Top O’ the Heap

According to defense industry experts, U.S. defense companies might be unscathed by the recent turmoil on Wall Street. These firms are flush with cash. Cash cows. Rolling in the dough. Top o’ the heap. (King of the Hill. A Number One.) Defense giants across the country are healthy, wealthy, and probably high-fiving it as they move forward with government-financed, mutlibillion dollar programs.

The question on defense industry minds is how long this party will last. At least one presidential candidate recently stated there are areas in defense that could be cut. It is unlikely this was political grandstanding; his revelation is no surprise to anyone in or around the large, unwieldy, and often (unintentionally) wasteful DoD. 

But for now, it is full speed ahead, even if on the taxpayer dime. It is predicted that 2010 might be the last big infusion of cash into defense spending. Since 2002, the services have become dependent upon “supplemental” budgets approved by Congress, essentially running two budgets and two sets of books (one “war” one “not war”). We say, “Enron!” They say, “GWOT!” Lipstick? Pigs? We digress.

Defense companies are so solid, finance experts say if they needed credit, they could get it. The reported state of the economy juxtaposed with the health of the defense industry make mergers and acquisitions within the industry more affordable. Such moves would not prove to be the shockers of the 1990s, when the fabulous-but-fading (and flat broke) painted ladies sold themselves in desperation.

Despite the good times, wise defense contractors might be looking at diversification, anticipating the inevitable cutbacks in government dollars. While commercial avenues do not present a good alternative, one look at the list of proposed foreign military sales shows a run toward foreign (and profitable) pastures.

Can defense denizens (large and small) avoid the misfortune of Wall Street’s epic purge? Can their front-line contractors? Magic Eight Ball says, “My Sources Say No.”

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