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January 9 Weekly Defense Industry Roundup

Posted by Fred Wellman

U.S. Industry Associations Release Bleak Report

Zachary Fryer-Biggs, Defense News. The three major industry associations in the defense sector released a report on Friday based on questionnaires to their members outlining a host of damaging effects to the defense industry based on the planned budget cuts. The Aerospace Industries Association, National Defense Industrial Association and Professional Services Council outlined three major risks: The closing of production lines and loss of skilled labor; reduction or elimination of industry investment in non-contracted innovation; and the outright departure of some firms from the industry all together. The report offers suggestions on how to mitigate the worst-case scenarios, including not frontloading the cuts so there is time to ramp down. Check out the full report below.

Full AIA, NDIA & PSC Report: Defense Executives Assess Business Impacts of Major Budget Cuts

At $230K, JLTV Still a Bridge Too Far for Congress

Carlo Munoz, AOL Defense. Even with efforts to slash the cost of the Army and Marines signature vehicle project underway, a new report from the Congressional Research Service feels it is too little, too late to save the overall program. Congress was up in arms over the initial cost of $350K per vehicle last year, so the services went back to the drawing board and pulled much of the high-tech upgrades from the base vehicle to get the price tag down to just over $200K. But CRS recognizes that it is a base model and upgrades can be retrofitted through other funding lines to drive the price back up again. It’s likely Congress will balk at such a heavy price for what is essentially a small SUV on steroids. Expect the services to fight hard to save this needed vehicle as the Humvee fleet ages and has reached its maximum upgrade capacity.

Boeing Betrays Wichita After Winning Tanker Deal, Mayor Says

Darrell Preston, David Mildenberg and Susanna Ray, Bloomberg. Defense giant Boeing announced on Wednesday they would be closing their massive production facility in Wichita, Kansas in a cost saving move that would lead to the loss of 2,160 jobs in the town long known as the Air Capital of the World. The political leadership was blindsided, especially in light of their help in lobbying for Boeing to win the new Air Force tanker contract that was set to get final outfitting in the city. Now that work will go to other plants with most work done near Boeing’s main facility in Washington State. The change is not sitting well with them at all after granting millions in tax breaks and other incentives over the years to keep the plant operating.

USAF Orders Work to Stop on Afghan A-29 Aircraft

Dave Mujumdar and Kate Brannen, Defense News. The Air Force awarded a contract last month to Sierra Nevada Corp. and their partner Embraer to build a series of light attack aircraft for the Afghan national air force. Now the contract award is being questioned by Hawker Beechcraft which has forced a stop to the execution of the effort. It seems that after working for years on the bid, Hawker was excluded from the competition without any explanation, except a statement that their submission was “technically unacceptable.” The company is suing to re-open the competition, and for an explanation of their exclusion from the final submission. This isn’t the first time the Air Force has had a bid process questioned, and it’s reasonable to assume as dollars become tighter contracts competitions will be under greater scrutiny for fairness.

Young Vets’ Jobless Rate Rises to 13.3 Percent

Rick Maze, Military Times. The new unemployment numbers came out this week showing a rise of 200,000 jobs and an overall drop in unemployment, except for veterans. Instead the numbers went up across the board, with a sharp rise to 13.3% for post-9/11 veterans, a jump from 11.7% in December. Across all veterans’ groups the unemployment rate remains below the national average, but it did rise to 7.7% up from 7.1% in December. The young veteran numbers have seen wild fluctuations, that the Department of Labor attributes to the low numbers in the monthly survey. Regardless of the statistical fluctuations there is clearly a problem for new veterans that is not being resolved through the many dozens of efforts being attempted.

New Strategic Guidance Leaves as Many Questions as Answers

John Grady, ScoutComms. The release of the new guidance was an important milestone for the Obama administration, that was most clearly demonstrated by the President’s personal participation in its roll out at the Pentagon. It seems clear that personnel accounts are going to be a major piece of the savings envisioned in the new strategy. The Army and the Marine Corps will shrink, with recognition that it is easier to ramp up training and field ground forces than to restart the industrial base and create high technology combat equipment. Those cuts will feed investments in intelligence, surveillance and reconnaissance (ISR), cyberspace, counter-terrorism and a physical growth of air and naval forces in the Pacific Rim. In the end the announcements left much unanswered that will become clearer when the actual budget request comes out next month.

Sustaining U.S. Global Leadership: Priorities for 21st Century Defense

This is a direct link to the official PDF of the Defense Strategic Guidance

In Creating New Defense Strategy, Obama Attempts to Outflank Congress

Scott Wilson and Greg Jaffe, Washington Post. Wilson and Jaffe have the behind-the-scenes look at the machinations that went into the new guidance issued this week. President Obama was heavily involved according to those who participated, and was very driven in ensuring that the military leadership was involved in the process and gained buy-in with that participation. In the end, they feel they have created the best that can be offered based on the mandatory spending cuts. Interestingly though, the worst-case sequestration numbers were not planned for in the effort. How that plays out remains to be seen.

The Defense Industry’s New Favorite Buzzword

Phillip Ewing, DoD Buzz. One term you have surely caught if you are following the new strategic guidance discussions is “reversibility”. General Dempsey mentioned it in his comments at the release and it comes up in the document as well. Simply it means that while there will be cuts and reductions in force that are meant to be managed so that they can be reversed quickly in a crisis. In other words, if we do suddenly need to occupy a larger Middle Eastern country, keeping the training base in place with a cadre ready means we can reverse course and build land forces quickly. Phil Ewing points out how the umbrella term will mean every defense manufacturer will try to fit their program under the concept. We agree and it’s not necessarily a bad point.

The week ahead:

Themes:  The defense media will be dominated by efforts to get a read on what the new strategic guidance means for the future ahead of the budget release next month. Congress is still on recess and the New Hampshire Primary on Tuesday will dominate the news. 

Tradeshows:   

Surface Navy Association 24th National Symposium (10-12 January) Crystal City, VA, This symposium brings together military, government and industry to highlight our Surface Navy Warriors currently serving in the past and future. The Surface Navy Association annual event is a smaller show in the pantheon of tradeshows but also provides a more intimate setting to meet with Navy contacts. The SNA has a membership that is 60% active Navy instead of mostly industry, so it’s a unique organization. Definitely worth stopping by if you are in D.C.

Congress: The full Congress is in recess this week, however, there will be pro forma sessions. There are no hearings scheduled.  

Think tanks and other news events:

The Center for National Policy – The Best Defense: Protecting America in an Age of Austerity (12:00, Tuesday, 10 January), Secretary of Defense and former CNP Chairman Leon Panetta has issued new Strategic Guidance that promises to redefine the mission and means of how best to protect American interests and values for years to come. Join CNP President Scott Bates and an expert panel to discuss what might come next. Light lunch will be served. Registration required. Participants: Speakers include Lawrence Korb, Former Asst SecDef, Spencer Ackerman, Senior Writer and Wired.com Danger Room and Heather Hurlburt, former special Asst to the President. Location: CNP, One Massachusetts 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, January 09, 2012 9:46 am

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