August 28, 2023 | International, Aerospace
Undeniably, the most crucial resolution made this week pertains to the impending procurement of thirty-four Saab JAS 39E/F Gripen multi-role combat aircraft.
July 17, 2023 | International, Other Defence
A la veille du 14-Juillet, le Parlement a définitivement adopté le projet de programmation militaire du gouvernement: 413 milliards d'euros sur sept ans et des mesures de modernisation des Armées, mais aussi des reports de livraisons.
November 28, 2018 | International, Naval
By: John Grady The Navy could be forced to make hard choices sooner rather than later when it comes to finding the money to replace its aging ballistic missile submarines or reach its goal of having a fleet of 355 warships, a panel of security and budgetary experts said this week. When asked by USNI News what the future holds for fleet size and ballistic missile submarines now that the Democrats control the House, Frank Rose, a senior fellow at the Brookings Institution and former assistant secretary of state for arms control, he said: “There is not enough money” for both, and “priorities need to be taken.” Rose and Jim Miller, a former undersecretary of Defense for policy, came down firmly on the side of building the Columbia-class ballistic missile submarines, the replacements for the current Ohio-class, in setting priorities for Navy spending. For the U.S., the ballistic missile submarines “secures the second strike” in event of a nuclear attack. “It really is the backbone of our nuclear force now and for the next 70 to 80 years,” Rose said. The Navy shouldn't be allowed to say, “sorry, we ran out of money” when it comes to paying for the ballistic missile submarine because the shipbuilding account was used for other kinds of warships. “The Navy needs to step up to that bill,” Miller said. That line of thought is not confined to think-tanks. Rep. Adam Smith, (D-Wash.), who is expected to become chairman of the House Armed Services Committee when the new Congress convenes in January, has long expressed skepticism over the Navy's shipbuilding plan leading to a fleet of 355 warships. He has several times at recent public events referred to it as “simply a number thrown out there.” A sense of how the Republican-controlled Senate Armed Services Committee will line up on fleet size and modernizing the nuclear triad could come Tuesday when the full panel looks at the recommendations of the commission on the National Defense Strategy and that afternoon its sea power subcommittee looks at current and future shipbuilding plans. In his presentation, Miller said a fleet of 355 ships, meaning a growth of about 70 from the current size “are numbers that should be challenged” as should those increasing Army end strength from about 450,000 soldiers to 510,000. If all the services force structure numbers were challenged there would be funds for readiness and modernization, including the nuclear triad. “Will this administration put its money where its strategy [of deterring new-peer competitors — Russia and China] is?” he asked rhetorically. There is some concern that the Trump administration will pull back from long-term, continually rising Pentagon budgets. The Defense Department was planning for a request for Fiscal Year 2020 of $733 billion, but it has now been told by the Office of Management and Budget to work with a $700 billion top line. The question for all the services is: “can they get by with current force structure” if missions are also re-examined to free money for readiness, modernization and investment in the future like cyber resilience and space, especially sensors for missile defense. Michael O'Hanlon, who moderated the session at Brookings in Washington, D.C., added in answer to the USNI News question that for the Navy it means looking at the missions its accepts critically. For example, does the lack of an aircraft carrier strike group presence in the Persian Gulf upset security in the region. Or is it a way to free money for other things. He pointed out that when there was no carrier present there for months Iran did not act more aggressively. “The Middle East was a mess before; the Middle East was a mess after. [The Navy] can be more flexible [and that] could be with a smaller fleet,” he said. Miller said during the presentation and later with USNI there was a tradeoff that needed to be understood between “quantity and quality.” Following the presentation, Miller said the Navy “is in a bind” when it has to choose between large capital surface ships, like carriers, “and places where it has an advantage, like submarines — boomers and attack and unmanned undersea vessels. He added modernizing the amphibious fleet remained a priority to meet the need for rapid response of Marines and special forces. Overhanging all this discussion of where the Pentagon should spend its money is the old bugaboo — sequestration, the automatic across-the-board cuts in defense and domestic spending if deficits are not offset, as required by existing law. Maya MacGuiness, president of the Committee for a Responsible Budget, said unless Congress reaches a spending agreement Pentagon spending would automatically fall back to $576 billion because the Budget Control Act of 2011 remains in place. As it has in the past, Congress has reached an agreement to lift the caps, but is no longer trying to offset those hikes in spending with comparable cuts in other programs. With a trillion dollar deficit and national debt “the highest it has been since World War II,” she said the United States “faces incredible fiscal challenges,” but administrations and Congress aren't making the choices in where to cut, where to spend, how to find revenue to pay for programs, cover entitlements — in and out of the military, and meet the interest payments on the debt. Instead, there has been “a doubling down” on spending and cutting taxes. The reality has become “I won't pay for mine; you won't pay for yours.” MacGuiness said, “We have to stop the notion we can have it all” in federal spending on guns and butter. She did not predict whether the new Congress would make those decisions. While expecting House Democrats to exercise more executive branch oversight, Elaine Kamerck, of Brookings, said didn't see their approach come the New Year as an all-out assault on Pentagon spending. The party's leadership is concerned about keeping its majority having taken seats in more conservative suburban areas after 2020. A more interesting question come January will be “how does the Republican leadership in Congress take the lessons from the elections” that saw “them decimated in the suburbs” and their winning margins cut in rural areas, she said, and apply them to the budget. https://news.usni.org/2018/11/23/panel-navy-may-choose-new-ballistic-missile-subs-355-ship-fleet
August 19, 2020 | International, Aerospace, Naval, Land, C4ISR, Security
