Obstacles
The CBO has said that they don’t want to see the $29 billion program go through and they would rather have the DoD upgrade the Bradley or use a different vehicle from Germany or Israel. The military has struck back saying this isn’t about the money, it is about the fighting capability on the ground which is lacking with outdated GCVs. This will provide some headwinds for the program because the CBO did say that they could save $14 billion if the DoD went with Germany’s Puma or $9 billion upgrading the Bradley’s, but I’m assuming the military will get its wish and get themselves a new tank.
If the Democrats take the House in 2014 maybe the program could get delayed (or canceled) as they want to cut defense spending overall. This is why the sequestration was heavily weighted towards the military and DoD. Historically speaking there is a very tiny chance of that happening, with Obama’s approval rating in the negatives and below 50 combined with all the scandals (IRS, AP, Benghazi).
If anything in the 2014 election the Republicans have the best chance of winning because they need to take 6 seats in the Senate and 7 seats the Democrats are defending are in very conservative states. Combined with 3 of those 7 incumbents are retiring and not running again, it seems the Republicans will still have significant sway in Congress and will be able to get the tank program to move forward. Republicans like John McCain have expressed strong support for updating our military and would love for this program to go ahead.
To the moon!
Lockheed Martin Corporation (NYSE:LMT) is making the Orion Multi-Purpose Crew Vehicle for NASA (which was announced back in 2006) and by 2014 will have its exploration flight test in 2014.The contract could be worth up to $8.15 billion when its all said and done.
This contract doesn’t have to do with the DoD but it still is a big thing for Lockheed Martin Corporation (NYSE:LMT). If the test flight goes well then Lockheed Martin Corporation (NYSE:LMT) will be able to make a fair amount of money making of the Orion and the services that are required to keep the program going.
NASA has seen its budget get slashed as the recession hit, but this program is still progressing forward and most likely won’t be canceled.
Final Thoughts
Contracts for upgrading the military’s existing infrastructure are very lucrative and pay dividends for decades, as evidenced by BAE SYSTEMS PLC ORD (PINK:BAESF)’s 32-year stint with the Bradley. Whoever wins will see increased revenue and profit growth over the next several years.
The advancement of the Orion program is important to Lockheed Martin Corporation (NYSE:LMT) as it will help solidify its dominance of the sky (Lockheed also won the F-35 contract worth $391.2 billion) and will offer Lockheed Martin Corporation (NYSE:LMT)growth beyond the DoD. Both of these contracts and programs will be important to follow in the coming years.
Callum Turcan has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics Corporation (NYSE:GD), Lockheed Martin Corporation (NYSE:LMT), and Northrop Grumman Corporation (NYSE:NOC).
The article Driving Forward in the Tank Industry originally appeared on Fool.com.
Callum is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
