There Might Be a Financial Crisis, But the World’s Arms Dealers Are Doing Just Fine

The CEO of a weapons manufacturer has plenty of chances to rub elbows with deputy secretaries of defense, officials from Homeland Security, retired military personnel, and the best and brightest of the defense establishment almost any week of the year.

One such opportunity occurred at the ComDef 2008 conference, which wrapped up at the National Press Club in Washington on September 3. Sponsored by weapons giants like Boeing, Raytheon, and BAE Systems, the day-long conference was organized around the theme of “Defense Priorities in an Age of Persistent Conflict.” It featured presentations from a Navy undersecretary, a deputy director at the Pentagon, several weapons manufacturers, and defense representatives from France, the Netherlands, Canada, and elsewhere. With this high-powered lineup, the conference probably delivered on the promise of its catch line: “Where the international defense cooperation community gets down to business.”

Next on the calendar in mid-October will be the Women in Defense National Conference at the Crystal Gateway Marriott near the Pentagon. Sponsored by consulting giant Booz Allen Hamilton, the conference includes a panel on the “National Security Priorities in the Next Administration,” moderated by a Lockheed Martin vice-president. Foreign policy advisers from the McCain and Obama campaigns will be on hand and — in a nod towards inclusiveness — representatives from Bob Barr’s and Ralph Nader’s campaigns have been invited. The closing reception is sponsored by Lockheed Martin, and Booz Allen Hamilton is picking up the tab for the “Breaking a Glass Ceiling” dinner featuring retired Air Force Major General Jeanne Holm. And then, who would want to miss flying south for the winter? The Defense Manufacturing Conference at Disney’s Coronado Springs Resort in Florida in early December offers military industry executives the chance to soak up the rays and address the question: “Are we ready to provide affordable warfighting capabilities?”

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One of the persistent themes of these and many other weapons industry conferences is the looming concern that the military budget — which increased by two-thirds between 2001 and 2008 — can’t keep spiraling upwards forever. ComDef 2008 frames it like this: “persistent warfare is eroding the capability of our armed forces and hard choices will need to be made … It is increasingly unlikely that more money will be found for defense.” Last year, the Women in Defense conference addressed this issue with a panel titled “Shaking the Money Tree: Funding National Defense,” moderated by a vice-president for programs and budget at Lockheed Martin.

Shaking the Money Tree

Lockheed Martin stands head-and-shoulders above its competitors as a professional tree-shaker. Between 2001 and 2008, the company saw its contracts from the Department of Defense jump nearly 130%, from $14 billion to $32 billion. In a stagflation economy, their profit margin is more than healthy. The Bethesda-based company reported a 13% increase in profitability for its second quarter — from $778 million last year to $882 million this year.

The weapons industry’s concern about belt-tightening notwithstanding, the military budget is likely to continue its dramatic growth. The Defense Department’s base budget, which does not include funds for nuclear weapons or the $12-billion-a-month “global war on terror,” has grown by nearly 70% — from $316 billion in 2001 to a request for more than $515 billion for 2009’s fiscal year (which begins in October). Despite the fact that these figures represent close to what the rest of the world combined devotes to the military, neither Barack Obama nor John McCain has adopted reducing military spending as part of his national security plan. In fact, as both of them talk about modernizing the military for the 21st century and expanding the size of the armed forces, the billions add up.

So the weapons industry’s alarm bells are ringing prematurely and the future — particularly in foreign weapons sales — looks very bright. Take Lockheed Martin, for example: The company, which is springing for the floral arrangements at the Women in Defense conference next month, has more than $10 billion in proposed or recent weapons deals with foreign nations. The biggest deal could be worth $7 billion (that’s a lot of gladiolas and irises for Women in Defense) to Lockheed Martin. The United Arab Emirates is interested in the company’s THAAD (Terminal High Altitude Area Defense) system. The mobile truck-mounted system is designed to intercept incoming missiles targeted at sites such as airfields or populations centers.

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