Is the American defense industry suffering from dollar indigestion?

For almost thirty years now, and the great concentration of 1994, the American defense industry has reigned over the world arms market, and controls 40% of annual turnover.

The 10 largest American defense companies alone recorded, in 2023, a turnover exceeding $250 billion, or the GDP of a country like Portugal or Finland, a significant part of which comes from the allies of the United States, particularly in Europe and the Pacific.

Despite this considerable market, and an undeniable dominant position, American arms programs continue to make headlines in the press across the Atlantic, due to missed deadlines, out of control excess costs, and even of resounding failures, going so far as to handicap, from now on, the modernization of the American armies, in a very tense international context.

The question therefore arises of the causes at the origin of these repeated obstacles, and of knowing whether it is not the profusion of credits, and the lack of control of American institutions over this industry which has become too powerful to be contested, which induce this dangerous pathology, which could well spread throughout the Western camp.

2000 billion dollars for the 100 largest Pentagon programs

It must be said that the figures mentioned are enough to make one dizzy. Thus, in its annual report on the American defense industry presented at the beginning of the week, the GAO, for Government Accountability Office, the American equivalent of the French Court of Auditors, draws up a particularly worrying inventory.

Gerald Ford class nuclear aircraft carrier
The construction of Gerald Ford-class aircraft carriers is on average 18 to 24 months behind schedule. However, it is not the US Navy's most delayed program.

Indeed, the vast majority of the 100 main industrial and technological programs undertaken today by the Pentagon suffer from missed deadlines, chronic overruns and, sometimes, threats of failure, including for the most advanced.

However, these programs, which concern both deterrence with the B-21 bomber, the Columbia-class nuclear ballistic missile submarine and the Sentinel ICBM missiles, as well as conventional domains with the Ford-class aircraft carriers , the NGAD fighter or the FLRAA high-performance maneuvering helicopter program, commit more than 2000 billion dollars in American credits, over the years to come.

The fact is, the Pentagon spends, each year, on average, more than $200 billion with the American defense industry. However, the vast majority of weapon systems currently in service within its armies remain inherited from equipment designed during the Cold War, such as the Abrams tank, the Bradley IFV and the M109 Paladin, for the US Army, the B-2, F-15, F-16 and C-17 of the US Air Force, or the Nimitz aircraft carriers, the Arleigh Burke destroyers, the LHD Wasp and the nuclear submarines Los Angeles and Ohio, for the US Navy.

And for good reason, the Pentagon has consumed, over the last twenty years, several hundred billion dollars, in sterile programs, having produced none, or very little, of the capabilities of renewing the equipment in service sought, such as the helicopter of RH-66 attack and the US Army's GCV IFV, or the US Navy's CG(x), Zumwalt and LCS programs.

RH-66 Comanche
The RH-66 Comanche program swallowed up $7 billion before being abandoned, like many other programs of the American armies over the last 30 years.

Even programs that manage to go beyond this stage, and enter service, are sometimes subject to delays and additional costs out of control, such as the F-35 Lightning II, from Lockheed Martin, which today displays additional costs design by 150% to more than $450 billion, and 10 years late for the first fully operational version, which will probably not arrive before 2029.

Repeated delays, failures and additional industrial costs hamper the transformation of the American armies against China

As long as the United States was in a hegemonic position, whether militarily or in the arms and defense technology market, these massive investment leaks, without results, did not seem to have any consequences. After all, until 2018, no one imagined that the all-powerful US military, and its no less powerful defense industry, could see their technological and operational superiority challenged.

This situation, also amplified by European mimicry, was, however, perfectly identified, and exploited, by certain countries, to develop their own defense industry, and catch up with their technological delay.

K9 Thunder Finland
South Korea has become, in just a few years, a major player in the international arms market, establishing itself in particular on certain captive American markets, such as with the K9 Thunder to replace the M109 Paladin.

This is the case of South Korea, which has gone, in thirty years, from a complete importer of its defense equipment, to a fierce competitor, in many areas, of American and European defense industries, including within their own armed forces.

Turkey, too, has considerably developed its defense industry, both to free itself from certain obstacles posed by the United States and European States, concerning the use of exported equipment, and to increase its influence in Africa and Asia. and in the Caucasus, thanks to its own exports of military equipment.

Russia, for its part, managed to reconstitute a perfectly coherent armed force, relying on a largely modernized deterrent, to free up certain capabilities for maneuver in Europe and the Caucasus, first in Georgia in 2008, then in Crimea and in the Donbass, in 2014, to finally launch a global offensive on Ukraine, in 2022.

But it is, incontestably, China that has best exploited the inertia and lack of efficiency of the American defense industry over the last thirty years. While it struggled to produce upgrades to the Soviet MIG-21 in 1990, a device which was 30 years behind American and European devices at the time, the Chinese defense industry manages, today, to deliver equipment often on an equal footing, at the margins, with the most advanced Western systems, including the American ones.

Chinese Navy J-35
The J-35 seems very close to the F-35C. However, we will have to wait until we have reliable information about it to judge its performance relative to the American device.

Worse still, where American programs continue, today, to suffer from the same ills which have so handicapped them, over the last thirty years, the Chinese defense industry is engaged in an effective dynamic of production, evolution and development, to which American manufacturers seem incapable of responding, whether in terms of quantity, but also in terms of pace of innovation.

