Lockheed Martin's supersonic aircraft is designed to evade radar and replace ageing fighter aircraft for the US military and eight other allied countries. --PHOTO: LOCKHEED MARTIN
WASHINGTON - FOREIGN governments in the market for fighter jets and cargo planes at this week's air show in Paris will likely hear a clear message from US defense contractors: We need your business now more than ever.
With the United States looking to cut defense costs and rethinking the way it fights wars, many defense companies are looking for international buyers to take the big, pricey weapons that the Pentagon no longer wants or needs fewer of. US contractors are chasing some lucrative deals, but could also face some legal and political hurdles as they hawk weapons overseas.
Budget cutbacks
MANY European allies need to upgrade their aging equipment, and are turning to US companies as likely suppliers.
However, budgets for big weapons are getting tighter as costs like personnel expenses eat up more Pentagon resources. Defense Secretary Robert Gates proposes spending more money on tools like unmanned drones to fight insurgencies instead of big and pricey equipment like US$140 million (S$203 million) apiece for F-22 fighter jets meant for more conventional wars.
NEW markets have emerged. Iraq wants to buy Lockheed fighter jets, Boeing helicopters and Abrams tanks made by General Dynamics Corp. to rebuild its military. The Middle East nation was the second largest potential buyer of U.S. military equipment last year, behind Israel, according to a March report by the Arms Control Association, a Washington think tank.
The Pentagon notified Congress it planned to sell US$74.5 billion worth of US military equipment to 25 countries in 2008, nearly double its proposed arms sales from 2007. Iraq accounted for $18.7 billion of that total.
Boeing Co and Lockheed Martin Corp are competing to sell fighter planes to countries such as India and Brazil. Boeing is trying to spark international interest in its C-17 cargo plane.
Middle Eastern nations fearful of threats from Iran are bulking up on missile defense equipment from Lockheed and Raytheon Co.
'This is a world market right now,' says Chris Chadwick, Boeing's president of military aircraft.
Globalisation is nothing new for many US industries, which often use overseas operations and sales to tap into fast-growing areas like China and as a hedge against domestic downturns. Some of the biggest US manufacturers, companies like Caterpillar and General Electric, make more than half of their sales overseas.
But the defense industry is closely tethered to one primary buyer - the U.S. government. It has been a lucrative relationship. Defense spending is up more than 40 per cent over the past eight years, fueled in part by spending on wars in Iraq and Afghanistan. Much of the money flowed to defense contractors that supply the Pentagon with everything from warships to bullets.
Overseas arms sales represent a relatively small segment of defense contractor sales. But many are turning to the global markets for growth now that the appetite for big and expensive weapons is waning in the United States. The push is helped by countries worried about security threats from nations such as North Korea and Iran. -- AP
