thedrifter
03-06-09, 06:23 AM
Meltdown 101: Can troop move aid defense industry?
By DONNA BORAK, AP Business Writer
Thu Mar 5, 6:17 pm ET
WASHINGTON – President Barack Obama's plan to shift 17,000 more soldiers and Marines to Afghanistan aims to help troops already fighting a strengthening Taliban-led insurgency.
Will it also help prop up a corner of the economy — the defense industry?
The top U.S. commander in Afghanistan Gen. David McKiernan says he needs not only additional combat troops but also surveillance aircraft and more civilian support. As a result, a troop surge could mean more business for the nation's defense companies — or at least delay of a long-expected decline in defense spending.
Here are some questions and answers about what the Pentagon's shift to Afghanistan may mean for U.S. defense contractors.
Q: Will the president's decision to send additional forces to Afghanistan help lift U.S. defense contractors' profits?
A: Defense analysts say probably not. Reprioritizing U.S. efforts toward Afghanistan is simply shifting spending from one country to another, says Dakota Wood, a military analyst for the Center for Strategic and Budgetary Assessments.
The amount of equipment required will mirror troops levels — and many of those soldiers being deployed from Iraq will likely arrive with the same gear, Wood says. However, the vastly different environments, smaller force size and logistical challenges will affect what the military needs to buy for its mission in Afghanistan — and what contractors will be building more of in the near-term.
Obama has asked Congress for $76 billion to pay for the wars in Iraq and Afghanistan through the fall, and another $130 billion in fiscal 2010. That figure is on top of the $534 billion in other Defense Department costs — and represents a 4 percent boost from the prior year's main budget.
A sustained level of defense spending, at least in the near term, is good news for the industry at a time when many sectors of the economy are slumping badly.
The defense sector has largely remained insulated from the financial crisis — but it has sustained a blow or two.
Falls Church, Va.-based General Dynamics Corp. said Thursday it will lay off 1,200 workers, though that was due in part to plummeting sales of business and personal jets. And Los Angeles-based Northrop Grumman Corp. plans to lay off 750 workers, mostly in southern California.
Q: What types of equipment will troops need in Afghanistan?
A: Afghanistan is a landlocked, mountainous country with little modern infrastructure and much higher altitudes than Iraq.
Even as troops are shifted to Afghanistan, there are no plans to have as many as are patrolling Iraq right now. With this smaller number of troops, deployed to small, remote outposts throughout the country, the military will need to find innovative ways to counter threats by insurgents while monitoring them closely, analysts say.
The Air Force is outfitting modified commercial planes built by Hawker Beechcraft with surveillance technologies that can help troops detect mines, explosives and other enemy-planted devices. The military has also grown to rely to unmanned aerial vehicles, or drones, built by General Atomics, to provide full-motion video to commanders on the ground.
"They are looking to obtain a decisive capability" that could "make a major contribution to winning the war," John Pike, a defense analyst and director of GlobalSecurity.org said.
Another challenge facing troops: rocky terrain and very few paved roads.
The Pentagon wants to buy an off-terrain vehicle that can traverse the mountains of Afghanistan, while protecting against rocket-propelled grenades and explosive devices.
Government contractors like the U.S. subsidiary of British defense conglomerate BAE Systems PLC, Lockheed Martin Corp., Humvee maker AM General and Navistar International Corp. are vying for the multibillion-dollar contract to build between 2,080 and 10,000 of the vehicles.
Q: Obama has said he plans to cut wasteful spending on outdated weapons systems designed for the Cold War. How will that affect jobs in the aerospace and defense sector?
A: Defense companies say thousands of jobs could be cut if we do away with certain programs like the F-22 fighter jet, built by Lockheed Martin Corp. The Bethesda, Md.-based defense contractor has said almost 95,000 jobs — mostly in states like California, Texas, Georgia and Connecticut — could be at stake if the Pentagon doesn't buy more of the radar-evading planes.
"You need something that's going to keep all of those high-tech aerospace workers employed," says Travis Sharp, a military policy analyst for the Center for Arms Control and Nonproliferation. But, he added, the fact that the program exists shouldn't justify its continuation, especially for a plane designed to counter a Soviet threat that has disappeared.
Q: When the government spends more on defense, does that help to stimulate the U.S. economy?
A: The defense sector keeps some people employed, but it doesn't have a huge impact on the national economy. Only certain pockets of the country have really seen the economic benefit that comes with buying more ships, aircraft and armored vehicles.
"Virginia does better than Michigan, Huntsville does better than the rest of Alabama and southern California does better than northern California," Pike said.
Some economists say defense spending hasn't produced a stimulative effect on the economy in recent years because of its relatively small share of gross domestic product. The last time the economy saw a meaningful boost from defense was World War II, when defense spending reached a peak of 37.8 percent of GDP in 1944.
Today, the figure is about 4.2 percent.
That number doesn't mean the military budget has shrunk — it simply hasn't come close to keeping up with growth in GDP, the value of all goods and services produced in the United States.
