November 26 Weekly Defense Industry Roundup

Posted by Fred Wellman

As Cyberwarfare Heats Up, Allies Turn to U.S. Companies for Expertise

Ellen Nakashima, Washington Post. The United States is acknowledged as the clear leader in cyber defense capabilities so increasingly foreign nations are turning to U.S. companies for help developing their own capacity. But this often means walking a fine line for U.S. firms. The speed with which cyberwarfare is developing means it’s far outpacing the ability of export control regulators, DoD, or Congress to keep up, leaving contractors in an uncomfortable middle ground. They are seeking new business but possibly running afoul of outdated regulations–or future ones–that could undermine the already launched efforts. Meanwhile countries like Cuba are joining the fray to outsource cyberwarfare efforts, leaving most experts to believe we haven’t seen the really interesting times in cyberspace that are coming over the horizon.

Sequestration Or Not, U.S. Firms, DoD Will Take A Hit

Marcus Weisgerber, Defense News. Few people in the defense industry now believe that anything but massive cuts of some kind are coming no matter what happens with the ‘fiscal cliff’ and sequestration discussions occurring in Congress. Most are predicting a cut of some $25 billion a year from the defense budget. The hope of many lies in how those cuts will be implemented. Instead of the ‘meat axe’ across the board cuts of sequester, the hope is a more measured and methodical approach that could backload many of the cuts several years down the road. Such an approach would give DoD and the defense industry a more predictable glide path to the lower numbers. No matter what form the cuts come in there are hard choices ahead for the Pentagon with what programs will survive, and what priorities will remain.

Upside: Is it Time to Play Defense on Defense Stocks

Brett Arends, Wall Street Journal. The Journal is finding that while many are worried about looming cuts to the defense budget one key group seems to not be as concerned—investors. Just this past week the Standard and Poor’s 500 Aerospace and Defense Index of leading defense companies rallied and gained roughly half of the small 5.5% it lost after the GOP election loss and continues to trade within 10% of its record high in 2007. This is leading to a lot of head scratching as it seems counter intuitive but many investment analysts see the industry as better able to diversify revenues than during previous cutbacks and already positioned to bear the brunt of cuts while being wary of the damage the cuts did to defense investors in the 1990s. All of this is well and good for the larger manufacturers that make up the S&P 500, but it should be cold comfort to medium and small defense companies who won’t be able to diversify or move to other market spaces.

New U.S. Presidential Helicopter Program Kicks Off

Christopher Cavas, Defense News. Here we go again as the Navy has released a draft solicitation for new helicopters for the presidential fleet flown by the U.S. Marine Corps and commonly referred to as “Marine One” when the POTUS is on board. The new VXX program follows the much-maligned effort that was canceled in 2009 by then Secretary of Defense Robert Gates over spiraling costs and schedule overruns. This newest effort hopes to field at least 23 aircraft in service by 2020 and will replace the current fleet of VH-60N “Night Hawks” and VH-3D “Sea Kings” produced by Sikorsky. The draft RFP is for the engineering, manufacturing, and development phase and already Sikorsky, Boeing, and AugustaWestland/Northrop Grumman have expressed interest in providing variants of existing designs for the competition.

National Guard Soldiers and Airmen Face Unemployment Crisis

Alexandra Zavis, Los Angeles Times. National Guardsmen and Reservists are facing a unique challenge even compared to other transitioning military and veterans because they still could face call up and return to the war zone. This means that many employers are hesitant to hire them and now there is an estimated 20% unemployment rate for what were once called “weekend warriors” and today are anything but. Despite laws that protect jobs while deployed, many have returned to find their positions eliminated or entire companies out of business leaving those rules irrelevant. To address the issue many states, including California, are taking an aggressive approach with the recognition that it’s a readiness issue for their state forces and exacerbates reintegration problems and mental health problems when work can’t be found. Advocates continue to worry that the drawdown in Afghanistan and reduction in the size of the military means these issues aren’t going away any time soon.

The week ahead:

Tradeshows and Conferences:

IDGA ISR Summit, Hilton Alexandria Mark Center, Alexandria, Va. (Wed-Fri, 28-30 November) The intelligence, Surveillance, and Reconnaissance, or ISR, Summit will focus on the emerging technology trends and capability requirements for tactical Intelligence, Surveillance, and Reconnaissance. This year’s ISR Summit will incorporate the changing face of ISR assets to include Target Acquisition or ISTAR as more armed UAVs enter the battlespace.

Congress:   The full Congress is in session this week.  There are no defense or veterans specific hearing scheduled at this time.

Think tanks and other news events: 

Foreign Policy Initiative: 2012 FPI Forum The Price of Greatness: The Next Four Years of Foreign Policy, Washington, DC (8:45 AM, Tues 27 Nov) Description: The conservative Foreign Policy Initiative notes, “in the next four years, the United States will face a wide array of international challenges. Iran continues to progress toward a nuclear weapons capability, China is expanding its military and economic power, and uncertainty over the outcome of the Arab Spring persists. These challenges will require substantial American leadership and a willingness to confront the looming budgetary crisis that underpins our involvement in the world.” RSVP online. Participants: Senator Jon Kyl, R-AZ, Ambassador Kim Beazley, Embassy of Australia, Ambassador Jose L. Cuisia Jr., Embassy of the Philippines, Ambassador Nirupama Rao, Embassy of India, Senator Joe Lieberman, I-CT, and others Location: Newseum, 555 Pennsylvania Avenue NW, Washington, DC 20001

Center for a New American Security: Global Swing States: Engaging the New Pivotal Powers Washington, DC (3:30 PM, Tues Nov 27) Description: The German Marshall Fund of the United States and the Center for a New American Security will release a new report hypothesizing a key opportunity for the second Obama administration: building closer partnerships with Brazil, India, Indonesia and Turkey to strengthen the international order. RSVP online. Participants: Dr. Daniel M. Kliman, German Marshall Fund, Richard Fontaine, CNAS, Under Secretary of State Robert Hormats Location: The German Marshall Fund, 1744 R Street, NW, Washington, DC 20009

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, November 26, 2012 9:55 am

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