What Is A Fair Price For An Air Force Part? Boeing Charged Japan 1,500% Markup On KC-46 Tanker Plane Part

U.S. Air Force Brig. Gen. Keith MacDonald, director of operations, National Guard Bureau, lands a KC-46 at Pease Air National Guard Base, New Hampshire, Dec. 11, 2020. (Tech. Sgt. Aaron Vezeau/U.S. National Guard)  

Japan Times/Bloomberg: Boeing charged Japan 1,500% markup on plane part, U.S. Air Force says 

Boeing Co. charged the Japanese government an “excessive” price for some spare parts for its refueling tanker plane, as much as 16 times more than the U.S. Air Force paid for its latest versions, according to a service assessment. 

In one example involving an April $79 million spare parts contract for the KC-46 tanker, Japan was billed for navigation lights made by subcontractor Honeywell Inc. “at a unit price more than 1,500% above the previous unit price,” according to the previously undisclosed Air Force summary prepared last month.  

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WNU Editor: Do not expect an answer on what is a fair price from the Pentagon .... What’s a fair price for KC-46 spare parts? The Air Force isn’t sure (Defense News).

Pentagon Declares Defense Contractors As ‘Critical Infrastructure’. They Must Go To Work

Contractors for the Defense Department need to stay on the job, Ellen Lord warned Friday. (Petty Officer 1st Class Matthew S. Masaschi/U.S. Coast Guard)

Defense News: Pentagon declares defense contractors ‘critical infrastructure,’ must continue work

WASHINGTON — The U.S. Defense Department has declared that defense contractors are “critical infrastructure” to national security, a designation that comes with an expectation to maintain a consistent, normal work schedule amid the outbreak of the new coronavirus, COVID-19.

In a Friday memo to industry, Undersecretary of Defense for Acquisition and Sustainment Ellen Lord made it clear that she wants defense companies to continue to deliver their products and services to the Pentagon on time.

“If you work in a critical infrastructure industry, as designated by the Department of Homeland Security, you have a special responsibility to maintain your normal work schedule,” Lord wrote. “We need your support and dedication in these trying times to ensure the security of this Nation. I understand that this national emergency presents a challenge and we are dedicated to working closely with you to ensure the safety of the workforce and accomplishments of the national security mission.”

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WNU Editor: My brother's work has been designated as "critical infrastructure". He does not want to go to work.

More News On The Pentagon Declaring Defense Contractors As ‘Critical Infrastructure’

Pentagon Urges Defense Industry to Sustain Work Amid Outbreak -- Bloomberg
COVID-19: Lord Urges Defense Workers To Stay On The Job; Cites White House -- Breaking Defense
DoD memo: Suppliers of critical products and services must stay on the job during pandemic -- Space News
Defense Contractors Can Go To Work Amid State & Local Lockdowns, Pentagon Says -- Defense One

These Seven Defense Contractors Would Benefit From A War Against Iran

US Marine Corps/Lance Cpl. Julian Elliott-Drouin

Markets Insider: These 7 aerospace and defense stocks are getting a huge boost from Trump's strike on Iran

Aerospace and defense firms are among the few groups of stocks soaring in Friday trading, with new fears of conflict between the US and Iran boosting war-driven industries.

A US airstrike approved by President Trump killed top Iranian general Qassem Soleimani on Thursday, ratcheting up tensions between the two nations and tanking prices for many risk assets.

Save-haven investments like gold surged, and the price of oil surged as analysts considered how Iran could harm the global oil supply.

Here are the seven major aerospace and defense stocks jumping in Friday trading, ranked in ascending order of intraday performance.

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WNU Editor: War and money have been walking hand in hand since the beginning of time.

These 20 Companies Profit The Most From War

USA Today/24/7 Wall Street: Lockheed Martin, Boeing among the 20 companies profiting the most from war

Global arms sales totaled $420 billion in 2018, up 4.6% from 2017, according to the Stockholm International Peace Research Institute (SIPRI). U.S.-based companies again dominate SIPRI's list of top global arms manufacturers and military services providers. With Congress passing its record high $738 billion defense spending bill this December, which includes military modernization and a new Space Force military branch, this trend is likely to continue.

24/7 Wall St. reviewed data provided by SIPRI to identify the companies profiting most from war. Companies were ranked based on SIPRI's estimates of arms and military services sales in 2018. Chinese companies were not considered due to lack of sufficient data. Arms and military services sales figures came from SIPRI. Profits for the latest fiscal year came from financial reports and corporate press releases.

