December 12 Weekly Defense Industry Roundup

Posted by Fred Wellman

General Dynamics CEO Sets Sights on Further Growth, Acquisitions

Andrea Shalal-Esa, Reuters. GD CEO and former Chief-of-Naval-Operations Jay Johnson discusses with Reuters last week his views of the future of General Dynamics and the industry. He offers an insight that most analysts agree with. This is actually a ripe time for major defense manufacturers like GD to acquire other companies to expand their offerings, while leveraging emerging markets like China and South America. While the worries are real about the future of the U.S. defense market, major programs will have to continue and support for most remains strong. 

Obama Administration Urges Flat 2013-2017 Defense Spending Plan

Tony Capaccio, Bloomberg. The White House and Pentagon are finally near agreement on a draft five-year budget plan. This is the first time the Obama administration has submitted a defense plan lower than the previous year, with a slight 1% drop for 2013, and smaller upticks in following years. The plan is being called a realistic approach and has the lowest war spending since 2004. One major point is a delay of two-years in the start of the building of the John F. Kennedy aircraft carrier by Huntington Ingalls Industries. The plan fits in the overall caps set in the budget control act, but does not meet those demanded by the sequestration brought on by the failure of the super committee. So in many ways this is a compromise between previously legislated directives and hopes that Congress will stop the sequestration.

White House to DoD: Shift Programs Out of War Budget

Kate Brannen, Defense News. In a somewhat surprising move the White House has directed the Pentagon to tighten the limits on the use of war spending accounts and close a potential loophole, to avoid the cuts mandated in the budget control act. In the past war funds have been used to buy equipment such as the MRAP’s and even a single F-35 fighter. Under the new guidance those efforts are closed even as the Senate itself was maneuvering to shift programs from the base budget to overseas operations accounts to avoid the more draconian cuts of the sequestration impasse. It seems to be another move by the administration to force the issue with Congress, to make cuts instead of finding back doors to avoid the pain.

JLTV Program Demonstrates the Importance of DOD-Industry Dialogue

Daniel Goure, Ph.D., Early Warning Blog, Lexington Institute. Goure examines how a recent meeting of the minds between the number two officers of the Army and Marine Corps, along with industry representatives competing for the Joint Light Tactical Vehicle contract, resulted in substantial improvements to the contract bidding process and should serve as a model for other programs. The fact is that industry and DoD relations have been strained for a few years as the department has sought to transfer more risk and costs burdens to the private sector, while not listening to their concerns about changes to programs and inherent inefficiencies in the business practices of the department. DoD and industry need to build requirements so that both sides truly share the risk and build what is needed without guesswork. The JLTV has been in danger of cuts, but reports came out this week the compromise defense bill in Congress will include funding for the program.

Exclusive: U.S. Defense Firms Blast Pentagon on Contract Changes

Andrea Shalal-Esa, Reuters. Over 100 defense industry firms sent a joint letter to SecDef Panetta this week expressing concern about the shifting of risk and development costs to manufacturers as part of the Pentagon’s cost saving measures. The letter was coordinated by the Aerospace Industry Association and is asking Panetta to delay implementing more contract changes without a thorough review of the impacts of these efforts to shift the burden to an industry already facing a bleak future with announced cutbacks.

Military Veterans Prepare for a New Role

Sarah Needleman, Wall Street Journal. Needleman looks at the soaring demand for programs to help veterans become entrepreneurs with some truly remarkable efforts springing up to give vets the education and mentorship they need to succeed in business. Syracuse University has a very popular program run by the Institute for Veterans and Military Families. We were able to chat with the Executive Director, Dr. Mike Haynie, this week. It’s an impressive program with more applicants than openings at the 8 schools now supporting the program. We see it as a simple mathematical equation, as we know that veterans tend to hire other veterans. Encouraging more vet-owned businesses will put a dent in new veterans’ unemployment in an exponential fashion. It’s a great story to check out on the growth in veteran entrepreneurs.

