiscal 2019, but well below the $58.1 billion at this point in fiscal 2018 and $51.9 billion in fiscal ’17, according to figures compiled by Cowen & Company analyst Roman Schweizer. 

“We think it's still too early to tell if that activity was in the pipeline before COVID/crude impacts,” Schweizer wrote in a May 6 note to investors. “U.S. allies may need to prioritize COVID-19 relief/recovery spending over defense purchases.”

A reminder: just because the State Department has approved a sale doesn’t mean the deal has been finalized.

“There’s always uncertainty when oil is $20 or $30 a barrel — obviously the Kingdom of Saudi Arabia is challenged as are most of the Middle East customers during this time,” Raytheon Technologies CEO Gregory Hayes said Thursday morning on the company’s quarterly earnings call. “At the same time, I don’t think peace is breaking out anytime soon in the Middle East and providing a solid defense posture to our customers over there remains a priority both for the U.S. government as well as for the Kingdom of Saudi Arabia and all of our other customers over there.”

Speaking of foreign arms sales, a new Center for International Policy and Project on Middle East Democracy joint report by William Hartung and Seth Binder recommends the U.S. cut $300 million in military aid to Egypt. “A significant reduction in military aid will signal to the Egyptians that U.S. assistance is not an entitlement, but rather is dependent on their conduct. The $300 million should be repurposed as humanitarian assistance for the global effort to overcome the COVID-19 pandemic.” More here.

Teams Form to Compete to Build Missile Interceptor

Northrop Grumman and Raytheon Technologies said they would team up to build the Next Generation Interceptor. Boeing, who is the lead contractor for the current U.S. missile shield in Alaska and California, said it too would compete. A Boeing spokesman, in an emailed statement, did not provide any details about any of the company’s teammates or proposal, but said the company would respond to the Missile Defense Agency’s solicitation. Bids are due at the end of July.

Boeing Unveils Drone Prototype

The planemaker unveiled the prototype of the new drone being pitched for Australia’s Loyal Wingman Advanced Development Program. The company said the project is “Boeing’s largest investment in an unmanned aircraft outside of the United States.” Boeing is globally marketing the drone, which is envisioned to fly alongside manned combat aircraft.

Navy Adds 2 Program Offices, Closes 1

Navy acquisition chief James “Hondo” Geurts has created two new program executive offices: PEO Digital and Enterprise Services and PEO Manpower, Logistics and Business Solutions. He has also axed PEO Enterprise Information Systems. The move is “to realize the vision of digital transformation and to optimize program alignment across the Navy and Marine Corps capability portfolios,” Geurts wrote in a May 4 memo, reviewed by Defense One.

Former SecNav to Lead Venture Firm

Richard Spencer, the former Navy secretary, will lead Pallas Ventures, a private investment fund of Pallas Advisors, the consulting firm founded by Sally Donnelly and Tony DeMartino, aides to former Defense Secretary Jim Mattis. The fund will invest in “technology companies whose products will benefit the national security sector,” the group said in an emailed statement. “In just the last two years we have come across several ground-breaking start-ups that are looking to maximize rapid growth and scale in the public sector,” DeMartino said in a statement. “In addition to being a trusted advisor, we wanted to establish a firm that can bring capital to bear to accelerate their success. We think this is particularly relevant as the national security sector looks to new solutions in this COVID era.”

Boeing Raised $25B to Avoid Public Bailout

The funds were raised through a bond offering last week. Reuters reports that its “the sixth-largest investment-grade bond offering of all time and the biggest year-to-date, according to Refinitiv data. The Federal Reserve's intervention in the credit market has boosted prospects for troubled borrowers such as Boeing.”

Done Deals

Leidos, on May 4, completed its $1 billion acquisition of L3Harris Technologies’ airport security business. Also on May 4, BAE Systems completed its $365 million acquisition of Raytheon’s airborne tactical radios business. BAE is also supposed to acquire Collins Aerospace’s GPS business for $1.9 billion.

AIA Aims to Help Boost Ventilator Production

The Aerospace Industries Association this week launched a website “to connect ventilator companies with component suppliers to help quickly scale production and distribution of these vital devices,” the group said in an emailed statement. “The platform was developed in conjunction with the Advanced Medical Technology Association (AdvaMed), Google, and other industry alliances and partners.” Aerojet Rocketdyne, L3Harris Technologies and Mercury Systems are among the companies working to scale ventilator production, according to the group’s website.

Making Moves

Aerojet Rocketdyne has named Amy Gowder, a former Lockheed Martin executive, its chief operating officer.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.