INSIDE THE

NEWS + ADVICE

April 30 Weekly Defense Industry Roundup

Posted by Fred Wellman

Economy Grew at 2.5 Percent in 1st Quarter, Amping Fears of a Stalled Recovery

Ylan Q. Mui (@ylanmui) and Marjorie Censer (@CommonCenser), Washington Post. The sequester cuts haven’t really settled in yet, most federal employee furloughs are only just starting, yet the 1st quarter economic data is already showing a slowed growth from expectations. Gross domestic product grew at annual rate of 2.5% for the first three months of the year thanks to an 11.5% annualized drop in military spending. This makes it two quarters in a row of massive defense cuts and represents the steepest declines in military spending since the Korean War. Things simply won’t get better as government analysts have already said sequester will cost a half percentage point in growth going forward while military and civilian defense workers have seen compensation fall every quarter since 2012. The nature of defense contracting and weapons procurement means the big defense firms will continue to hold steady for a while but smaller firms without large multi-year programs to manage will see more immediate effects. As long as this doesn’t inconvenience most citizens or Congress members like the flight delays from FAA furloughs last week, which Congress was able to miraculously come together and solve before going on recess, you can expect sequester to remain in effect.

>AP Impact: Congress Slows Military Efforts to Save

Lolita Baldor (@lbaldor), Associated Press. Lolita Baldor takes a deep look at the many pet programs that Congress is insisting the Pentagon continue to support even while demanding dramatic budget cuts from many programs and the very uses of the equipment. Over a dozen C-5A cargo aircraft sit idly on the ramp at Lackland as the Air Force is blocked from retiring the huge jets even though there are not enough crews, flying hours or maintenance funds to fly the giants. This year the DoD estimates they are spending over $5 billion to maintain aircraft and ships in the Air Force and Navy alone that Congress refuses to stop supporting. The Army is waging a withering battle to stop production of M1A2 Abrams tanks, of which they insist they have enough, while backers want to keep the tank line going until the next version begins production in 2017. The same battle is ongoing for excess facilities that will be kept operating even as thousands of troops leave uniform and repeated requests for Base Realignment and Closure round are rejected. These clashes aren’t new but when mandatory cuts have been kicked into effect the dichotomy is almost painful to watch as budget cutting warrior legislatures then turn around and insist on spending on their particular projects. The battle is anything but cold as this very contentious conversation erupted between Army Chief of Staff Gen. Ray Odierno and California Congressman, and Marine Corps Reserve Captain, Duncan Hunter during a budget hearing last week. Hunter had once again attacked the Army leadership for not supporting his pet program, intelligence analysis software from Palantir Technologies, when they took offense at his accusations. Tensions are getting very real as very real pain is occurring for the military services.

Pentagon Sees Risks, Progress on Lockheed’s F-35 Jet

Andrea Shalal-Esa, Reuters. Air Force Lt. Gen. Christopher Bogdan hasn’t been very shy in his criticisms of the F-35 makers since assuming his job, but last week he told a Senate hearing that he and others were heartened by progress on the program including product cost. Of course, they also expressed concerns at projections showing it will cost over $1 trillion to operate the planes for the next fifty years. In addition, the software to operate the stealth jets in combat is a huge question mark as the Block 3F software that actually allows the aircraft to be used in combat operations may yet be delayed beyond its 2017 due date leaving the many military’s purchasing the aircraft as its concurrently designed with beautiful, stealthy, expensive training aircraft. Yet, more countries are showing interest in the JSF with potential orders from Singapore and South Korea adding to the list of operators and thus lowering the per unit cost per model. All in all the world’s most expensive weapons program is on track to continue in production with little impeding its momentum.

Dozens of Air Shows Cancel Without Military Jets

M.L. Johnson (@MLJohnsonOnline), Associated Press. Thanks to sequestration, entire seasons for the military services aerial demonstration teams have been canceled saving just less than $20 million dollars by most estimates. In these budget times it seems like a logical decision but as has been the case throughout the sequester debacle, nothing is simple. The problem is that there are approximately 300 airshows held in the United States each year and some 200 will be affected by the cancellations and over 60 have already been canceled. Once again, that sounds like no big deal except economic impact studies have shown that nationally air shows generated some $1 to $2 billion in revenue. Almost all of that money is made in local communities supporting small businesses and, sadly, non-profits that are often the beneficiaries of the profits. Many of the canceled shows are likely to never return and even those that continue are expected to see a 15% to 20% decline in ticket sales and attendance without appearances by the Blue Angels or Thunderbirds. Once again, what seems like such an easy decision in tight budget times ends up with second and third order effects that ripple far from Washington D.C. and the silly political games driving this situation.

