Monday, October 06, 2014

Profiting From War - It's The Bottom Line

"In every adversity lies the seed of an equal or greater benefit."

Death and destruction, homeless and terrified populations, disaster and chaos likely to continue for years? Let's not dwell on that, there's plenty of good news for those making profits from war material.

Three days after U.S. warships fired 47 cruise missiles at Sunni militant targets in northern Syria last week, the Pentagon signed a $251-million deal to buy more Tomahawks from Raytheon Co., a windfall for the military giant and its many subcontractors.
As U.S. combat operations ended in Iraq and Afghanistan, the defense industry braced for protracted budget cuts at the Pentagon. Major contractors have laid off workers, merged with one another and slowed production lines as spending shrank and leaner times loomed ahead.
But with U.S. and allied aircraft now bombing Islamic State and Al Qaeda positions in Iraq and Syria, including 41 airstrikes since Monday, many analysts foresee a boost to bottom lines for munitions manufacturers, weapons producers and other military contractors — including many in Southern California.

The daily pounding by U.S. bombers, fighters and drones, and the resupply of European and Arab allies that have joined the effort, has cost nearly $1 billion so far, analysts say, and will cost billions more down the road.
Ironically, dozens of the U.S. airstrikes have targeted American-made Humvees, mine-resistant ambush-protected vehicles and other armored vehicles that Islamic State fighters captured as they overran Iraqi military bases and airfields during their blitz across northern Iraq this year. The new government in Baghdad is scrambling to rebuild its battered army and will need to buy replacement vehicles.

Wall Street is paying attention. Shares of major military contractors — Raytheon, Lockheed Martin Corp., Northrop Grumman Corp. and General Dynamics Corp. — all have been trading near all-time highs, outpacing the Standard & Poor's 500 index of large companies' stocks.
Investors anticipate rising sales for precision-guided missiles and bombs, and other high-priced weapons, as well as sophisticated surveillance and reconnaissance equipment, as the Pentagon gears up for a conflict that commanders say is likely to last years.

Congress also has agreed to provide $500 million in weapons and training to Syrian rebels who can act as a ground force against the militants in Syria, although it's unclear whether that will require new stocks.
The cost of future U.S. operations will depend on how long they continue, their intensity and whether U.S. ground forces are added beyond the 1,600 military advisors now in Iraq.
Defense Secretary Chuck Hagel says the Pentagon needs more money to combat Islamic State, and Pentagon officials have begun working with Congress on an emergency measure to make more available.

In all, the U.S. has launched 250 airstrikes in Iraq since Aug. 8 and, working with Arab partners, a total of 73 in Syria since Sept. 23. French warplanes also have bombed targets in Iraq, and British fighters also conducted their first airstrikes this week.
In Syria, the Pentagon and its five Arab partners — Saudi Arabia, the United Arab Emirates, Jordan, Bahrain and Qatar — are flying American-made fighter jets and dropping American-made bombs that are guided by GPS signals or a laser beam that's pointed directly at the target.

To replace those munitions, experts say, officials are likely to turn to Boeing Co. for a tail kit that converts an unguided free-fall bomb into a "smart" bomb through installation of a GPS-guided tail section.
The company has sold nearly 262,000 such kits, at $25,000 each, including thousands to Saudi Arabia, the United Arab Emirates, Qatar and Bahrain.

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