By: Doug Berenson and Chris Higgins This year's Defense News Top 100 list of global defense companies coincides with a steep economic downturn created by COVID-19. Although the defense sector has faced pandemic-related business disruptions, it remains a safe haven, with most defense-oriented firms reporting only modest impact on revenues and profits. Seeing how diversified players rely on their defense units is of particular interest at a time when the commercial aviation market has all but collapsed. While many defense firms are bracing for stagnation in defense-spending growth, other markets could experience an extended downturn. Avascent drew on the Top 100 list to examine the broader mix of market exposure among firms comprising the global defense industrial base. We segmented company revenues across more than two dozen defense and commercial end markets. This analysis provides insight into how companies with defense business leverage exposure to other markets, either as a complement or as a hedge to their defense activities. One can think of defense companies in three categories: Defense/government pure-plays: Companies that focus overwhelmingly on military markets generate about 23 percent of the defense-oriented revenue on this year's list. To the extent these companies have revenue outside defense, it comes from close adjacencies in intelligence, civil space or others. Indeed, the top ranks of the Defense News Top 100 list includes numerous firms for whom defense and government comprise 85 percent or more of total revenue. Lockheed Martin, Northrop Grumman, BAE Systems, LIG Nex1, and Huntington Ingalls Industries and many others fall in this category. BAE Systems and L3Harris maintain significant positions in the commercial aviation supply chain, but these activities represent a small portion of their total revenues. The unique demands of military and government markets — complex acquisition processes, challenging sales channels, burdensome regulatory compliance — has led many leading defense players to maximize their position across the defense product range. These frustratingly unique features of government customers have deterred many commercial technology firms from pursuing this space, a fact that the U.S. Department of Defense is struggling to reverse. Firms in this category have optimized their financial management, business development and other processes to the particular demands of government customers. Within government markets, the different economics that characterize the sale of products and services has increasingly led to the separation between these two distinct segments. Many of the market leaders in U.S. government services, including Leidos, Booz Allen Hamilton, CACI International, SAIC and others, feature a near-exclusive focus on government customers. A range of firms providing such services continue to find business with both the government and commercial clients, to be sure, including Bechtel, Jacobs, Babcock International and KBR, to list just a few on this year's Top 100 list. But companies with a significant focus on mission-oriented requirements have increasingly focused solely on government customers. Commercial and defense sectors: Nearly 60 percent of the defense revenue tracked in the Top 100 list comes from firms that compete in sectors that cross the defense-commercial divide. These include shipbuilders and automotive manufacturers, but the vast majority of firms serving both defense and commercial customers are focused on commercial aerospace. A range of firms recognize the unique complementarity between military and commercial aerospace technology in their business mix. Airframe primes like Boeing and Airbus are chief among these, sitting atop vast aerospace supply chains. But many other household names have sought opportunity in commercial aviation, either as airframe primes (General Dynamics via Gulfstream, Textron via Cessna) or as suppliers of avionics, structures, and other content. Because it calculates 2019 revenue, this year's Defense News list does not count Raytheon Technologies, which was created with the merger of Raytheon Company and United Technologies Corp. in April 2020. The new “RTX” would have pro forma 2019 revenue of about $43.4 billion in defense and $33.7 billion in commercial markets; this excludes Otis (elevators) and Carrier (air conditioners), which were spun off concomitant with the Raytheon-UTC merger. Many firms with heavy commercial market exposure now face unprecedented economic headwinds. Between March 1 and Aug. 1, 2020, stock prices for firms spanning defense and commercial aerospace declined by 33 percent, as global air travel nearly ground to a halt amid the coronavirus pandemic. By contrast, an index representing defense/government pure-plays has dropped by just 5 percent over the same period. Conglomerates were in the middle, declining about 16 percent. The silver lining, however, may be the ability of some companies to draw on defense-related cash flows to sustain commercial aerospace investment in preparation for an eventual upturn. Industrial conglomerates: Finally, there are firms with a foot squarely in defense but which also pursue markets far afield, in terms of customer types and market economics. About 18 percent of the defense revenue tracked in the Top 100 list is earned by firms with interests that have almost no technical or customer link with defense. Large Asian conglomerates — including China North Industries Group Corporation Limited, also known as NORINCO; Japan's Mitsubishi Heavy Industries; and South Korea's Hanwha — top this category in total revenue. But several Western firms also follow this approach to varying degrees: Textron, Ball Corporation, Diehl Group and others combine widely disparate product lines in a holding company structure. With defense versus commercial valuations relatively high, there may be competing instincts in the boardrooms of these giants. On one hand, these companies may decide to reorient their portfolio more toward defense activities by exiting underperforming industrial businesses. On the other hand, firms could elect to use defense cashflows to support the broader corporation and position the company for an economic rebound. Trends to monitor While defense budgets could face downward pressure in much of the world, many U.S. contractors have good predictability through 2021 because of DoD outlays already in process. It is the wider commercial economy where the real uncertainty lies. This makes it hard to predict how many firms active in defense markets will fare over the next year, given the variety of other markets they serve. Over half the revenue earned by the Defense News Top 100 is generated from commercial sectors. Commercial aviation markets are likely to languish at pre-2019 levels through 2022 or later. The outlook for other commercial markets is more heterogeneous, but challenges exist across areas like shipbuilding, automotive, industrial equipment and energy. To the extent that countries pursue infrastructure-led stimulus, some of the more diversified companies may find pockets of sunshine amid the gloom. Doug Berenson is a managing director at Avascent, where Chris Higgins is a principal. https://www.defensenews.com/opinion/commentary/2020/08/17/market-exposure-in-the-top-100-defense-commercial-aviation-and-much-more/