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Pentagon to Lobby Mexico to Reopen Factories Critical to U.S. Defense Companies

By Lou Whiteman – Apr 21, 2020 at 10:24AM

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U.S. planemakers in particular are dependent on parts made overseas.

A top Pentagon official on Monday urged Mexico to reopen certain manufacturing facilities that supply U.S. defense contractors, highlighting the international nature of the industry's complex supply chain.

Mexico, like the U.S., has taken steps to slow production or close factories in response to the COVID-19 pandemic. The U.S. government has exempted defense-related production facilities from local shutdown orders, but there appear to be issues with some U.S. contractors getting parts from Mexico.

"Domestically, we are seeing the greatest impacts in the aviation supply chain, ship-building, and small space launch," Ellen M. Lord, Pentagon undersecretary for acquisition and sustainment, told reporters on Monday. "We are seeing impacts on the industrial base by several pockets of closure internationally. Particularly of note is Mexico, where we have a group of companies that are impacting many of our major primes."

Lockheed's F-35A is likely among the planes that rely on foreign-made parts.

Image source: Lockheed Martin.

Lord and other Pentagon officials have been very proactive in trying to make sure defense production, and in particular supply chains, remain functional during the pandemic. The Defense Department has pledged quick payments and has attempted to boost liquidity flowing through the supply chain.

In the news briefing, Lord said that Mexico right now "is somewhat problematical for us," but said she is working with the U.S. Embassy in Mexico City to push for certain international suppliers to be reopened. She said there are other issues globally, including in India, that the department is monitoring.

Aviation supply chains are particularly tied to Mexico. Defense giant Lockheed Martin, a manufacturer of a number of planes, in its first quarter earnings release out Tuesday mornings said that while the pandemic did not have a material impact on first quarter results, "the corporation is beginning to experience some issues in each of its business areas related to COVID-19, primarily in access to some locations and delays of supplier deliveries."

Lou Whiteman owns shares of Lockheed Martin. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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