The United States is home to half of the world’s 10 largest defense contractors and to 43 of the top 100 defense companies. These companies accounted for 59% of total arms sales by the world’s 100 largest defense contractors in 2018 – an increase of 7.2%

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WNU Editor: Here is an easy prediction. Arms sales and profits will continue to increase in 2020.

Women Have Taken Over America's Military-Industrial Complex

Politico: How women took over the military-industrial complex

For the first time, the nation's defense hierarchy is no longer dominated by men.

From the executive leadership of top weapons-makers, to the senior government officials designing and purchasing the nation’s military arsenal, the United States’ national defense hierarchy is, for the first time, largely run by women.

As of Jan. 1, the CEOs of four of the nation's five biggest defense contractors — Northrop Grumman, Lockheed Martin, General Dynamics and the defense arm of Boeing — are now women. And across the negotiating table, the Pentagon's top weapons buyer and the chief overseer of the nation's nuclear stockpile now join other women in some of the most influential national security posts, such as the nation's top arms control negotiator and the secretary of the Air Force.

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WNU Editor: Women now make up the majority of students in university, and they are dominant in the sciences and engineering programs. This advancement to the top is not a surprise, and it is a trend that will continue.

Here Are The Largest Defense Companies On The Planet

Defense News: The list is here: The largest defense companies on the globe, revealed

People like lists. And certainly, there are plenty of lists to come by in our space — some are based on contract awards, some are based on total revenue. To quote a really terrible proverb, there are many ways to skin a cat.

How we do it is to rank companies by defense revenue — that is, sales that support efforts in military, intelligence and aspects of homeland security. It’s a tactic that we believe isolates the one statistic that best reflects market presence.

But it’s not an easy statistic to come by. We ask companies to dig up and submit to us the totals, which can often be strewn across multiple business units and programs.

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WNU Editor: The list of the top 100 is here .... Top 100 for 2018 (Defense News).

The Top 100 Arms-Producing And Military Services Companies

(Click on Image to Enlarge)

Forbes: The World's Biggest Arms Companies [Infographic]

Sales of arms and military services across the world totaled $374.8 billion last year, according to new data from the Stockholm International Peace Research Institute (Sipri). That's 1.9 percent higher than 2015 and the first year of growth after five years of decline. American companies had a $217.2 billion slice of the global arms market in 2016, driven by large export orders as well as several major acquisitions.

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Update: The SIPRI Top 100 arms-producing and military services companies, 2016 (SIPRI)

WNU Editor: No surprises here.

Does The U.S. State Department Have A Plan To Evacuate Contractors From Afghanistan If The Taliban Launch A Massive Attack?

GK Sierra Security Contractors in Afghanistan. Wikipedia

Sara A. Carter, Circa: The next Benghazi? State Department leaves contractors in Afghanistan without escape plan

Surrounded by increasing violence and instability, U.S. contractors left behind in Afghanistan are raising alarm about the potential for another Benghazi tragedy, saying the State Department isn't sharing with them a plan to evacuate if insurgents launch a debilitating attack.

The concerns are heightened by the fact that many of those civilians doing the security and nation-building work of the U.S. government hold sensitive security clearances, making them an attractive target for the enemy.

And the situation could become even more precarious after the U.S. military in Afghanistan draws down to just 8,400 troops by year's end.

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WNU Editor: I am sure that the U.S. State Department has a plan .... I am also sure that such a plan will be useless within the first hour of such an offensive.

How U.S. Troop Constraints In Afghanistan Is Resulting In A Massive Increase In The Use Of Contractors

Crews from a Black Hawk helicopter and an Apache attack helicopter from the Combat Aviation Brigade, 4th Infantry Division, Multi-National Division – Baghdad, stop at a Forward Arming and Refueling Point in northern Iraq on Nov. 5, 2008. (Spec. Jason Dangel)

Washington Post: How Obama’s Afghanistan plan is forcing the Army to replace soldiers with contractors

Current restrictions on U.S. troop levels in Afghanistan and a heavy reliance on civilian contractors are eroding the skills and cohesion of units deployed to the country, according to information from the Army given to the House Armed Services Committee and provided to The Washington Post.

According to an Army document, the use of civilian labor in one of the Army’s combat aviation brigades, or CABs, in Afghanistan has had negative side effects because the contractors are being used in lieu of the brigade’s maintenance soldiers. Those soldiers should be deploying with their units, but are not because of the “constrained troop level environment” in Afghanistan, the document says.

