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12/18/2001 (14:05)

Published on Tuesday, December 18, 2001 by Common Dreams

The War Profiteers:

How Are Weapons Manufacturers Faring in the War?

by Frida Berrigan
'Afghanistan hasn't had a direct impact on sales yet.'
Peter Simmons, Spokesman for Lockheed Martin's Marietta, Georgia plane (Emphasis added)
Companies like General Electric and IBM, which cashed in on the tragedy of September 11th through tax breaks in the Economic Stimulus Bill, have drawn the ire of fiscal conservatives and progressive corporate watchdogs alike. But scant attention has been paid to the biggest war profiteers, the weapons manufacturers and the Pentagon.

Congress is debating a Bush administration defense budget of $343.2 billion, an increase of $32.6 billion over last year. This increase would mean that military spending would account for more than half of all discretionary spending (money that Congress must allocate each year).

This is good news to the weapons industry and while pink slips and hiring freezes are spreading like an epidemic from sector to sector, the top weapons manufacturers are awaiting new orders, holding job fairs, planning Initial Public Offerings, raising new capital and gaining new attention on the stock market.

As Loren Thompson, a defense analyst with the Lexington Institute, remarked 'the whole mind set of military spending changed on Sept. 11. The most fundamental thing about defense spending is that threats drive defense spending. It's now going to be easier to fund almost anything.'

So, what better time to be Lockheed Martin, Raytheon, Northrop Grumman or even the beleaguered Boeing? The war in Afghanistan is an unequivocal success- despite friendly fire incidents, bombing accidents, mounting civilian casualties and the recent crash of a $280 million B-1 bomber- and the Bush administration is already listing new countries targeted for military action, with Somalia, Yemen and Iraq topping the list. It is a good time to be in the war business.

'For a long time*[the defense industry] just didn't seem like a sexy area that has a lot of legs to it,' said a partner at one options trading firm. Well look again, because these former 'wallflowers' are ready to go. Responding to investor interest, stock exchanges are thinking about creating a new Defense Index. The American Stock Exchange has its 15- stock index up and running, Philadelphia and Chicago are not far behind.

That is music to the ears of weapons manufacturers. And they have not wasted any time capitalizing on Congress' new generosity. As a lobbyist for a major defense contractor boasted, 'There are 150 programs on Capitol Hill that we are actively working.'

Congress is still working out the wrinkles of their versions of the military budgets, but weapons manufacturers and their supporters are confident that it will be big. 'With the [Bush] administration, we'll see a rebuilding of the military to bring it back to where it was eight years ago,' said defense analyst Paul Nisbet. 'We'll see a considerable appreciation in defense stocks, as we saw in the Reagan years.'

NORTHROP GRUMMAN
This Los Angeles-based company manufacturers planes and bombers dropping munitions on Afghanistan, including the B-2 bomber, the F-14 fighter. The company also makes the much-praised unmanned Global Hawk. The $10 million per copy Global Hawk has been deployed to Afghanistan despite the fact that it had not completed its testing requirements.
The company boasts that it has the capability to 'meet current and emerging national defense needs, including anti-terrorism and homeland security.' And analysts like Loren Thompson agree, 'the most immediate hardware demand that this crisis will generate is for intelligence gathering and command and control. Those are Northrop's strengths.'

In addition to its planes and bombers, the company's Maryland based Electronic Systems division makes high tech systems like the Airborne Warning and Control Systems (AWACS), a control center and a huge radar disc mounted atop a Boeing 707, which serves 'as the airborne nerve center for a military air campaign.' Northrop Grumman is also responsible for ALQ-15 jamming device, used to protect jets from enemy radar-guided missiles. As David Steigman, senior defense analyst for the Teal Group, boasts, 'Northrop Grumman's role is supplying the command control communications and the intelligence surveillance systems to find the bad guys and bop them in the head.'

When Wall Street opened again on September 17, 2001, Northrop Grumman was ready to bob those bad guys and its stock had risen 16% to $94 a share in anticipation of the coming war. Two days after bombing in Afghanistan began; Northrop Grumman's stock had reached a three-year high of $107.60 a share on the New York Stock Exchange. The future looks bright and the company has job openings from more than 1,000 employees. According to a recent article in the financial magazine Barrons, Northrop Grumman is now seeking $2 billion in loans and equity investment to expand business opportunities and acquisitions.

It doesn't hurt that Northrop Grumman has friends in high places, like Secretary of the Air Force James Roche, former Northrop Grumman Electronics Systems chief. Since September 11th, Roche has emphasized the need for more spending on intelligence systems, specifically mentioning Northrop Grumman's AWACS plane. Not content to rest on its laurels, the company is lobbying Congress for a $300 million to upgrade the $1.3 billion B-2 Stealth Bomber, which has successfully completed bombings run in Afghanistan.

RAYTHEON
The Lexington, MA based company is best known for its Tomahawk missile. About 100 of these million dollar land-attack cruise missiles have been lobbed at Afghanistan from U.S. Navy ships since October 7th, fifty in the opening salvo alone.

Orders for Tomahawk missiles are already coming in from allies like Britain, which signed a contract for 48 Tomahawk missiles in a $87 million deal (TK date). And Raytheon is confident that significant Pentagon orders will follow. As David Polk, Raytheon spokesman, proudly said, 'we are prepared to meet the urgent needs of our customers.'

Raytheon also makes the 'bunker buster' GBU- 28, a 5,000-pound bomb and missiles like the TOW, Maverick and Javelin, all being used in Operation Enduring Freedom. In addition to missiles, Raytheon also builds sensors and radars used on unmanned and manned reconnaissance airplanes used extensively in Afghanistan. This diversity is part of what makes Raytheon the biggest stock percentage gainer since the war began; on September 10th the company's stock stood at $26.85, now it is holding at about $32.80. Raytheon is looking to hire 1,400 new college graduates this year.

The company has been raising money recently. In mid-October, the company doubled its equity sales program with a major offering. The company raised about $1 billion by selling 29 million shares. Raytheon says the money will be used to reduce debt and for general corporate purposes.

In the never ending quest for more contracts, Raytheon has been pushing its agenda on Capitol Hill; $677 million to work on the next generation of Patriot cruise missiles and an undisclosed amount to upgrade Tomahawk cruise missiles.

Continued...