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Shocking Defense News: Foreign Buyers Outspend the U.S. Military

By Rich Smith - Feb 23, 2014 at 7:45AM

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Here's our weekly rundown of the major stories in defense spending.

The U.S. military has a reputation as a somewhat secretive organization. But in one respect at least, the Pentagon is one of the most "open" of our government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open on its website.

So what has the Pentagon been up to this week?

Actually, very little. DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2014. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). Spending has been exceedingly light this year, though, with the Pentagon awarding less than $17 billion in contracts year to-date -- and less than half the budgeted amount. This trend continued into the most recent week, with contracts amounting to a mere $1.12 billion.

And what did the generals get for their (read "our") money?

European helicopters
One of the few significant deals for unitary pieces of military hardware this past week came on Tuesday, when the Pentagon contracted with Airbus (EADSY -2.08%) to deliver four UH-72A Lakota light utility helicopters to the U.S. Army. The total value of the deal was small -- just $23 million. Still, it stood out in a week of exceedingly light spending.


Sikorsky Black Hawk, in service with the Turkish military. Photo: Wikimedia Commons.

Accessories for warships
Raytheon
(RTN) bagged a somewhat larger contract -- $36 million worth -- to outfit the U.S. Navy's littoral combat ships with new AN/AQS-20A sonar mine detecting sets. Recent talk at the Pentagon has centered on downsizing the number of "LCSes" that the Navy will buy, and directing those few ships that are bought toward minesweeping missions. Raytheon's sonar sets will be useful for such missions, as they're designed to detect and identify mines located on or near the sea bottom.

Batteries "R" Us
And in a pair of related contracts, battery makers EnerSys (ENS -1.20%) and Exide Technologies (NASDAQOTH: XIDEQ) won contracts worth $40 million and $18 million, respectively, to supply the U.S. Army with storage batteries over the next three years. 

Opportunities on the horizon
Exciting stuff, huh? Well, like I said. It was a slow week -- but business could be picking up real soon for the Pentagon's favorite defense contractors. In addition to these contracts already publicized by the Pentagon, we got word late this week of a pair of contracts on the horizon. And they're both much bigger in scale.

In the first, Australia's prime minister announced Friday that it will proceed with plans to buy anywhere from eight to 12 Boeing (BA -4.23%) P-8A Poseidon sub-hunting aircraft for its armed forces. The planes will be used to upgrade a fleet comprised primarily of older AP-3C Orions, and promise to generate incremental revenues of anywhere from $3.6 billion to $5.4 billion for Boeing over time.

In a second, unrelated prime ministerial contract, United Technologies (RTX 0.34%) got word from the Turkish PM that that nation will proceed with plans to buy at least 109 Turkish variants of the Sikorsky S-70 Black Hawk International helicopter -- and potentially as many as 600 such helicopters. Valued at $3.5 billion for the initial 109-helo order, this contract has the potential to swell to $20 billion in size.

As a general rule, it's a rare day when we see international sales manage to dwarf the size of the Pentagon's own weapons orders. But Friday was just that kind of day. 

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Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
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Raytheon Company Stock Quote
Raytheon Company
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ENS
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Airbus
EADSY
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