US Defence Executives Expected Governments to Boost Spending in New Technologies

PARIS, (BM) – US defence executives sounded a bullish note on the outlook for the industry on the eve of the Paris air show, saying they expected governments to boost spending in new technologies to counter evolving threats.

Plans announced by United Technologies and Raytheon last week to merge to form a $120bn aerospace and defence behemoth have raised questions about whether spending in the US, the world’s biggest defence market, will plateau after 2020.

But speaking to the Financial Times in Paris, Marillyn Hewson, chief executive of Lockheed Martin, the world’s biggest defence contractor, said she did not anticipate a decline in defence spending globally, noting that “we are seeing defence budgets well supported both in the US and outside of the US”.

“Countries realise that the global security environment is not getting less challenging. It is getting more unpredictable,” she told the FT.

Governments were investing in new technologies such as hypersonics, autonomy and directed energy, she added.

The Pentagon has made modernisation a key priority. By combining their technologies, UTC and Raytheon have said they will be better able to develop new types of equipment for the government, stressing that together they will spend as much as $8bn a year on research and development.

William Brown, chairman and chief executive of Harris, which is in the final stages of completing its merger with L3 Technologies, said “the funding [in the US] remains pretty robust”.

“There are unspent funds that are still out there yet to flow into the industrial base, something like $100bn, so there is a lot more room to grow the companies,” he told the FT.

The company’s merger with L3, he added, was being driven by “an evolving need by our customers for more complete, end-to-end solutions that are technologically advanced and are affordable”.

Separately, Ms Hewson said she was confident that Lockheed would win further orders for its F-35 fighter jet in Europe, despite Germany earlier this year deciding to exclude it from its final deliberations to replace its ageing Tornado fleet. Lockheed Martin, she said, was competing in Switzerland and Finland among others.

She said she had been “surprised” by Germany’s decision but said Lockheed had not yet given up hope of a possible sale to the country.

“I think Germany will continue to look at what their requirements are for the future,” she added.

The F-35 is a big part of Lockheed’s push to expand in Europe. The company expects to increase its sales in the region by 30 per cent over the next few years. Last year about 28 per cent of its group sales, or $15bn, came from outside the US. It employs about 4,000 people in Europe, with almost half of those at its facility in Poland where it manufacturers Black Hawk helicopters for customers around the world.

Lockheed Martin last week agreed a $34bn handshake deal with the Pentagon for 478 new F-35 jets at a lower cost per aircraft. The cost will be roughly $81m per plane for the first lot of jets included in the deal and could be less than $80m for planes produced afterwards.

Plans by Germany and France to launch a next generation fighter jet – dubbed the Future Combat Air System – were not “a threat today”, Ms Hewson said.

The “F-35 will be the fighter of this time,” she said and could be flying out to 2070.

Ms Hewson declined to comment in detail on the outlook for the company’s operations in Turkey. The Pentagon has said it would end the country’s role as a partner in manufacturing and buying the F-35 if it went ahead and bought Russia’s S-400 air defence missile systems. Turkish companies currently produce some of the parts for the F-35, including landing gear and fuselage components.

Ms Hewson said the company was continually assessing how it could “mitigate any risk of what might happen around the world in our supply chain”.

Suppliers in Turkey, she added, were working on orders for the F-35 but she declined to say whether the company was continuing to place new orders in the country. Lockheed, she said, “would take direction from the [US] government” on that issue.

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Author: Online Activity web site

Original title: Manufacturers upbeat on outlook for defence spending
Cover photo by Wikipedia
Source: Online Activity

The views expressed in this article are the author’s own and do not necessarily reflect BGM`s editorial stance.