DoD Still 3,700 Cyber Experts Short of Full Staff

Zachary Fryer-Biggs, Defense News. In remarkably candid remarks at last week’s C4ISR Journal Conference, Pentagon intelligence official Kenneth Bray discussed the efforts to grow the manpower of U.S. Cyber Command and the challenges the agency faces. Pegged at a goal of around 6,000 or more staff the command appears to be several thousand short although it’s not seen as a crisis yet. Of course, one of the latest challenges is that many are finding the idea of a Federal job not as enticing as it once was with furloughs and pay freezes killing many of the more lucrative aspects of the work. Throw in that the precise skills needed only belong to a select amount of potential employees and the existing training and certification programs have already fallen short and are being overhauled. All of this makes the goal of a fully manned cyber defense command becomes a more difficult goal.

The week ahead:

Tradeshows and Conferences: SOFIC, the annual special operations forces conferences in Tampa, is fast approaching on May 14.

National Training and Simulation Association: MODSIM World What: “MODSIM World is a unique multi-disciplinary conference for the exchange of modeling and simulation knowledge, research and technology across industry, government and academia.  Focus areas for MODSIM World 2013 will include Defense, Healthcare/Medicine, Engineering & Applied Science, Information Assurance & Cyberwarfare, Cross-Cutting Applications in M&S, Education/Workforce Development, Transportation, and Manufacturing.” Who: Bob McDonnell, Governor of the Commonwealth of Virginia, and others When: April 30 – May 2, 2013 Where: Hampton Roads Convention Center, Hampton Road, VA

National Defense Industrial Association: Annual Awards Dinner Who: Honorable Ashton B. Carter, Deputy Secretary of Defense, and others When: May 3, 2013 Where: Ritz-Carlton Tysons Corner, McLean, VA

Congress: Both chambers are in recess this week. Enjoy the break from budget hearing madness.

Think tanks and other news events: 

Carnegie Endowment for International Peace: Dealing With North Korea’s Increased Belligerence What: “As the North Korean regime continues to issue provocative warnings for foreigners to evacuate the Korean peninsula, suggesting military escalation, regional cooperation has become essential to maintainingstability on the peninsula. With the economic and strategic interests of nations around the world at stake, the necessity for multilateral collaboration is stronger than ever.” Who: L. Gordon Flake, Executive Director, Mike Mansfield Foundation, Paul Haenle, Director, Carneige Endowment for International Peace, Jin Canrong, Associate Dean with the School of International Studies at Renmin University of China, Zhang Chuanjie, Resident Scholar Carnegie-Tsinghua Center for Global Policy, Zhu Feng When: 12:00 PM, Monday, April 29, 2013 Where: 1779 Massachusetts Avenue NW, Washington, DC 20036

CSIS-Brookings Institution: Taiwan’s Response to an Evolving Security Environment What: “The Ministry of National Defense of the Republic of China (Taiwan) released its second Quadrennial Defense Review (QDR) in early March. The QDR presents a comprehensive examination of developments in Taiwan’s security environment and explains updates in its planning and strategy. As in the United States and other countries, the document is a reflection of the president’s strategic priorities, a serious planning exercise and a public relations tool which seeks to inform the public and win its support. On April 29, the Center for Northeast Asian Policy Studies (CNAPS) at Brookings and the Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS) will host a discussion on Taiwan’s recently released QDR.” Who: Andrew N.D. Yang, Vice Minister of National Defense for Policy, Ministry of National Defense, Republic of China (Taiwan), Chia-Sheng Chen, Director, Defense Net Assessment Division, Department of Integrated Assessment, Ministry of National Defense, Republic of China (Taiwan), Phillip Saunders, Director, Center for the Study of Chinese Military Affairs, Institute for National Strategic Studies, National Defense University When: 2:00 PM, Monday, April 29, 2013 Where: Brookings, Falk Auditorium, 1775 Massachusetts Avenue NW, Washington, DC 20006