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WNU Editor: Because of troop limitations there are currently 9,800 U.S. soldiers in Afghanistan .... but .... as of April, there are 26,000 Pentagon contractors in Afghanistan, about half of whom are assigned to logistics and maintenance duties, according to publicly available reports. So in reality .... if it was not for the political decision to limit the deployment of U.S. soldiers to Afghanistan .... the true number of U.S. soldiers in Afghanistan would be around 25,000.

A Look At America's Top 9 Defense Contractors

Business Insider: The top 9 biggest defense contractors in America

As a general in World War II, President Dwight D. Eisenhower intimately knew how to lead and manage the armed forces. After years of public service, he prepared to leave his position as the Commander in Chief with a final farewell address to the nation.

In this farewell address, he outlined the dangers of what he coined as the "military industrial complex."

Although Eisenhower could have been unwavering in his argument, one cannot deny the amazing advancements, or the destructive power, that military R&D has created. Military research and development has now paved the way for medical achievements and other inventions that have reshaped the world.

The following figures from 2015 were compiled by the US General Services Administration and are publicly available.

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WNU Editor: No surprises here.

Why Are Some Predicting A Massive Increase In U.S. Defense Stocks This Year?

Gene Marcial, Forbes: Why Gabelli Is Hot On Shares Of Military-Equipment Makers

Even as the stock market is taking an unprecedented beating, not every important investment player is necessarily bailing out or giving up on equities. To some stouthearted investors – yes, there still are brave optimists around – the reaction is, “This, too, shall pass.”

The best recourse, they argue, is to engage in an aggressive stock-buying program to re-build currently crushed portfolios by augmenting them with fundamentally sound equities now selling at fire-sale prices.

A proven way to counter an ugly market mood, they say, is to pick selected and meticulously researched companies. Indeed, applying savvy stock-picking is a way to seize bargain opportunities, such as the fallen shares of, Apple AAPL) shot down to $97 a share on Jan. 7, from $118 just last month, and Facebook, which got blasted down to $96 from $107.

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WNU Editor: I have always used the stock market to analyse future trends in war and conflicts. When the markets are down .... that is a prediction to me that global wars and conflicts will be decreasing in a year or two. When defense stocks increase .... they are projecting more wars and conflicts 2 years in the future. This is why this changing sentiment on defense stocks concerns me. There is now a growing sentiment that wars and conflicts are going to escalate in the next year or two .... and we may see that translated in rising defence stocks. There is also going to be a political change in Washington this year ... and I suspect that the next President .... regardless of who he or she is .... is going to boost the Pentagon's budget.

The World's 5 'Best' Defense Firms

Robert Farley, National Interest: The Real Top Guns: The World's 5 Best Defense Firms

After the end of the Cold War, the defense industry witnessed a wave of consolidations, sparked by a speech given by Deputy Secretary of Defense William Perry in 1993. In a talk later dubbed “The Last Supper,” Perry suggested to a group of defense industrialists that the number of major firms should shrink by about half, from fifteen to seven or eight. Perry, Secretary of Defense Les Aspin and others within DoD reasoned that the defense industry of the 1980s was far too large to sustain on a post–Cold War defense budget.

This talk, along with associated changes in Defense Department policy, helped transform the nature of the U.S. military-industrial complex. The next five years saw several major mergers and acquisitions, often with very old competitors becoming part of the same firm. The mergers led to a reduction of production facilities and infrastructure, but allowed firms to capture the intellectual property, tacit knowledge and social relationships owned by their competitors.

WNU Editor: I am surprised that Northrop Grumman is not on the list. For the future .... my money will be on Chinese and Russian defense firms playing a bigger and far more prominent role in global defense/military sales.

It Is Big Business Feeding U.S. Soldiers

Supreme Owner Made a Billionaire Feeding U.S. War Machine -- Bloomberg

Chemical warfare and car bombings are just a few of the hazards working in war-torn countries such as Iraq and Syria. For Supreme Group BV, it’s the cost of doing business.

Dubai-based Supreme delivers fuel and food -- 100,000 meals a day -- to troops stationed in some of the most inhospitable parts of the world, including Liberia, Mali and Sudan. The perilous business, where contractors dodge bullets fired by the Taliban and explosives set by insurgents, has made the company’s majority owner, Stephen Orenstein, a billionaire.

“Our mantra is to provide the same quality of service in Rwanda or Somalia as we do for restaurant chains in Germany,” Orenstein, 49, said in a phone interview from his office in Dubai. “We took a developed world standard and brought it to the developing world.”