In this context, the relative trajectory followed by the United States and China, and their respective defense industries, can no longer be balanced today without significant additional investments coming from the US federal budget. , without however reestablishing a dynamic comparable to that which allowed the United States to take up the Soviet challenge in the early 70s.

No acceptable option regarding the NGAD program for the US Air Force?

The example of the US Air Force's 6th generation NGAD fighter program is, in this respect, symptomatic of the imbalances which today affect relations between the Pentagon and the US defense industry.

Like evoked in a recent article, this program, hitherto considered solid and carried out with emphasis, for entry into service at the end of the decade, or at the beginning of the following decade, now risks a significant postponement, or even a cancellation, pure and simple. , from the US Air Force.

The explanations put forward on this subject by the Chief of Staff of the US Air Force, General Alvill, as well as by the Secretary of the Air Force, Franck Kendall, referred to difficult budgetary decisions in favor of the CCA combat drone program, considered more urgent to contain the Chinese threat.

NGAD vision Lockheed Martin
The NGAD program could pay more for the difficulties encountered by the US defense industry than for the decisions in favor of combat drones advanced by USAF leaders.

However, some echoes, on the sidelines of the Pentagon, today report a very unsatisfactory response from the two manufacturers selected for this program, Boeing and Lockheed Martin.

The first, which is going through a particularly difficult period with seriously failing management in recent years, seems to no longer be able to effectively meet the expectations of the US Air Force. Furthermore, the numerous difficulties encountered concerning the KC-46A and T-7A programs tend to reduce the Pentagon's confidence in the promises made by the Seattle aircraft manufacturer.

However, it will certainly take several years for Boeing to reorganize its activity, and especially its management, and thus, we hope, to return to an activity meeting the operational and planning imperatives of the American armies. We can also think that the postponement of the F/A-XX program announced for 2025 by the US Navy, reflects the same distrust towards the aircraft manufacturer behind the F/A-18 and of the F-15.

If the hypothesis of having a single competitor for the NGAD program is already worrying in itself, it is even more so when it comes to Lockheed Martin. The American giant simply has no interest in seeing the NGAD emerge, based on the new contractual conditions issued by the US Air Force.

US defense industry assembly line F-35 Lockheed-Martin
Lockheed-Martin could have more interest in increasing the US Air Force fleet of F-35As, rather than developing the NGAD, as the contracts surrounding the new program are less favorable to it.

Indeed, if the NGAD were to fail, it is certain that the US Air Force would have to turn to more F-35As. However, LM has a particularly favorable contract, around this device, whether it concerns its production, and especially its maintenance and its evolution, prohibiting any industrial alternative, in terms of modernization and maintenance in condition. operational.

In other words, For Lockheed, it is much more profitable to bet on the F-35 than to invest in another aircraft, which could potentially harm its profits.

Is the essential restructuring of the American defense industry possible?

As we can see, in the absence of a profound transformation of the American defense industry, and a radical reorganization of the procedures for awarding contracts and conducting the Pentagon's industrial and technological programs, it is very likely that, over time, For years, the United States has been losing its technological, but also military, ascendancy to China.

This is partly what is recommended by Donald Trump's teams, who are planning a drastic reduction in the Pentagon budget, precisely to bring about this reorganization and restructuring of the US defense industry.

Donald Trump campaign
Donald Trump's teams are considering drastically reducing the Pentagon's budget to bring about a saving shock to the American defense industry. However, the consequences of such a decision could go far beyond the borders of the American defense ecosystem alone.

However, the chances of such an approach being successful remain small. Indeed, the major American defense companies, Lockheed-Martin, RTX, Northrop-Grumman, Boeing and General Dynamics, today have political, economic and political influence over the Pentagon, such as even a very determined American president, would only be very difficult to pass the Congressional barrier in this area.

What's more, such a restructuring would lead, without the slightest doubt, to a significant drop in the stock prices of these companies, and with it, significant losses for American pension funds, and therefore massive unpopularity among public opinion. . This is especially true since the market capitalization of these 5 companies currently exceeds $500 billion, and a massive drop in their stock prices could lead to a temporary panic on the markets.

The situation, as presented, therefore does not aspire to optimism beyond a few years, and even turns out to be most worrying, when we project ourselves beyond 2035 or 2040.

In all cases, the American authorities will have to find the martingale that will bring defense manufacturers back to much more efficiency, in a very short time frame, if Washington actually intends to take up the challenge posed by Beijing. and its defense industry regulated like a Swiss chronograph. It remains to be seen how they will go about it, or even if they will attempt to tackle this very difficult subject.

As for Europeans, they would be wise to take, as a reference, for their own equipment and research programs, no longer the American guideline used until now, but rather that drawn up by Beijing, or even by Moscow, to define their own goals. Otherwise, they are likely to join the United States in their self-induced downfall.

Article from June 20 in full until July 27, 2024

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  1. I don't have the impression that Europeans have fallen into laziness. All European groups are hungry. No state is rich enough to guarantee budgets at the top level in the world. No engineer can rely on guarantees. It has its disadvantages but also its advantages. We are aiming for the program that will definitely be exported in the short term. There is less risk taking. However, we aim for the clever advantage that can make the difference. In short, we are hungry. Yes, the new reference is required, especially the one that we risk facing on the battlefield and not in living rooms.


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