Center for Strategic and International Studies: Statesman Forum: A Conversation with Ali al-Naimi, Saudi Arabia’s Minister of Petroleum and Natural Resources What: “The CSIS Energy and National Security Program is delighted to welcome back His Excellency Ali al-Naimi to Washington to hear his views on the dynamic changes taking place on the global energy scene. Now in his 18th year as Saudi Arabia’s Minister for Petroleum & Mineral Resources, Minister Naimi possesses a unique and long-term global perspective on energy markets, the impacts of technology, and the opportunities and challenges that lie before us. In his remarks, the Minister will examine the relationship between oil and economic growth, the impact of recently developed unconventional resources in the United States, and the transformation underway in Saudi Arabia.” Who: His Excellency Minister Ali Ibrahim Al-Naimi, Minister of Petroleum and Mineral Resources for the kingdom of Saudi Arabia When: 10:00 AM, Tuesday, April 30, 2013 Where: 1800 K Street, NW, Washington DC, 20006 

Wilson Center: Afghanistan after 2014: Regional ImpactWhat: “This event explores local and regional perspectives on the future of Afghanistan against the backdrop of the planned NATO withdrawal of military forces from the region. The first session focuses on local politics and governance in Afghanistan, and the second session investigates the ways in which Afghanistan’s neighbors have been discussing and planning for the upcoming changes.” Who: Noah Coburn, Professor, Bennington College, and author, “Bazaar Politics: Pottery and Power in an Afghan Market Town” (2011), , Research Professor and Director, Central Asia Program, IERES, George Washington University, Simbal Khan, Director, Afghanistan and Central Asia, Institute for Strategic Studies, Islamabad, Pakistan When: 2:00 PM, Wednesday, May 1, 2013 Where: 5th Floor, One Woodrow Wilson Plaza, 1300 Pennsylvania Ave., NW, Washington, DC 20004

George Mason University School of Public Policy: Convergence: Illicit Networks and National Security in the Age of Globalization What: “To mark the publication of Convergence: Illicit Networks and National Security in the Age of Globalization by the National Defense University Press, Professor Louise Shelley, director of TraCCC and a contributor to the volume, will host a panel. This important new book discusses the challenge of converging and connecting illicit networks; how the proliferation, convergence, and horizontal diversification of illicit networks challenge state sovereignty; and how different national and international organizations are fighting back.” Who: Louise Shelley, Professor at George Mason University, Michael Miklaucic, director of research, information, and publications in the Center for Complex Operations (CCO), Institute for National Strategic Studies at the National Defense University, Danielle Camner Lindholm, technical director at BAE Systems Intelligence and Security Sector, David M. Luna, director of Anti-Crime Programs at the Department of State’s Bureau of International Narcotics and Law Enforcement Affairs (INL) When: 12:00 PM, Tuesday, April 30, 2013 Where: Founders Hall, Room 134, 3351 Fairfax Drive, Arlington, VA 22201

Center for Strategic and International Studies: Future of U.S. Ground Forces Report Roll-Out Event What: “The Center for Strategic and International Studies presents the roll-out event for the report Beyond the Last War: Balancing Ground Forces and Future Challenges Risk in USCENTCOM and USPACOMWho: David J. Berteau, CSIS Senior Vice President and Director, International Security Program, Nathan Freier, Senior Fellow, Center for Strategic and International Studies, Barry Pavel, Director,Brent Scowcroft Center on International Security, The Atlantic Council, Lieutenant General James Dubik, U.S. Army (Ret.), Senior Fellow, Institute for the Study of War,Frank Hoffman, Senior Research Fellow, Institute for National Strategic Studies, National Defense University When: 9:00 AM, Wednesday, May 1, 2013 Where: B1 Conference Center,1800 K Street, NW, Washington DC, 20006

Fred Wellman, President ScoutComms, brings us his weekly review of defense industry news via The Scout Report. Fred served over twenty years as an Army officer in both aviation and public affairs. You can follow Fred on Twitter @ScoutComms.

Google+

This entry was posted on Tuesday, April 30, 2013 9:25 am

Leave a Reply

Your email address will not be published. Required fields are marked *

Notify me of updates to this conversation