The CEOs of most of the biggest defense companies are urging the White House and Pentagon to seek stimulus funding to cover their firms’ coronavirus-related expenses.
Without the money, there would be “significant job losses in pivotal states just as we are trying to recover from the pandemic,” according to the letter, which was first reported by Bloomberg.
Maintaining production “in the midst of a life-threatening pandemic comes with costs that are not incurred in the course of normal operations,” the CEOs wrote in the July 7 letter, which was reviewed by Defense One.
While the letter doesn’t include a dollar figure, Jim McAleese, who runs McAleese & Associates, estimates the Pentagon would need between $12 billion and $15 billion in coronavirus-related reimbursements for defense companies.
Last month, Ellen Lord, the defense undersecretary for acquisition and sustainment, said the Pentagon has asked White House’s Office of Management and the Budget to request “on the lower end” of “tens of billions of dollars” to cover personnel-cost reimbursements in a future coronavirus stimulus package. The CARES Act allows defense companies to recoup money they used to keep employees working amid the pandemic.
If Congress does not appropriate funds, the Pentagon could be forced to cut weapons buys or development to pay for the companies coronavirus-related costs, the CEOs wrote.
“This would create a ripple effect throughout the defense industrial base, leading to less investment in new technologies and significant job losses in pivotal states just as we are trying to recover from the pandemic,” the CEOs wrote.
The letter was signed by the CEOs of Lockheed Martin; Boeing Defense Space and Security; Raytheon Technologies; General Dynamics; BAE Systems; L3Harris Technologies; Textron; and Huntington Ingalls Industries. Kathy Warden, CEO of Northrop Grumman, did not sign the letter.
“Warden committed to absorbing as much of the COVID-19 costs as possible, during Northrop’s 1Q 2020 Results Call; because of potential for public misperception of excessive DoD funding, (from increasing Progressive demands to slash defense funding),” McAleese wrote in a note to clients on Thursday.
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Is the Pentagon’s Budget Aligned with its Strategy?
Kind of, according to a new report from the Center for a New American Security’s Susanna Blume and Molly Parrish. They found that the Defense Department’s fiscal 2021 budget proposal — the one under review by Congress — is “making progress” toward aligning the budget with the 2018 National Defense Strategy.
Specifically, it gives the Pentagon good marks in pursuing new “command and control strike architectures” (think Joint All Domain Command and Control, or JADC2, as the cool kids call it). But there’s underinvestment in “critical enablers that will make these emerging command and strike complexes work,” like artificial intelligence.
The specific areas of underinvestment in weapons and technology for “great power competition” with Russia and China:
- “Logistics must be shored up, as they will be stressed by a more dispersed posture as well as by enemy attack.
- “Current joint exercises are likely insufficient to deliver the joint high-end preparedness the U.S. military should have heading into a conflict with China or Russia.
- “Investment in the future, in the form of basic research and advanced technologies such as artificial intelligence, is still lagging.”
Leidos Realigns Innovations Center
The company has put its Leidos Innovation Center — which focuses on research, development and production of advanced technology — under recently acquired subsidiary Dynetics. “Dynetics will provide the [the Leidos Innovation Center] with immediate resources to support rapid prototyping and a path to product development and programs of record,” the company said in a June 6 emailed statement. “The [Leidos Innovation Center] provides Dynetics with further cutting-edge research in electronic warfare (EW), novel radar technology, airborne autonomy, directed energy, space payloads, ground sensors, and other areas that can yield new products and production opportunities. The change in alignment creates an organization that will enable all parts of Leidos to provide customers with a greater set of capabilities, offerings and solutions.”
More Trade Shows Go Virtual
The Air Force Association’s annual Air, Space & Cyber conference in September is going virtual as is the Space and Missile Defense Symposium amid the coronavirus pandemic. AFA is promising the “same exceptional line-up of speakers, world-class (virtual) exhibits, professional development opportunities, and important interaction between and among industry, government, the media, academia, and the public.” A key factor in moving the event to an online only format was “feedback we have received from prospective speakers, attendees, exhibitors, sponsors, Airmen, and Space Professionals.” The Association of the U.S. Army annual meeting in October is the next large event on the schedule that has not ye) been moved to a virtual format. There is still a ban on gatherings of more than 50 people in Washington, D.C.
State Department Approves $7.5B in Exports
The approved deals include:
- July 7: Jordan, One UH-60M Black Hawk helicopter, $23 million
- July 6: France, Three E-2D Advanced Hawkeye aircraft and related equipment, $2 billion
- July 6: Lithuania, Six UH-60M Black Hawk helicopters, $380 million
- July 6: Israel, JP-8 aviation fuel, diesel fuel and unleaded gasoline, $3 billion
- July 6: Indonesia, Eight MV-22 Osprey, $2 billion
- July 6: Argentina, 27 Stryker vehicles, $100 million
Remember, an approved deal isn’t a done deal. U.S. officials have outlined various ways that the pandemic is depressing global defense spending. “Preliminary reports from the field suggest the scope and nature of defense spending cuts vary widely between regions, from nominal declines in line with GDP decreases in Western Europe and Northeast Asia to large cuts an order of magnitude greater than the underlying economic contraction in some of our Middle Eastern and South Asian partners,” R. Clarke Cooper, assistant secretary of the State Department Political-Military Affairs Bureau, told the Aerospace Industries Association last month. “Defense budgets in countries hard-hit by COVID-19 — or in those nations which took drastic measures to prevent wide-scale infection — have in most cases declined significantly versus pre-pandemic spending forecasts.”
President Trump on July 6 nominated Air Force Lt. Gen. Glen VanHerck to receive his fourth star and become commander of U.S. Northern Command and the North American Aerospace Defense Command. VanHerck is currently director of the Joint Staff.