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My Comment: I am not surprised to see that this company is based in Dubai .... the owner and shareholders clearly do not want to pay U.S. taxes while providing the necessities to U.S. service personnel.

U.S. Government Shutdown May Mean That DoD Contractors May Not Get Paid

Shutdown May Disrupt DoD Contractor Pay, Official Says -- Defense News

A government shutdown could potentially disrupt or delay payments to contractors and some will not be paid at all, according to a Sept. 26 letter from a top DoD official.

Frank Kendall, undersecretary of defense for acquisition, technology and logistics, said in a letter to trade groups that contractors performing work on contracts made in fiscal 2013 or before will “generally” be paid, but that only fiscal 2014 contracts for “excepted” activities will be paid during a shutdown.

“There may, however, be delays or disruptions in payments because of the effects of shutdown on government employees who process payments,” he said.

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My Comment: As of now the U.S. government is shutting down .... and here is an easy prediction .... as soon as all of these top defense executives get into their office, every one of them  will be calling their lobbyists and politicians demanding to know what are they going to do to fix this mess.

The Aftermath Of The Failed BAE - EADS Merger -- A News Roundup

US Defence Giants Poised To Swoop On BAE Following Collapse Of Merger With French And German Companies -- Daily Mail

Fears were growing last night that BAE Systems could fall prey to a major US competitor.

A number of American aerospace and defence companies are believed to be running the rule over the UK defence giant, which could put British jobs at risk.

It came as pressure mounted on the company's top two executives to resign after they led the group into disastrous negotiations with the European aerospace conglomerate EADS.

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More News On The Aftermath Of The Failed BAE -EADS Merger

BAE-EADS Torpedoed By Politicians -- Wall Street Journal
Self-Interest Leads to Collapse of BAE-EADS Merger -- International Herald Tribune
BAE, EADS call off deal to create European defense giant -- Star Telegram
BAE-EADS: Angela Merkel blamed for collapse of £28bn merger -- The Guardian
BAE jobs at risk after EADS deal failure -- Financial Times
Analysis: BAE-EADS merger collapse shifts focus to smaller deals -- Reuters
BAE Systems cautious about US defence spending outlook -- BBC
BAE CEO Says Company Robust in Wake of EADS Merger Failure -- Bloomberg Businessweek
Back to drawing board after Berlin halts BAE, EADS deal -- Today Online
BAE investors should not expect any quick answers from the US -- The Telegraph
BAE warns of limited disruption to its US business -- The Guardian
Expected Deals With Oman, Saudi Arabia Help BAE Project Strength -- Defense News
EADS-BAE Deal’s Collapse Damps Bankers’ Fee Prospects -- Bloomberg
EADS CEO Faces Terminator Torment After BAE Merger Judgment Day -- Bloomberg Businessweek
EADS chief was 'politically naive’ over defence merger -- The Telegraph
EADS-BAE merger collapse hits EU ambitions, firms' future -- Economic Times
BAE-EADS Merger: What next after the collapse of the deal? -- Rusi
After The Demise Of BAE-EADS, What Comes Next? -- Wall Street Journal
IN FOCUS: BAE-EADS merger a 'test of national resolve to change' -- Flight Global
Whitehall’s mistake over BAE and EADS -- David Blackburn, The Spectator
The BAE fiasco shows just how much we need America -- Con Coughlin, The Telegraph
The BAE dilemma -- The Telegraph (editorial)
EADS-BAE Failure Shows Road to United EU Ends in Berlin -- Bloomberg Businessweek

No Mega Merger Of Defense Giants BAE Systems And EADS

Astute class submarines, Artful, left, and Ambush, right, being built by BAE Systems. Photo: BAE Systems

BAE And EADS Ditch £28bn Mega Merger -- The Telegraph

The £28bn mega-merger between British defence giant BAE Systems and EADS has collapsed after governments blocked the deal to create the world's biggest aerospace and defence company.

The companies said that while they had agreed the principal terms of a merger, convincing governments in Germany, France and Britain to approve a deal had become a major sticking point.

"It has become clear that the interests of the parties' government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger," the companies said in a statement..

