Arms Companies Await Sales Boost

"There is an $8 billion gap between what the Pentagon has pledged to send to support Ukraine and its allies, and the contracts awarded to defense companies.

Executives at military contractors said the combination of supply chain hurdles, labor shortages and Pentagon bureaucracy means billions of dollars in contracts won't start to benefit their financial results until late next year and into 2024 and beyond.

Lockheed Martin Corp., maker of the Javelin missiles and Himars rocket launchers deployed in Ukraine, said it would be 2024 before elevated international demand showed up in higher sales. The world's largest defense company by revenue expects sales to be flat next year, before growth resumes.

"The clutch is engaging, but into some lower gears initially," Lockheed Martin Chief Executive Jim Taiclet said on an investor call, referring to the flow of Pentagon contracts.

The Defense Department said its contracting process for Ukraine was now moving faster. "The DoD is prioritizing Ukraine support and replenishment contracts and moving far more quickly than normal given the urgency of those contracting actions," a spokesman said.

The Pentagon said it had committed $11.8 billion in military assistance to Ukraine since the start of the conflict. Most of the missiles, launchers, armed drones and other munitions have come from existing stockpiles.

Arms sent by the U.S. and its Western allies -- notably more than a dozen U.S. Himars launchers -- have enabled the Ukrainian forces to retake dozens of settlements and more than 3,500 square miles of Russian-controlled territory in the northeastern Kharkiv region, government officials said.

The Ukrainian forces are also pushing to retake the city of Kherson.

About $3.9 billion in new contracts has been awarded to equip Ukraine, replenish U.S. stocks of weapons and backfill those supplied by allies, the Pentagon said. Many of those purchases, such as Nasams missile-defense systems made by Raytheon Technologies Corp., will flow over the next several years rather than in the short term, based on contract terms.

The Pentagon also outlined the expected pace of contracting. For example, the department said the Army has so far awarded 445 contracts for Ukraine replenishment or support valued at more than $2.4 billion. That amount is expected to rise to more than $3 billion by the end of the year and $4 billion by the end of March 2023.

Defense executives said they are looking for more commitments to turn into orders. They also said they need more reassurances that elevated demand now won't turn into what Pentagon acquisition chief Bill LaPlante in September called the "feast or famine" of reduced orders when a crisis passes.

Mr. LaPlante has said the often-complex process of military purchasing has been streamlined, with approvals that once took months now expedited.

"We push money very quickly out to contractors," he told reporters in September." [1]

1. World News: Arms Companies Await Sales Boost
Cameron, Doug. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 31 Oct 2022: A.6.