Foreign Arms Sales, Sequestration And The Future of Aerospace Companies

http://breakingdefense.com/2013/06/24/foreign-arms-sales-sequestration-and-the-future-of-aerospace-companies/



Foreign Arms Sales, Sequestration And The Future of Aerospace Companies
By Colin Clark on June 24, 2013 at 5:27 PM

PARIS: Every American defense company here wants to sell more weapons to foreign buyers in the Middle East and in Asia as they seek to compensate for flat or declining sales in the United States. Every European defense company wants to sell more weapons to foreign buyers in the Middle East and in Asia as they seek to compensate for flat or declining sales to the United States and to their own governments.

Someone is going to lose in those competitions between EADS, Thales, MBDA, Raytheon, Lockheed Martin, Northrop Grumman and others. Add to this mix the fact that American companies also confront the painful uncertainty caused by the mandatory budget cuts known as sequestration. The major American companies have conducted detailed reviews of the systems they sell to the US government to assess the likely impact over the next two to three years. Dan Crowley, president of Raytheon’s IDS unit, told me his company — intent on boosting its foreign sales to 30 percent of the company’s total from its current 25 percent — has combed through all its programs to estimate the impact of both sequestration and the coming drawdown of US forces from Afghanistan.

Crowley said they estimate the impact at up to 8 percent of domestic sales. The good news is that international sales “partially offset the effects of sequestration.” The bad news is they partially offset those cuts. And the competition will only increase as the French, German, British and Italian defense budgets shrink over the next few years. The only significant defense budget in Europe that is increasing is that of Poland, as it warily watches Vlad Putin and the thuggish Russia he presides over.

Crowley and a host of other defense industry leaders I spoke with here all say the Pentagon’s senior acquisition officials — Ash Carter, deputy defense secretary, John Kendall, undersecretary of defense for acquisition, and Brett Lambert, deputy assistant secretary for manufacturing and industrial base policy — understand the risks faced by the American companies and are scrambling to help.