As the United States sends billions of dollars in weapons to Ukraine, leading defense contractors are poised to benefit even as they navigate supply chain pressures, a national security expert told The Daily Wire.
Share prices for top defense contractors Northrop Grumman and Lockheed Martin have surged 15.6% and 13.2% since February 24, the first day of Russia’s invasion of Ukraine, as Congress weighs various multibillion-dollar military assistance proposals for the eastern European nation. Since the beginning of the war, the Biden administration has sponsored nearly $4 billion in arms and equipment for the Ukrainian government.
Among other items, the packages have included Stinger anti-aircraft systems, Javelin anti-tank missiles, tactical unmanned aerial systems, grenade launchers, rifles, and sets of body armor.
“The transfer and procurement of weapons to Ukraine … which is north of $3 billion to date and likely to go much higher over the next two to three months as new authorizations are approved, both benefits and stresses the defense industrial base,” Mark Montgomery, senior director of the Foundation for the Defense of Democracies’ Center on Cyber and Technology Innovation, told The Daily Wire.
Indeed, President Joe Biden has asked Congress to fast-track a $40 billion aid package for Ukraine. “I have nearly exhausted the resources given to me by a bipartisan majority in Congress to support Ukraine’s fighters,” the commander-in-chief said. “This aid has been critical to Ukraine’s success on the battlefield.”
Montgomery, who retired as a rear admiral in 2017 after serving for 32 years in the U.S. Navy, noted that the Biden administration’s aid to Ukraine thus far is a “small amount of procurement relative to the annual U.S. defense procurement, where contract obligations are about $400 billion every year.” Nevertheless, the unexpected business poses challenges to the defense industry.
“At the specific factories involved — for example Javelin — this is going to require maximum production for the rest of the decade just to replenish U.S. and allied stocks, not to mention already planned foreign arms sales to needy partners like Taiwan,” Montgomery, who also worked as policy director for the Senate Armed Services Committee, told The Daily Wire. “While this will benefit the defense contractors, it was completely unplanned so it will introduce stresses for both the big companies and their smaller supply chain partners.”
Indeed, Lockheed Martin CEO Jim Taiclet warned during a Sunday interview that supply chain bottlenecks were hurting his company’s ability to ramp up production of Javelin missiles. He urged lawmakers to invest in infrastructure that would increase the availability of semiconductors.
“We’re already investing ahead of time to buy tooling, to expand the plant and also support our suppliers to get ready to ramp up production,” he explained to CBS News anchor Margaret Brennan. “So right now, our capacity is 2,100 Javelin missiles per year. We’re endeavoring to take that up to 4,000 per year, and that will take a number of months, maybe even a couple of years to get there because we have to get our supply chain to-to also crank up. As we do so, we think we can almost double the capacity in a reasonable amount of time.”
Montgomery also told The Daily Wire that “In the case of older systems like Stinger, it is going to be very challenging to stitch an effective supply chain matrix back together again as production has been off-line for years.”
Raytheon Technologies CEO Greg Hayes likewise warned that a lack of parts and materials will inhibit the production of the anti-aircraft missiles as the company is forced to “redesign some of the electronics in the missile and the seeker head.”
The redesign will “take us a little bit of time,” Hayes said. Unlike Northrop Grumman and Lockheed Martin, Raytheon’s share price is roughly equal to its February 24 level, despite a surge at the beginning of the invasion.
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