Budget: Lockheed gets almost as much as State Department

Boeing is in second place with annual sales of $26.5 billion in 2016.

The Washington Post

Of Lockheed Martin’s $51 billion in sales last year, nearly 70 percent, or $35.2 billion came from sales to the U.S. government. It’s a colossal figure, hard to comprehend.

So think of it this way: Lockheed’s government sales are nearly what the Trump administration proposed for the State Department next year in its recently released spending plan. Or $15 billion more than all of NASA. Or about the gross domestic product of Bolivia.

With a White House proposal to spend a massive amount on defense next year in what one consultant called an “eye-watering” budget for the defense industry, Lockheed, the world’s largest defense contractor, could get even more.

Over the past decade, Bethesda-based Lockheed, which employs 100,000 people across the globe, has averaged about $38 billion a year in federal sales, a reign during which, year after year, Lockheed has received more federal money than any other corporation.

Boeing is in second place with annual sales of $26.5 billion in 2016, a year in which the top five defense contractors — including General Dynamics, Raytheon and Northrop Grumman — had total sales of nearly $110 billion to the U.S. government, according to federal procurement data. The five biggest defense contractors took in more money from the U.S. government than the next 30 companies combined.

But no one can touch Lockheed, the manufacturer of the F-35 Joint Strike Fighter. The company is so big that some have likened it to a government agency and have quipped that Marillyn Hewson, Lockheed’s chief executive, is as powerful as a Cabinet secretary — or higher. When she gives her annual state of the company speeches, flanked by a pair of flags — one American, one with the company logo — she looks, well, presidential.

Over the past year, Lockheed’s stock price has jumped 36 percent to close Friday at $360. Over the past five years, it’s up 300 percent. Boeing’s stock has doubled over the past year, driven in large part by increased demand for commercial airplanes.

Now, President Trump has opened the floodgates for defense spending, proposing $716 billion for the Pentagon, a 13 percent increase. And the defense industry is poised to profit, with Lockheed in the lead.

“Diplomacy is out; airstrikes are in,” said Richard Aboulafia, an aerospace consultant with the Teal Group. “In this sort of environment, it’s tough to keep a lid on costs. If demand goes up, prices don’t generally come down. And, of course, it’s virtually impossible to kill stuff. You don’t have to make any kind of tough choices when there’s such a rising tide. Warren Buffett always said, ‘When the tide goes out, you see who is swimming naked.’ Well, this is the reverse of that.”

In 2013, Marine Corps Gen. Jim Mattis, now the secretary of defense, told Congress, “If you don’t fully fund the State Department, then I need to buy more ammunition.” As Fred Kaplan noted in Slate, the Trump administration’s budget calls for a more than 25 percent increase in spending on missiles and munitions.

Jim McAleese, a consultant and analyst, covered the “‘Wow!’ moments from the 2019 DoD budget roll-out” in a recent note. Among them: Navy shipbuilding “hits juicy” $22 billion, he wrote; Navy aircraft “spiked” to $19 billion; and the nuclear triad “drove the majority of development ‘winners,’ ” he wrote, which included funding for the B-21 Bomber, the Columbia-class submarine and various missile defense programs.

The Pentagon wants to buy more Super Hornet fighter jets, a boon for Boeing. But in the history of defense programs, there has been nothing like the Lockheed Martin F-35 Joint Strike Fighter. Over its projected 60-year life span, it’s expected to cost more than $1 trillion, making it the most expensive weapons program in the history of the Defense Department. As production has ramped up, sales of the stealthy fighter jet have continued to climb. Last year, Lockheed delivered 66 jets to U.S. and international customers, and this year that number is expected to grow to 90.

The company is also building the Orion spacecraft for NASA, for which the White House has budgeted $5.6 billion over the next five years.

There’s so much money that when the Pentagon decided last year it needed a new long-range missile it chose not one but two companies to develop it. It awarded $900 million contracts — each more than the entire budget of the Small Business Administration — to both Lockheed and Raytheon to develop the next Long-Range Standoff Missile, designed to deliver a nuclear warhead from a B-21 or B-2 bomber.

But ultimately, the Pentagon plans to select only one missile in a winner-take-all contract that could be worth as much as $10 billion. The loser? It would walk away with its $900 million consolation prize, leaving the Pentagon with missile technology that may never be used.

The top defense firms have gotten so large in recent years that in 2015, the Pentagon’s chief weapons buyer issued an unusually strong statement warning against further consolidation in the industry.

Frank Kendall, then the undersecretary of defense for acquisition, technology and logistics, said he feared a future in which the Pentagon “has at most two or three very large suppliers for all the major weapons systems that we acquire.”

