Did the Pentagon Just Blow a Golden Opportunity?

File this story under: Opportunity -- lost.

Earlier this week, the website DefenseNews.com reported that the nation of Peru has just ordered a pair of C-27J "Spartan" tactical transport aircraft to be built for it by Alenia Aermacchi, a division of Italian defense giant Finmeccanica (NASDAQOTH: FINMY  ) . Peru will be paying approximately $136 million for the planes.

Ordinarily, of course, this would be a minor news item and of little interest to U.S. investors, or taxpayers -- except for one small point. Here in the States, we've also been buying a lot of C-27J Spartans. So far, the Pentagon has spent $567 million to purchase 21 C-27J Spartans. Legislators have talked about buying 42 more, tripling the size, and cost of the fleet to nearly $2 billion.

A rare sight -- a C-27J Spartan in actual flight. Source: Wikimedia Commons.

Problem is, the actual U.S. military -- the U.S. Air Force -- doesn't want any of these planes. Complaining that Alenia's aircraft costs nearly 50% more to operate than comparable Lockheed Martin (NYSE: LMT  ) C-130s, USAF has been refusing to fly the planes, sending Spartans directly into storage as soon as they arrive from Alenia. Already, a dozen Spartans have been mothballed at Davis-Monthan Air Force Base in Tucson, Ariz.

The U.S. Special Operations Command has offered to take seven Spartans to prevent their suffering a similar fate, and it's possible that other U.S. agencies -- the Coast Guard and/or the U.S. Forestry Service -- will ultimately be able to put the remainder to use. 

Five more planes, already on order, may go straight to this airplane "boneyard" upon their delivery in 2014 as well.This fact alone is a tragedy verging on scandal -- an egregious waste of taxpayer dollars. It's especially unforgiveable in light of the serious concerns Pentagon officials have raised about the military's lack of funds for essential operations. And that isn't the worst of it.

What's wrong with a win-win?
Knowing that there are buyers out there who, like Peru, appear to actually like and want the Spartan, and knowing that we've got a dozen of the birds in "like new" condition, stranded out in the Arizona desert, suggests a pretty obvious solution. Had Congress and the Pentagon acted quickly, we could have offered to sell Peru our unwanted Spartans for a cheaper price than Alenia charged them.

President Obama calls Peru "one of our strongest and most reliable partners in the hemisphere," a potential counterweight to less friendly regimes in Bolivia and Venezuela. Giving Peru a cut-rate price to upgrade its military could have helped out an ally, won us some goodwill in Lima, and recouped a few wasted dollars for U.S. taxpayers all at the same time.

You know, they say that "military intelligence" is a contradiction in terms. Failures of imagination like this one tend to support that thesis.

Warren Buffett would not approve
Warren Buffett is the master of win-win business deals, often willingly paying a high price for businesses he wants to own, just to make sure everybody's happy in the end -- and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Editor's Note: the following statement was added after the article was published, "The U.S. Special Operations Command has offered to take seven Spartans to prevent their suffering a similar fate, and it's possible that other U.S. agencies -- the Coast Guard and/or the U.S. Forestry Service -- will ultimately be able to put the remainder to use."


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 03, 2013, at 11:24 AM, Dardus wrote:

    No chance to resell to Peru the US C-27Js.

    Alenia Aermacchi was pretty clear NO OEM support for US aircraft resold abroad.

    Alenia Aermacchi already suffered big losses due to program cancellation (21 ordered against original 72 planned) and it is clearly not interested in suffering more for unfair competition on its product sponsored by US Gov

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2747527, ~/Articles/ArticleHandler.aspx, 10/22/2014 8:07:32 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement