Last week, leaders of eight of the nation’s biggest defense contractors went begging, titanium cups in hand, for federal dollars to ease the pinch the COVID-19 virus is inflicting on their bottom lines. All the usual suspects were there: BAE Systems, Boeing Defense, General Dynamics, Huntington Ingalls, L3Harris Technologies, Lockheed Martin, Textron and Raytheon.
Northrop Grumman chief Kathy Warden didn’t join the two July 7 letters signed by the other eight CEOs to the Pentagon’s top weapons buyer and the acting head of the White House’s Office of Management and Budget.
Without such aid, the CEOs said all sorts of disasters will befall the nation, “thwarting its ability to meet the challenges and threats associated with great power competition.”
Frankly, that’s an absurd claim when it comes to a $750 billion annual Pentagon tab that tops the Cold War average. Although the letters don’t mention sums, a top Pentagon official said July 13 that it is seeking “about $10 billion” to pay contractors’ virus-related costs.
Interestingly, only the letter to the White House brazenly warned the OMB chief of one particular downside if the Pentagon doesn’t reimburse contractors for COVID-19-related expenditures: “This would create a ripple effect throughout the defense industrial base, leading to less investment in new technologies and significant job losses in pivotal states just as we are trying to recover from the pandemic.”
The letter didn’t bother to define “pivotal,” but with President Trump’s re-election in doubt, it doesn’t take Einstein to figure it out. It reads like a blatant spiel suggesting Trump’s re-election might be aided with a bunch of bailout billions. Frankly, this surprises The Bunker, because the defense industry is generally more deft when it comes to such transactions.
So why is Northrop different?
The company says it has already realized savings because of efficiencies achieved following its recent $9 billion acquisition of rocket-builder Orbital ATK, Warden told defense-industry analysts during an April 29 conference call. “We have some increased COVID-19 related cost, as any company does, as we do more of the safety protocols, cleaning, social distancing,” she added. “And we fully expect…that we can offset those through other cost reduction measures that we anticipate taking this year.”
Ten weeks passed between that Northrop conference call and the July 7 letter to OMB. That suggests Warden still believes her company can handle the extra costs without Pentagon help. Too bad she’s the only one.