Are you a federal contractor wondering what to do if Washington suddenly starts choosing who to pay and who not to pay come Aug. 3? Elizabeth Ferrell and Jim Schweiter, partners with McKenna Long & Aldridge’s government contracts and government affairs practices in Washington, say to do three things now.
NEW DELHI — Sikorsky Aircraft Corp. plans to pursue multiple opportunities in the Indian defense market, and has responded to the Indian navy’s recently issued Request for Information (RFI) for a second batch of multi-role helicopters, a top company official says. “We don’t know the numbers” of aircraft needed, says A.J.S. Walia, Sikorsky’s executive vice president for India and South Asia. The company has the option of offering its S-70 Bravo or the MH-60R “Romeo” helicopter, which it offers jointly with Lockheed Martin and the U.S. Navy.
EADS RESULTS: Strong order intake has caused EADS to partly improve its guidance for full-year business performance, with a promise that earnings will improve materially next year. The updated outlook is largely driven by strong Airbus order bookings. Revenue for the first half was up 8% to €21.9 billion ($31 billion), yielding net income of merely €109 million (net income stood at €189 million at the half-year point last year).
If the U.S. Congress defaults on its debt obligations by failing to raise the debt ceiling by an Aug. 2 deadline, cash flow could become a problem — for the government and for contractors, a Pentagon official says.
SALES SETBACK: Asian growth could prove crucial to the future of U.K. defense exports, which dropped in 2010 over 2009 levels. Nevertheless, the U.K. still maintained its position as the second largest exporter of defense products and services. The U.K. Trade and Investment (UKTI) department reports that U.K. business won around £6 billion ($9.8 billion) in business last year, down from more than £7 billion in 2009. Last year’s figures already saw strong growth from Asia, with Indian sales representing 17% of the total. South Korea also was a key market.
As defense budget cutbacks in the U.S. and Europe begin to bite into corporate sales and profits, military contractors have a choice of two paths. They can seek new avenues of growth by making acquisitions and selling their technologies into other markets. Or they can become smaller but more focused by spinning off underperforming business units.
GETTING PERSONAL: The U.S. Air Force has more four-star generals than any other armed service, and former Marine Sen. Jim Webb (D-Va.) and the likely next chairman of the Joint Chiefs of Staff could be looking into it. At Army Gen. Martin Dempsey’s nomination hearing last week, Webb said he will call a hearing later this year to examine why the Air Force has one general or flag officer for every 1,000 active-duty members, while the Marines have one every 2,300 and the Army every 1,800.
Just days after the U.S. Navy confirmed it had reached a deal with Bath Iron Works to build the next two DDG-1000s, the service sent further signals that the next-generation destroyer still is important for the surface ship fleet despite cuts to the program.
BIG TABLE: Pentagon officials keep saying that “everything is on the table” to revamp the Defense Department and help cut costs. While that mindset has mostly been applied to acquisition, it seems that certain U.S. Navy and Air Force operations also are up for review. New Defense Secretary Leon Panetta is taking another look at the Air Force-Navy battle concept directed by the Pentagon last year to deal with China and its expanding military muscle, Vice Chief of Naval Operations (CNO) Adm. Jonathan Greenert told Congress last week.
DEFICIT DEALS: With a dearth of details in the deficit reduction proposals on Capitol Hill, analysts are left guessing and doing a little bit of math to figure out just how the Pentagon might fare if the bills ever come to pass. The bill floated by Senate Majority Leader Harry Reid (D-Nev.) proposes capping security spending at $606 billion in fiscal 2012 and $607 billion in fiscal 2013.
SINGAPORE — Boeing’s U.S. Air Force tanker win will, in the immediate term, adversely affect its efforts to sell the KC-46A tanker overseas, leaving the international market wide open for Airbus Military. Having the U.S. Air Force as a major customer is usually a positive, but in this instance the requirement to design, develop and deliver 18 KC-46A tankers by 2017 means Boeing’s production line in Everett, Wash., will be so busy that there will be no production slots in the near term for overseas customers.
GPS interference caused by a planned broadband wireless network could cost at least $70 billion and an additional 30 million tons of carbon dioxide (CO2) over the next 10 years through the loss of aircraft efficiency and safety benefits, FAA estimates. LightSquared, which plans to deploy the nationwide network of terrestrial transmitters, says FAA’s assessment is based on plans that are no longer on the table and does not reflect the latest proposal to use its frequency spectrum farthest from GPS (Aerospace DAILY, July 1).
CAPE CANAVERAL — The first International Space Station crew in the post-shuttle era had an additional stop in its training flow — Space Exploration Technologies’ Hawthorne, Calif., facility for familiarization with the company’s Dragon cargo freighter.
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China may be looking to use its navy to broaden — and not just protect — the country’s power base, according to the U.S. Navy officer slated to be the next chief of naval operations (CNO). Adm. Jonathan Greenert, the current U.S. Navy vice CNO, also raised caution flags this week against using a redesigned Virginia-class attack submarine as a template for the next U.S. ballistic missile submarine rather than following the current plan for a new SSBN(X) boomer fleet.
ROLLS RESULTS: Rolls-Royce has released first-half results, with underlying profit up 28% to £595 million ($972 million) on 4% revenue growth year-on-year, buoyed by civil aerospace activity. By contrast, the defense order book contracted 5% year-on-year. Rolls-Royce’s defense business gained a £60 million one-off payment to cover cancellation costs from program cuts imposed by the U.K. defense ministry following last year’s Strategic Defense & Security Review. Without that money, full-year profit for the defense sector would be flat.
The Republican-led House Armed Services Committee (HASC) has finally met a defense spending cut it can tolerate. The deficit-reduction plan proposed by House Speaker John Boehner (R-Ohio) up for consideration by the full House July 28 may just be the lesser of two evils, according to HASC spokesman Claude Chafin.
LONDON — With defense budgets in its core European and U.S. markets under pressure, BAE Systems is looking at potential further cost-cutting and streamlining activities, even as it seeks growth opportunities in export campaigns. “The environment is challenging,” says BAE Systems CEO Ian King in presenting the company’s half-year results, which show a £1.3 billion ($2.1 billion) drop in sales and a £757 million operating profit, or £92 million less than last year’s midyear results.
The chairman and ranking Republican of the Senate Commerce, Science and Transportation Committee have made good on their threat to subpoena documents related to NASA’s selection of a design for the heavy-lift Space Launch System (SLS), setting up a showdown over the agency’s pace in meeting a congressional order.
The development of a joint vertical-lift aircraft needs to be a priority now for U.S. forces, the head of U.S. Army aviation says. “It’s critical to have a strategy now,” said Col. Bill Morris, Army aviation director, during a Pentagon briefing with reporters July 27. The Army, other services and the Pentagon are working together to come up with a strategic plan aimed at developing the first multirole variant for attack and assault missions by 2030, Morris says.