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More News On The Collapse Of The BAE And EADS Merger

BAE and EADS merger collapse: How it all unfolded -- The Telegraph
EADS, BAE call off world's biggest arms merger -- Reuters
BAE Systems, EADS End Merger Talks -- Wall Street Journal
EADS-BAE Pull Plug on Merger After Governments Balk -- Bloomberg Businessweek
EADS/BAE merger talks break down -- Defense News
BAE, EADS Walk Away from $45B Merger -- FOX News/Reuters
Proposed BAE-EADS merger called off -- Bloomberg Businessweek/AP
BAE-EADS merger cancelled amid political impasse -- BBC
EADS, BAE call off world's biggest arms merger -- CNBC
BAE, EADS scrap merger talks on lack of govt accord -- AFP
EADS-BAE Pull Plug on Merger After Governments Deny Backing -- SFGate/Bloomberg
BAE Systems and EADS Abandon Merger Talks -- New York Times
BAE, EADS drop $45 billion merger plan -- CNN
EADS-BAE Systems Call Off Talks: Here’s Their Wistful Statement -- Wall Street Journal
Germany feared being left on the sidelines in BAE-EADS merger: Analysts - -Economic Times
BAE/EADS merger off as Angela Merkel refuses to endorse deal -- The Guardian
How Germany killed the merger of BAE and EADS -- Robert Peston, BBC

Talking Defense Cuts And Sequestration With Boeing

Dempsey Talks Defense Cuts, Sequestration With Boeing Execs -- The Hill

Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey met with top Boeing executives on Friday to gauge the defense giant's level of concern over the automatic defense cuts facing the Pentagon next year.

The answer the four-star general got was disconcerting, but not surprising.

"I wanted to get a sense of their level of concern, and they are concerned," Dempsey told reporters after the meeting at the company's headquarters in Seattle.


Pentagon officials and the defense industry have been sounding the alarm on the damage a projected $500 billion in automatic defense budget cuts would have on U.S. national security interests, should the cuts go into effect in January.

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My Comment: Defense cuts and sequestration reminds me of a slow moving train wreck. Everyone sees it coming .... people are running all over the place .... but nothing can stop the inevitable crash.

U.S. Defense Contractors Are Starting To Cut Jobs

FILE: April 10, 2010: An Army UH-60 Black Hawk helicopter practices landing aboard the USS Underwood off the coast of Honduras. (U.S. Navy)

Black Hawk Maker Cuts Jobs As Contractors, Lawmakers Fret Over Defense Cuts -- FOX News

Sikorsky Aircraft Corp. – maker of the Black Hawk helicopter – has announced the elimination of 570 jobs, becoming the most recent defense contractor to announce financial struggles amid tightened defense spending and the potential for drastic cutbacks in January.

The Pentagon plans to cut $487 billion from its budget over the next decade, but contractors and lawmakers alike are alarmed about a separate wave of cuts that could begin Jan. 2 unless Congress and the White House team up to avert them.

The Sikorsky cuts are set to go into effect Dec. 31 when the company closes its upstate New York plant and sends the work to its facility in West Palm Beach, Fla.

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My Comment: I suspect that these cuts are just the tip of the iceberg .... and if sequestration occurs at the beginning of 2013, these cuts will end up gouging defense contractors and their workforce. But with 40 cents of every dollar that the government now spends is borrowed cash .... options are fast becoming limited.

The Growing Role Of Civilian Contractors In U.S. Drone Operations Are Raising Concerns

Personnel at March Air Reserve Base in Riverside County last year control a Predator drone flying over Ft. Irwin, northeast of Barstow. (Don Bartletti, Los Angeles Times)

Civilian Contractors Playing Key Roles In U.S. Drone Operations -- L.A. Times

Reporting from Washington — After a U.S. airstrike mistakenly killed at least 15 Afghans in 2010, the Army officer investigating the accident was surprised to discover that an American civilian had played a central role: analyzing video feeds from a Predator drone keeping watch from above.

The contractor had overseen other analysts at Air Force Special Operations Command at Hurlburt Field in Florida as the drone tracked suspected insurgents near a small unit of U.S. soldiers in rugged hills of central Afghanistan. Based partly on her analysis, an Army captain ordered an airstrike on a convoy that turned out to be carrying innocent men, women and children.

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Update: US Civilians Are Now Helping Decide Who To Kill With Military Drones -- Business Insider

My Comment: These concerns are justified. As the U.S. military becomes more dependent on civilian contractors .... more accidental deaths and questionable calls will probably be raised.

Rating The Top Defense Contractors

Defense, Military And Government Executives Rate The Top Defense Contractors -- Space War

More than 600 defense industry executives, including military and government program decision makers, participated in a DID survey collecting major defense contractor performance rankings. The resulting report revealed new learnings about how the defense industry awards business, including:

* That procurement officers assess contractors differently, and often in non-intuitive fashions that are not in sync with general industry opinions.

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My Comment: ADS did the survey. It's website is here.