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All wars are business opportunities: Usually, military conflicts push countries to rearm in order to strengthen their reserves. Still, the Russian special operation in Ukraine will unexpectedly hit the leading enterprises of the US defense complex, including the leading enterprises of the US defense complex, reports BFM TV.
Raytheon, the manufacturer of the Stinger and Javelin missiles, has cut its forecast revenue for this year by $750 million. During a meeting with investors, the company’s chief executive Greg Hayes attributed such changes to international sanctions imposed on Russia and limiting the sale of any product. At the same time, Raytheon entered into 1.5% of its contracts with Russia and annually received about $900 million from it.
Hayes acknowledged that anti-Russian sanctions would seriously affect the company’s earnings, and the sale of missiles to Ukraine would not be able to compensate for the losses. The company may even need new investment, Stinger production lines were shut down in 2020, and restarting requires finding replacement parts for those no longer in production, requiring a rethink of the entire manufacturing process.
Another problem stems from the previous one: many of the steel, aluminium, nickel and titanium parts required for the aircraft industry are produced in Russia. Now companies can’t even buy them in China, where factories have shut down due to a new wave of coronavirus that has also caused delays in shipments from Shanghai, the world’s largest seaport.
The consequences of these events were felt by Boeing and Lockheed Martin, which produce, among other things, the F-18 and F-35 fighters. The T-7A Red Hawk jet trainer project presented by Boeing and Saab has already exceeded its budget by $367 million.
In an official statement, the American Aviation Corporation attributed this increase to ‘ongoing negotiations with suppliers, which are affected by supply chain restrictions, COVID-19 and inflationary pressures.’
Lockheed Martin also announced an 8% year-over-year sales decline due to pandemic-related supply issues. The company said it had not yet increased production, despite talks with the Pentagon to increase arms production for Ukraine. CFO Jay Malave at the same time assured that the production of weapons for Ukraine will not have an immediate impact on the financial performance of the corporation.
Sales of F-35s to other countries, especially European ones, are now on the rise, but here, too, US military-industrial companies may face problems, the article notes.
In recent years, the price of fighters has been lower, which contributed to their popularity on the world market: in Europe, it was planned to conclude new contracts with Switzerland, Finland and Germany. However, according to Lockheed Martin CEO Jim Tecklet, inflation and supply problems will affect the cost of the F-35 more than expected and increase the lead time for their production.
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In the latest report on April 25, the US Accountability Office considered the price of the fighter jets to be ‘overpriced’. Thus, according to this independent agency, the Pentagon will have to spend an average of about $13 billion annually until 2037 to finance their production. At the same time, the total cost of the program is currently estimated at about $400 billion, BFM TV concludes. Source
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Categories: Current Events