Defense companies prepare for cuts in military funding
The wars in Iraq and Afghanistan are winding down, Osama bin Laden is dead, and the federal government is deeply in debt. This spells the end of what was a golden decade for the defense industry.
NEW YORK — The wars in Iraq and Afghanistan are winding down, Osama bin Laden is dead, and the federal government is deeply in debt. This spells the end of what was a golden decade for the defense industry.
Multimedia
More Info
At a glance
Protecting troops
remains a priority
During the war in Iraq the military realized that it couldn't protect troops from a low-tech, but potent threat: Jerry-rigged road side bombs. In Afghanistan, commanders needed ways to find and root out insurgents that had tucked themselves in caves in hard-to-reach mountains. These challenges led to new hardware. Among the most important:
• Identification tools. Soldiers now carry small portable devices that identify a person by scanning fingerprints, irises and faces. These devices, made by L-1 Identity Solutions, which was recently acquired by Safran, can weigh as little as 3 pounds, transmit data by several different wireless methods and remember 1 million identities.
• Unmanned aircraft. General Atomics' Predators, drones that can fire missiles, have killed several al-Qaida commanders. Lockheed Martin's RQ-170 Sentinel reportedly kept watch on Osama bin Laden's compound as the raid that killed him was taking place.
• Another type of company surged in importance in the last decade: Companies that provide services and support to military operations.
In the decade since the Sept. 11, 2001, attacks, the annual defense budget has more than doubled to $700 billion and annual defense industry profits have nearly quadrupled, approaching $25 billion last year.
Now defense spending is poised to retreat, and so are industry profits. “We're about to go into the downhill side of the roller coaster here,” said David Berteau, a defense industry analyst at the Center for Strategic and International Studies.
Congress agreed last month to cut military spending by $350 billion over the next 10 years.
Defense industry stocks have already begun to suffer; they are lagging the S&P 500 in recent months. During the last defense spending downturn, which lasted from 1985 to 1997, defense stocks underperformed the broader market by 33 percent, according to an analysis by RBC Capital Markets.
The Sept. 11 attacks forced the world's biggest and best-funded military to quickly retool itself. It needed to develop technologies, weapons and strategies to find and fight an elusive network of terrorists that seemed more sophisticated and dangerous than ever imagined.
The U.S. spent $1.3 trillion in the 10 years following the attacks chasing al-Qaida and fighting two wars. That was on top of baseline military spending in excess of $4 trillion.
53yr Old Mom publishes 1 simple wrinkle trick that has angered doctors.
www.ConsumerLifestyleMag.com
Mom Publishes Facelift Secret That Has Doctors Angry ...
SmartConsumerChoices.org
Prev
If you prefer your thoughts to appear in The Oklahoman, we encourage you to submit a letter to the editor.
Would you like to leave a comment?
Log in or sign up (it's free).