Are American defense contractors hoisting themselves on their own petards?
Ever since Dwight Eisenhower uttered his famous leave-of-office presidential address warning of the dangers of a rising military-industrial complex, the defense industry has done its level best to prove him right. $500 toilet seats may have passed into the history books as asterisked anachronisms, but companies continue to win defense contracting bids by lowballing bids on cost-plus-profit contracts, only to later declare "Oops! The cost rose, and so must our price" -- and profit.
But in recent weeks, firms like Lockheed Martin
General Dynamics may have shot itself in the foot, asking for 50% to 75% more money than it had originally agreed to build the ship for -- a sum that seems GreeDy with a capital GD. But the collateral damage that began with General Dynamics may not stop there. Both Northrop Grumman
And who might benefit if (worst-case scenario) the Littoral Combat Ship contract is put up for rebid? Raytheon
For more on the defense contractors' ups and downs, read:
Fool contributor Rich Smith does not own shares of any company named above.
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