Still it's a very small number, and it shows the limited influence the sector can have on the economy at large.
Ellie
By DONNA BORAK, AP Business Writer
Thu Mar 5, 6:17 pm ET
WASHINGTON – President Barack Obama's plan to shift 17,000 more soldiers and Marines to Afghanistan aims to help troops already fighting a strengthening Taliban-led insurgency.
Will it also help prop up a corner of the economy — the defense industry?
The top U.S. commander in Afghanistan Gen. David McKiernan says he needs not only additional combat troops but also surveillance aircraft and more civilian support. As a result, a troop surge could mean more business for the nation's defense companies — or at least delay of a long-expected decline in defense spending.
Here are some questions and answers about what the Pentagon's shift to Afghanistan may mean for U.S. defense contractors.
Q: Will the president's decision to send additional forces to Afghanistan help lift U.S. defense contractors' profits?
A: Defense analysts say probably not. Reprioritizing U.S. efforts toward Afghanistan is simply shifting spending from one country to another, says Dakota Wood, a military analyst for the Center for Strategic and Budgetary Assessments.
The amount of equipment required will mirror troops levels — and many of those soldiers being deployed from Iraq will likely arrive with the same gear, Wood says. However, the vastly different environments, smaller force size and logistical challenges will affect what the military needs to buy for its mission in Afghanistan — and what contractors will be building more of in the near-term.
Obama has asked Congress for $76 billion to pay for the wars in Iraq and Afghanistan through the fall, and another $130 billion in fiscal 2010. That figure is on top of the $534 billion in other Defense Department costs — and represents a 4 percent boost from the prior year's main budget.
A sustained level of defense spending, at least in the near term, is good news for the industry at a time when many sectors of the economy are slumping badly.
The defense sector has largely remained insulated from the financial crisis — but it has sustained a blow or two.
Falls Church, Va.-based General Dynamics Corp. said Thursday it will lay off 1,200 workers, though that was due in part to plummeting sales of business and personal jets. And Los Angeles-based Northrop Grumman Corp. plans to lay off 750 workers, mostly in southern California.
Q: What types of equipment will troops need in Afghanistan?
A: Afghanistan is a landlocked, mountainous country with little modern infrastructure and much higher altitudes than Iraq.
Even as troops are shifted to Afghanistan, there are no plans to have as many as are patrolling Iraq right now. With this smaller number of troops, deployed to small, remote outposts throughout the country, the military will need to find innovative ways to counter threats by insurgents while monitoring them closely, analysts say.
The Air Force is outfitting modified commercial planes built by Hawker Beechcraft with surveillance technologies that can help troops detect mines, explosives and other enemy-planted devices. The military has also grown to rely to unmanned aerial vehicles, or drones, built by General Atomics, to provide full-motion video to commanders on the ground.
"They are looking to obtain a decisive capability" that could "make a major contribution to winning the war," John Pike, a defense analyst and director of GlobalSecurity.org said.
Another challenge facing troops: rocky terrain and very few paved roads.
The Pentagon wants to buy an off-terrain vehicle that can traverse the mountains of Afghanistan, while protecting against rocket-propelled grenades and explosive devices.
Government contractors like the U.S. subsidiary of British defense conglomerate BAE Systems PLC, Lockheed Martin Corp., Humvee maker AM General and Navistar International Corp. are vying for the multibillion-dollar contract to build between 2,080 and 10,000 of the vehicles.
Q: Obama has said he plans to cut wasteful spending on outdated weapons systems designed for the Cold War. How will that affect jobs in the aerospace and defense sector?
A: Defense companies say thousands of jobs could be cut if we do away with certain programs like the F-22 fighter jet, built by Lockheed Martin Corp. The Bethesda, Md.-based defense contractor has said almost 95,000 jobs — mostly in states like California, Texas, Georgia and Connecticut — could be at stake if the Pentagon doesn't buy more of the radar-evading planes.
"You need something that's going to keep all of those high-tech aerospace workers employed," says Travis Sharp, a military policy analyst for the Center for Arms Control and Nonproliferation. But, he added, the fact that the program exists shouldn't justify its continuation, especially for a plane designed to counter a Soviet threat that has disappeared.
Q: When the government spends more on defense, does that help to stimulate the U.S. economy?
A: The defense sector keeps some people employed, but it doesn't have a huge impact on the national economy. Only certain pockets of the country have really seen the economic benefit that comes with buying more ships, aircraft and armored vehicles.
"Virginia does better than Michigan, Huntsville does better than the rest of Alabama and southern California does better than northern California," Pike said.
Some economists say defense spending hasn't produced a stimulative effect on the economy in recent years because of its relatively small share of gross domestic product. The last time the economy saw a meaningful boost from defense was World War II, when defense spending reached a peak of 37.8 percent of GDP in 1944.
Today, the figure is about 4.2 percent.
That number doesn't mean the military budget has shrunk — it simply hasn't come close to keeping up with growth in GDP, the value of all goods and services produced in the United States.
Still it's a very small number, and it shows the limited influence the sector can have on the economy at large.
Ellie