By Jim Wolf
WASHINGTON (Reuters) - U.S. arms makers and aerospace companies are girding for battle to preserve multibillion-dollar Pentagon programs as President-elect Barack Obama sets new priorities amid mounting economic woes.
Bruising budget battles could flow from a promised review by Obama's team of each major weapons plan in light of what his transition website calls "current needs, gaps in the field and likely future threat scenarios in the post-9/11 world."
The new administration faces early decisions on more than $100 billion of politically sensitive projects, from missile defense to a new U.S. Air Force aerial refueling fleet, to ships, fighter aircraft and satellite systems.
The long-delayed replacement of the jet-refueling fleet pits Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) against a team of Northrop Grumman (NOC.N: Quote, Profile, Research, Stock Buzz) and Europe's EADS (EAD.PA: Quote, Profile, Research, Stock Buzz), parent of Airbus, Boeing's chief airliner-building rival.
Now dragging into its eighth year after a pair of botched procurement plans, the tanker competition -- valued at $35 billion for its 179-plane first phase and perhaps $100 billion over time -- was punted by Republican President George W. Bush's Pentagon to the next administration.
The chief executives of Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz), Northrop Grumman and the defense chief of Boeing, will address the industry outlook at the Reuters Aerospace and Defense Summit in Washington that starts Monday.
Also taking part in the summit will be the Pentagon's top foreign arms sales official and the U.S. Air Force Major General heading the F-35 fighter program.
Big weapons programs generate so many jobs that they spawn powerful political backing. Arms makers deliberately spread out their suppliers throughout the country.
"Weapons programs will be fiercely defended," said consultant Loren Thompson, both by the arms makers and by lawmakers protecting jobs in their districts.
EXPORTS
To offset some of the uncertainty surrounding their prospects, U.S. arms makers are expanding overseas sales efforts and retooling offerings to position themselves for any changes in approach to the so-called military-industrial complex by Obama, a Democrat.
For instance, the defense side of Boeing, the Pentagon's No. 2 supplier after Lockheed, is aiming to boost exports to 20 percent of its overall revenue in the next five years, compared with 13 percent now. Boeing's Integrated Defense Systems' sales were about $32 billion in 2007.
Similarly, Raytheon Co (RTN.N: Quote, Profile, Research, Stock Buzz), the world's biggest missile maker, is hoping to push foreign sales to 25 percent from 20 percent of projected 2008 revenue of about $23 billion, said Anne Marie Squeo, a company spokeswoman.
Arms makers say the Pentagon, constrained by federal spending to shore up the ailing economy, could turn to lower-cost systems that would deliver most if not all of the capabilities sought by U.S. forces.
"For example, we could offer existing platforms enhanced with new technology like networked capabilities," said Dan Beck, a Boeing spokesman. Continued...
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