Cyber-Intruder Sparks Massive Federal Response – and Debate Over Dealing with Threats Ellen Nakashima, Washington Post. Nakashima has a fascinating inside look at what ended up being one of the most massive cyber intrusions in the U.S. military’s history, that all started with a simple insertion of a contaminated thumb drive. It has led to the near complete banning of the devices on military networks today. This is a first time look at the massive response and new organizations created, based on the lessons of the discovery of a worm on the Secret network of DoD in October, 2008. If you want to learn a bit about cyber security and its challenges, this is a great place to start.

The week ahead:


Gulf Defense and Aerospace  Exhibition, (12-14 December) Kuwait City, Kuwait. This is a conference sponsored by the government of Kuwait for the members of the Gulf Cooperation Council.  Estimates say that the six members of the GCC will spend over $105 billion over the next two years on defense and security and this conference is designed specifically to showcase items and companies to the leaders of the Army, Navy and Air Forces of the GCC.

Congress:   The full Congress is in session this week.  

Senate Veterans Affairs Committee-Field Hearing (9:15, Mon, 12 December) Full committee field hearing on delays in veterans’ services related to the claims backlog and the Veterans Affairs Department’s plans to reduce the backlog. Witnesses: TBA Location: Quincy City Hall, 1305 Hancock St, Quincy, Mass.

Senate Veterans Affairs’ Committee-Field Hearing (9:30, Mon, 12 December) Full committee field hearing on employment challenges facing veterans. Witnesses: TBA Location: Center for Workforce Development, 315 Cleveland Avenue, Columbus, OH

House Veterans’ Affairs Committee-Hearing (10:00, Weds, 14 December) Oversight and Investigation Subcommittee hearing on “Is it Working: Reviewing VA’s Compensated Work Therapy Program.” Witnesses: TBA Location: 334 Cannon House Office Building

House Veterans’ Affairs Committee-Hearing (10:00, Thurs, 15 December) Economic Opportunity Subcommittee hearing on “Reviewing the Implementation of the ‘VOW to Hire Heroes Act of 2011.” Witnesses: TBA Location: 334 Cannon House Office Building

 Think tanks and other news events:

The Aspen Institute – Washington Forum on Combatting Terrorism (12:30 PM, Mon, 11 December) Description: The Aspen Institute will sponsor a two-day seminar on combating terrorism. Most of the event will be private with small groups discussing a wide range of topics but there will be one public event on Monday. The public conversation, titled “The War on Terrorism and the Need for International Collaboration,” will address the inherent challenges of coordinating international counterterrorism policy. Geopolitical, economic and religious interests as well as domestic political considerations frequently make it difficult to consolidate a joint policy in the war on terror. Terrorist leaders are well aware of the different approaches to combating terrorism, and varied interests of the countries engaging in this war, and they exploit those differences in order to maneuver between the various countries. The challenge facing Western countries today is how to formulate a joint preventative policy that will enjoy wide public support in each country before another major terrorist attack is perpetrated Participants:  Gen. (Retired) Michael Hayden, former CIA and NSA Director, and NBC News National Investigative Correspondent Michael Isikoff Location: Please contact Josh Diamonstein at [email protected] for additional information and to RSVP

The Foreign Policy Initiative- 2011 FPI Forum: Maintaining America’s Global Responsibilities in an Age of Austerity (8:00, Tues, 13 December) FPI will roll out a series of Republican political figures to offer their take on the future of U.S. security in an age of budget cutbacks.  Interestingly they will be live tweeting the event using hashtag #FPIForum. Breakfast will be served. Registration required. Participants: Speakers include U.S. Senators Kelly Ayotte, Lindsey Graham, Mark Kirk, and Marco Rubio; Congressmen Adam Kinzinger and Mike Rogers; and Governor Tim Pawlenty Location: Newseum, 555 Pennsylvania Ave, NW, Washington DC, 20001

Fred Wellman with General Petraeus in Iraq

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.

This entry was posted on Monday, December 12, 2011 8:29 am

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