Feeling the Impact:Sequestration and the Defence Industry

Drastic and arbitrary US budget cuts are hindering the defence industry in a big way.Sequestration is the single worst piece of public policy in my 35 years of experience,said Clay Jones,CEO of  leading defence contractor Rockwell Collins.We've laid off 150 in Iowa and the rest of the year will lay off another 150 throughout our enterprise.
That's just the tip of the iceberg.One of the biggest problems is,it is impossible to plan.2014 will be even worse.We already took 60 million in restructuring charges.We don't like it,but we're gonna manage well.
Our defence business went down 8% last year;it will go down another 10% this year.By 2015,however,our commercial business will grow 10%.There's a high demand for fuel-efficient aircraft.We're about 33-35% international.That will grow to over 40% by 2020.
We'll be paid eventually.The biggest impact will be on the cash flow.
We produce the helmet-mounted sight for the F-35 Lightning II Joint Strike Fighter-the most Buck Rogers thing in the aircraft,so I think we're secure in that project.
Senator Ben Cardin,D-Maryland,said he doesn't expect any progress in resolving the sequestration issue.
Rockwell says the world's leading aerospace and defence companies rely on them for smart communications and aviation electronics solutions.Their products span displays,electronic warfare/intelligence,navigation and guidance,precision targeting and weapons,space components and other engineering applications.
Rockwell Collins,Inc(COL)

Gates Unveils 2010 Budget

Defense Secretary Robert Gates has released his 2010 defense budget proposal.Mr.Gates says he is just trying to get the irregular warfare guys to have a seat at the table.He is shifting the emphasis to less costly systems that are appropriate to today's low intensity conflicts,not tomorrow's wars.Mr.Gates dismissed the "exquisite" weapons that characterized Pentagon thought in recent times.He is also rolling back the number of contracts from 39% of defense work to the pre-9-11 figure of 26%,as defense projects are moved in house.The 2010 proposal calls for 31 new F/A-18 fighter jets for the Navy;increasing special operations forces by 2800;increasing the Marine Corps by 27,000;halting the DDG 1000 Zumwalt destroyer at three ships,while returning to the Arleigh Burke class destroyer;canceling the new light armored vehicles in favor of the Mine Resistant Ambush Protected vehicles;adding two billion more for surveillance systems;accelerating the production of F-35 fighters to 30 in 2010,up from 14 in 2009;and increasing the number of helicopter maintenance crews and pilots for Afghanistan service.The budget is for 534 billion dollars,an increase of 20 billion over 2009.