Morning Coffee: 2014 Outlook for Large Contractors
Morning Coffee is a robust blend of links to news around the internet concerning the Naval Air Station Patuxent River economic community. The opinions expressed here do not necessarily reflect those of the Leader’s owners or staff.
The Washington Post takes a detailed look at the future for large local defense contractors after release of their first 2014 earnings reports of the year. Lockheed Martin, General Dynamics and Northrop Grumman posted higher profits, but sales dropped in the combat and information systems reflecting the dwindling defense budget. Analysts believe that this will be a tough year for defense contractors just like 2013, but if companies can ride out 2014 with no major curve balls from the Pentagon or Congress, the worst could soon be in the past. Defense corporations expect an increase in business from foreign customers in 2014. Lockheed should benefit from from additional orders for its F-35 fighter jets, and General Dynamics from orders for the commercial Gulfstream jet. Northrop has a higher potential for growth than Lockheed or General Dynamics and is pinning its hopes on unmanned aerial vehicles, especially its Triton and Global Hawk systems.
The constricted defense contracting environment affects relations between contractors as they compete for a slice of the shrinking Pentagon pie, according to Politico. Cooperation between firms, exemplified by Lockheed Martin and Northrop Grumman working together in 2012 to fight automatic defense cuts, has vanished. Lockheed and Boeing are trading barbs over the Pentagon’s potential purchase of Navy EA-18G Growler aircraft with Boeing advocates deriding Lockheed’s F-35 Joint Strike Fighter. Politico concludes, “The latest battles among the defense giants signal a shifting landscape for contractors, in which new programs are far from guaranteed, legacy programs are no longer sacred cows and defense hawks are getting beaten by budget hawks.”
A new Defense News Thought-Leader Poll indicates that 44.9 percent of leaders in government, industry and academia disapprove of DefSec Chuck Hagel’s job performance as opposed to 36.2 percent who do approve his leadership. Mr. Hagel received strong support from Democrats with 82.6 percent approving, but a disapproval from a combination of Republican and defense industry workers pushed him into negative territory. Military service members gave him positive marks at 44 percent approval and 36 percent disapproval with DoD civilian workers evenly split at 38.2 percent.
The “stealthy” F-35 Joint Strike Fighter is detectable by Russian and Chinese radar and is not effective at jamming enemy radar, according to the Daily Beast. The author believes that there have been significant advances in stealth technology since the the JSF specifications were defined in the mid-90s and that, “These are not criticisms of the program but the result of choices by the customer, the Pentagon.”
The Pentagon is preparing an initiative to help contractors cope with production-line disruptions caused by budget cuts, reports Bloomberg. A small fund, including $10 million that Congress approved in this year’s defense policy bill, would target investments to make weapons systems effective if production is stopped or interrupted under sequestration funding reductions. A DoD representative said the fund is an example of the actions Pentagon officials are designing to cushion the scheduled fiscal 2016 return of sequestration restrictions after a budget deal in December reduced the cuts for two years.
There are two bills being debated in Congress that call for mental health screening of all military recruits, reports The Military Times. The bipartisan Medical Evaluation Parity for Service Members (MEPS) bill was introduced before the April shootings at Fort Hood, Texas and a companion bill was drafted in the Senate after the Army Spc. Ivan Lopez wounded 16 soldiers, killed three others and then himself. The MEPS Act would require all services to screen for behavioral health problems just as they conduct medical evaluations and physical exams.
The Phantom Badger, a 240-horsepower combat support vehicle recently certified by the Navy, is about the size of a Mini and tough enough to traverse extreme terrain, according to Wired. It’s designed to fit inside several different aircraft, including the V-22 Osprey, and airdropped to provide ground troops with superior mobility.
The Navy Times provides a chilling account of Mineman Third Class (SW) Travis Kirckof’s heroism after his ship, the mine countermeasures ship USS Guardian, ran into a reef off the Philippines. Mineman Kirckof swam for five hours in shark-infested waters to help shipmates into lifeboats, saving two sailor’s lives and aiding dozens more. He earned one of the Navy’s highest medals, the Navy and Marine Corps Medal, often called the non-combat Medal of Honor.
