 Defense giants may lose out whoever wins
(China Daily)
Updated: 2008-07-01 08:02 Goldman Sachs Group Inc warned its clients last month that Barack Obama (right) would be "a negative for defense stocks" if he became president, because he will cut weapons programs that generate the companies' biggest profits. Boeing Co, Lockheed Martin Corp and other military contractors may not fare any better under John McCain (left). While the two presidential candidates are hammering each other over their differences on Iraq, they share a skepticism over big Pentagon programs such as Lockheed Martin's F-22 fighter and the Army's $159 billion Future Combat Systems, a modernization plan jointly managed by Boeing and SAIC Inc.
"When you get beyond the issue of the war in Iraq, Senator McCain and Senator Obama sound remarkably similar on many defense issues," says Loren Thompson, a defense analyst at the Lexington Institute in Arlington, Virginia. Both have signaled they will increase overall defense spending. Still, they say the military should invest in technologies best-suited to fighting the unconventional wars of the post-Sept 11 world - and rethink those designed for the Cold War. Thompson says that will likely lead them to favor building more cargo and tanker planes and developing the Littoral Combat Ship, a new Navy vessel designed for coastal operations. That may help contractors offset some possible losses from larger programs such as the Future Combat Systems. Chicago-based Boeing builds the C-17 transport aircraft and is seeking an additional $3.9 billion order. Bethesda, Maryland-based Lockheed Martin, which is building the Air Force's C-130 cargo plane, has a $4 billion contract for 60 aircraft. Lockheed and Falls Church, Virginia-based General Dynamics Corp are competing to build the littoral ship. Comprehensive review Both McCain and Obama say they will order a comprehensive review of weapons spending early in their presidency. McCain has cited the F-22 as one example of the cost overruns and delivery delays that he says have plagued the acquisition process. In a speech last year in Oklahoma, he said the US "must be willing to pull the plug before sinking more dollars into weapons that do not provide what our warriors need". The next administration must decide whether to support building more F-22s beyond the 183 already approved, at a cost of at least $175 million per aircraft. Any president who seeks to curtail weapons-spending programs will likely face resistance from Pentagon officials and lawmakers who favor the systems and could marshal support in Congress to preserve them. It's hardly surprising that Obama, 46, an Illinois Democrat, holds such views. Over the past three decades, Democrats in Washington have generally favored military spending cuts, according to a January analysis of Pentagon budget trends by Merrill Lynch & Co. McCain, 71, an Arizona Republican, also approaches the Defense Department budget with skepticism, even though he is a former Navy pilot and the son and grandson of admirals. McCain believes "there's a huge waste in the Pentagon's acquisition system", says John Lehman, a McCain military adviser who served as Navy secretary under President Ronald Reagan. Agencies (China Daily 07/01/2008 page16) |
