Industry leaders discuss the challenges of doing business
The defense/aerospace industry in the United States provides the technology that buttresses the nation in its
status as the world’s superpower. The industry enables the United States to maintain a global presence and
rapid-response capability in defense of its interests, and to promote a peace that exists in much of the world.
Because of the billions of taxpayer dollars expended annually in the defense sector — and the high development costs of its products — the industry naturally is a lightning rod for criticism when programs
encounter turbulence. Many of the challenges it faces remain constant over time; others emerge and
morph as the world’s markets, political climate and demographics change.
Perhaps more than any other sector, the defense industry thrives when requirements are clear and funding
is stable, difficult even in the best political climate. There is concern that a trend toward fixed-price contracts
will, in program development, hamper the ability of managers and engineers to address high-risk unknowns.
Competition for the technical talent to maintain the edge of superiority is increasingly a concern of managers. Globalization of the industry appears to bring mutual benefits to nations, while giving the United
States its strongest export sector and attracting infrastructure and jobs from international companies.
Seapower asked executives from the top defense/aerospace corporations operating in the United States
to give readers their take on the challenges facing their industry today. Below are edited excerpts of written responses, in alphabetical order by company, from Walter P. Havenstein, chief operating officer
of BAE Systems plc, London, and president and chief executive officer (CEO) of BAE Systems Inc.,
Rockville, Md.; James F. Albaugh, executive vice president of Boeing Co., Chicago, and president and
CEO of Boeing Integrated Defense Systems, St. Louis; Robert J. Stevens, chairman, president and
CEO of Lockheed Martin Corp., Bethesda, Md.; Ronald D. Sugar, chairman and CEO of Northrop
Grumman Corp., Los Angeles; and Daniel L. Smith, a Raytheon Co. vice president and president of
Raytheon’s Integrated Defense Systems business unit, Tewksbury, Mass.
What are the major challenges faced by the defense
HAVENSTEIN: Uncertainty regarding the strategic
direction of the United States and global defense industrial base in relation to the priorities of the U.S. government and other nations. During the next U.S. administration, the rate of growth in defense spending is widely
expected to slow, if not actually decrease. The question,
then, is how will the Pentagon spend its acquisition
funds — to buy more modern weapon systems (e.g.,
Future Combat Systems, Littoral Combat Ship, Joint
Light Tactical Vehicle, etc.), or continue to buy and/or
upgrade existing systems (e.g., Bradley Fighting Vehicle,
Mine Resistant Ambush Protected vehicle, Arleigh
Burke-class destroyer, etc.)? Similarly, how are global
defense issues going to affect non-U.S. defense priorities?
ALBAUGH: The defense industry faces unique challenges. Despite flattening defense budgets and shifting