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January 14 Weekly Defense Industry Update

Posted by Fred Wellman

Congress’ Budget Games Mean Less Cash, More Chaos for Pentagon

Spencer Ackerman, Wired.com Danger Room. In one of the most disheartening press conferences in memory last Thursday, Secretary of Defense Leon Panetta and Chairman of the Joint Chiefs Marty Dempsey laid out the immediate steps the Pentagon would take to make precautionary cuts based on the chaos in Congress. Without any real assurance that sequestration cuts won’t kick in on March 1, the DoD has little choice but to start taking drastic measures including docking ships, grounding aircraft and bringing training to a grinding halt, while contracts are suspended and civilian employees placed on furlough. While Congress and the president were patting themselves on the back for averting the cliff last week the reality in the military is one of even worse chaos and uncertainty. Ackerman lays all of the moving pieces out pretty thoroughly.

Hagel’s Worldview Shaped by Business as Much as War

Gregory Korte, USA Today. In all of the arguments over whether former Nebraska Senator Chuck Hagel is the right guy to be the next Secretary of Defense it’s been lost how much business experience he brings to the job on top of his combat in Vietnam and elected office time. Hagel started a cellular phone company before the technology had even been heard of and has since run multiple companies and served on boards that arguably make him one of the most business savvy SecDef’s in years. This unique experience comes at a moment when cost cutting and tough business decisions will be the norm more than strategic deployment of combat forces for the agency that faces precipitous budget cuts in the coming years. While many can argue fine points of his worldview it can’t be denied that he understands how to run a business and has the experience to run the largest federal agency.

Experts: Drones Basis for New Global Arms Race

Jim Michaels, USA Today. The United States has been demonstrating in no uncertain terms the value and success of unmanned aerial vehicles for the last decade and the world is rushing to catch up. According to the GAO there are now 75 countries that have acquired or developed their own UAV’s, up from 40 in 2005. Israel is second to the U.S. in the development of drones and has exported them to Russia, Georgia and India already. While useful as reconnaissance platforms many analysts recognize that acquiring drones for their military is often a prestige issue as much as a military value increase, since most nations lack the sophisticated sensors and weapons the U.S. is able to bring to the technology. For whatever the reason they are being acquired, the preeminence the U.S. holds in this technology will likely not last much past the next decade.

BAE Butts Into Lockheed’s $3 Billion F-16 Servicing Work

Nick Taborek, Bloomberg. In what is likely to be an increasing trend in the face of dwindling defense budgets, BAE Systems beat Lockheed Martin to refurbish 130 South Korean F-16 fighter jets through the U.S. Foreign Military Sales program. What’s significant about this is that Lockheed who is also deep into developing the F-35 fighter, the most expensive weapons program in history, builds the F-16. More of these situations are likely as companies fight over lucrative servicing contracts for existing systems and are willing to take on the traditional relationships that have existed for years in search of increasing market share.

Army Aviation Heads to a ‘Tipping Point’ by Looking at Calendar and Not a Watch

John Grady, ScoutComms Special Correspondent. The Association of the United States Army held their annual Army Aviation Symposium last week and our John Grady was on hand to talk to industry and military leaders about the challenges ahead for the most expensive branch of the service. While initial numbers might look good as old aircraft are replaced and upgraded the optimism quickly fades as industry leaders look ahead at the next generation of aircraft and the fate of smaller companies in the tightening budget environment already upon us.

The week ahead:

Tradeshows and Conferences: 

Surface Navy Association 25th National Symposium , Hyatt Regency Hotel, Crystal City, Va. (Tue-Thurs, 15-17 Jan) The Surface Navy Association holds their conference each year in Crystal City bringing together leaders of the Navy and industry to discuss the professional issues surrounding the fleet. This year’s symposium arrives as the “Asia pivot” is set to begin while dealing with potentially devastating budget cuts to the services. The event has been designated, as an authorized event by the Secretary of the Navy so uniformed personnel will be in attendance.

Congress: The full Congress is not in session this week although House of Representatives organizational meetings will take place on January 15th.

Think tanks and other news events: 

Institute of World Politics: Book Lecture with James Farwell: Persuasion and Power: The Art of Strategic Communication, Washington, DC (4:30 PM, Mon 14 Jan) Description: A discussion with the author of Persuasions and Power. From the publisher, the book “stands apart for its critical evaluation of the concepts, doctrines, and activities that the US Department of Defense and Department of State employ for the art of strategic communication including psychological operations, military information support operations, propaganda, and public diplomacy.” RSVP online. Participants: James P. Farwell, author, Persuasion and Power: The Art of Strategic Communication Location: Institute of World Politics, 1521 16th Street NW Washington, DC

Electronic Privacy Information Center: Drones and Domestic Surveillance

Washington, DC (9:00 AM, Tues 15 Jan) Description: This symposium will be devoted to an assessment of the impact that increased domestic drone use will have on privacy. Experts in law, technology, and security will discuss the 2012 FAA Modernization and Reform Act that opened the door for increased use of drones in the United States as well as pending legislation, technical capabilities, and potential legal pitfalls. RSVP online. Participants: Representative Ed Markey, D-MA, (Invited), Representative Zoe Lofgren, D-CA, (Invited), Representative Ted Poe, R-TX, (Invited), Michael Huerta, Acting Administrator, FAA (Invited), Laura Donohue, Associate Professor of Law, Georgetown Law School, Orin Kerr, Professor of Law, George Washington University Law School, Bruce Schneier, Author and Chief Technology Officer, BT Counterpane, Amie Stepanovich, Associate Litigation Counsel, Electronic Privacy Information Center, Gretchen West, Executive Vice President, AUVSI Location: First Amendment Lounge, National Press Club, 529 14th Street, NW, Washington, DC

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.

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This entry was posted on Monday, January 14, 2013 7:43 am

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