Talk to us

More in Herald Business Journal

Everett Community College's Dennis Skarr sits in front of a 15-foot interactive wall that can replicate a manufacturing company's assembly line, hardware, software and networks on Wednesday, Nov. 24, 2021 in Everett, Washington. A class taught by Skarr focuses on cyber threats against manufacturers, pipelines, water treatment systems and electrical grids.(Andy Bronson / The Herald)
At EvCC, ‘The Wall’ teaches students how to thwart cyber crime

The Everett college is first in the nation to have a tool that can model cyber attacks aimed at vital infrastructure.

Double Barrel owner Lionel Madriz places a wine sale sign outside of his business on Friday, Nov. 19, 2021 in Snohomish, Wa. (Olivia Vanni / The Herald)
Job-seekers today are choosy, forcing employers to adapt

If they even show up, prospective employees are calling the shots. First question: What’s the pay?

The Lab@Everett director Diane Kamionka stands outside the Lab's new home at the Angel of the Winds Arena on Monday, Nov. 29, 2021 in Everett, Washington. When Everett Community College tore down the Broadway mall to make room for its new Cascade Resource Learning Center, The Lab@everett, a business accelerator, also succumbed to the bulldozer. However, the city of Everett found a new home for the TheLab, which serves entrepreneurs and startups: the Angel of the Winds Arena. (Andy Bronson / The Herald)
Everett business incubator finds a sporty new home

TheLab@everett, an innovation center for entrepreneurs, has relocated to Angel of the Winds Arena.

An illustration of the TerraPower Natrium nuclear-power plant planned for Kemmerer, Wyoming. (TerraPower) 20211201
TerraPower plans to build demo nuclear reactor in Wyoming

The firm, which operates a research facility in Everett, is developing an electricity-generating plant.

Local aero firms get $4.5 million from feds to protect jobs

Federal Aviation Manufacturing Jobs Protection Program grants were awarded to six Snohomish County employers.

Carpenters from America and Switzerland build the first "modular home" made from cross-laminated timber, inside a warehouse on Marine View Drive on Tuesday, Nov. 30, 2021 in Everett, Washington.  (Andy Bronson / The Herald)
Affordable housing’s future? Innovative home built in Everett

Swiss and American carpenters built the nation’s first “modular home” made of cross-laminated timber.

FAA Administrator Steve Dickson speaks to lawmakers as Michael Stumo, holding a photo of his daughter Samya Rose Stumo, and his wife Nadia Milleron, sit behind him during a Senate Committee on Commerce, Science, and Transportation hearing on the implementation of aviation safety reform at the US Capitol in Washington on Wednesday, Nov. 3, 2021. Samya Stumo was among those killed in a Boeing 737 Max 8 crash in 2019. (AP Photo/Amanda Andrade-Rhoades)
Democrats push FAA for action against certain Boeing 737 Max employees

Rep. Rick Larsen co-signed the letter stating concerns over the “absence of rigorous accountability.”

FILE - In this June 12, 2017, file photo, a Boeing 787 airplane being built for Norwegian Air Shuttle is shown at Boeing Co.'s assembly facility, in Everett, Wash. Boeing is dealing with a new production problem involving its 787 jet, in which inspections have found flaws in the way that sections of the rear of the plane were joined together. Boeing said Tuesday, Sept. 8, 2020, it's not an immediate safety risk but could cause the planes to age prematurely. (AP Photo/Ted S. Warren, File)
FAA memo reveals more Boeing 787 manufacturing defects

The company said the problems do not present an immediate safety-of-flight issue.

Homes in The Point subdivision border the construction of the Go East Corp. landfill on Wednesday, Nov. 10, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Mudslide briefly stalls housing project at former Everett landfill

The slide buried two excavators in September. Work has resumed to make room for nearly 100 new houses.

Ameé Quiriconi, Snohomish author, podcaster and entrepreneur.  (Kevin Clark / The Herald)
Snohomish author’s handbook charts a course for female entrepreneurs

She’s invented sustainable concrete, run award-winning wedding venues and worked in business… Continue reading

A final environmental cleanup is set to begin next year at the ExxonMobil and ADC properties, neighboring the Port of Everett. Photo courtesy of the Washington State Department of Ecology.
Port of Everett to get $350K for its costs in soil clean-up

The end is finally in sight for a project to scrub petroleum from two waterfront parcels, owned by ExxonMobil and ADC.

Shawn Loring, owner of Lazy Boy Brewing, received $10,000 through Everett's federal CARES Act funding.  (Kevin Clark / The Herald)
Everett, Snohomish breweries to open on Everett waterfront

Lazy Boy Brewing and Sound to Summit see a bright future at the port’s Waterfront Place.