Defense Industry's Wild Ride May Slow

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Defense Industry's Wild Ride May Slow
October 15, 2008
Associated Press

WASHINGTON - There are few industries whose fortunes are so closely tied to government as defense contractors, companies that now provide the military with everything from fighter jets to janitors. And for the past eight years, business has been very good.

But with that government customer now ailing, the boom times are likely to end.

Long-term problems loom for the defense industry - growing Pentagon costs for items other than weapons, calls for defense contracting reform by both men vying for the White House, and uncertainty over how massive government expenditures to prop up the economy will affect defense spending, by far the largest discretionary portion of the federal budget. With the Treasury pouring billions of dollars into rescue plans, there is suspicion that Washington's appetite for expensive defense programs will diminish.

"No one really yet knows when or to what extent defense spending could be affected, but it's unrealistic to think there won't be some measure of impact," Boeing Co. Chief Executive W. James McNerney wrote in an Oct. 2 e-mail to company employees in which he warned the plans could "crowd out" defense funding.

Major military contractors are scheduled to report their quarterly earnings next week, and with defense spending still robust, there are few forecasts of an immediate downturn for the industry that has enjoyed record profits in recent years. But analysts say leaner times are ahead.


Rest of article at: http://www.military.com/news/article/defense-industrys-wild-ride-may-slow.html?col=1186032310810&wh=wh