THE U.S. DEFENSE INDUSTRY AND ARMS SALES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

***Anonymous if on web PLEASE***

 


INTRODUCTION

            The three largest defense companies in the world are all United States companies.  With a combined total revenue in 2001 of $100 billion and employing 400,000 people, Lockheed Martin, Northrop Grumman and Boeing are three powerhouses of American business.[i]  Their combined revenues account for 1% of the United States' $10 trillion GDP.[ii]  Each company is on each of the Fortune lists: America’s Most Admired Companies, Global Most Admired Companies, Fortune 500 and Global 500.[iii]  Lockheed Martin, Northrop Grumman and Boeing are also the three top arms-producing companies in the world.  To scope this paper is to examine to what extent these three companies depend on their arms sales in general and their arms sales to foreign governments in particular, and to evaluate how these companies would fare if the wars they are faced with in the future are fought with economics instead of aircraft and missiles.  In the first section of this paper, company-specific financial analysis is examined and in the second section of this paper, the US arms industry as a whole is considered.  After considering the global parameters of the arms industry, the future prospects of Lockheed Martin, Northrop Grumman and Boeing are qualitatively considered. 

 

SECTION I: COMPANY-SPECIFIC ANALYSIS

 

COMPANY PROFILES

 

            In order to properly understand how these three top defense companies operate, it is important to have an accurate understanding multiple lines of business each runs, beyond merely the high profile aircraft they manufacture.  There is a tendency to think these combat aircraft is all they produce when, in fact, this is not the primary business sector for any of the companies.

 

Lockheed Martin Corporation

Lockheed Martin F-16 Fighting Falcons

 
             Lockheed Martin Corporation, based in Bethesda, Maryland, is the world’s largest defense contractor. Among Lockheed’s many claims to fame, it is also the largest military aircraft manufacturer in the world and the prime contractor on the largest defense contract ever, the $250 billion Joint Strike Fighter (JSF) program.

            Its four principal business sectors are Systems Integration (including data processing subsystems and electronic warfare), Aeronautics (combat and transport aircraft), Space Systems (communication satellites and launch vehicles), and Technology Services (management and logistic services).[iv]  Familiar Lockheed products include the F-16 Fighting Falcon, and the C-130 Hercules, however a greater percentage of Lockheed’s sales revenue comes from the Systems Integration and Space Systems sectors than from Aeronautics ($9 billion and $6.8 billion vs. $5.4 billion, respectively[v]).  The biggest moneymaking programs in 2001 were Naval Electronics & Surveillance and Missiles & Fire Control, both a subset of Systems Integration.[vi]

            In 2001, total sales were $24 billion and for the nine months ending 9/30/02, sales had risen 13% to $18.8 billion.[vii]  Over the past five years, the average annual gross profit has been $1.9 billion.[viii]

            Lockheed’s primary customer is the United States government, and specifically, the Department of Defense.  The sales percentages by customer are:[ix]

U.S. Department of Defense - 57%

NASA & Other Government Agencies - 20%

International - 17%

Domestic Commercial - 6%

 

            Lockheed Martin Corporation employs 125,000 people in the United States and abroad.

 

Northrop Grumman Corporation

 

Northrop Grumman B-2 Spirit Stealth Bomber

 
            Northrop Grumman Corporation, based in Los Angeles, California, will become the world’s second largest military contractor, after a recent $8 billion purchase of TRW propels the company up from the number three slot.  Although Northrop Grumman is the world’s largest shipbuilder and the sole builder of the US Navy's aircraft carriers, it is more famous for being the manufacturer of the most expensive plane ever built, the $1.2 billion apiece B-2 Spirit Stealth Bomber.[x] 

            Northrop's six principal business sections are Electronic Systems (combat avionics and surveillance), Information Technology (computer systems), Integrated Systems (air combat, electronic warfare, and battlefield management) , Ship Systems (military and commercial), Newport News (nuclear-powered subs and aircraft carriers), and Component Technologies (electronic and optical components).[xi]  Familiar Northrop products include the B-2 Spirit Stealth Bomber and the F-14 Tomcat.  However, like Lockheed, the largest percentage of Northrop’s revenue comes from Electronic Systems and Information Technology sectors, and not Integrated Systems sector (which includes the combat aircraft business unit).  Electronic Systems Sector comprises 34% of revenues and Information Technology comprises 27% of revenues while Integrated Systems comprises 22% of the company’s revenues.[xii] The biggest programs in 2001 in terms of sales were Government Information Technology, Air Combat Systems, and Aerospace Electronic Systems.[xiii]

            Northrop recently engaged in a successful hostile takeover of TRW, Inc., a $16 billion company whose products span the automotive, aerospace, and information technology markets.  The Department of Justice and Northrop Grumman have agreed to a timeline for the closing of Northrop’s acquisition of TRW, Inc.  According to the timeline, agreed to in October, the acquisition will close in the fourth quarter of 2002.[xiv]  The acquisition was officially cleared by the European Commission in October.[xv]

 

            In 2001, Northrop’s total sales were $14 billion and for the nine months ending 9/30/02, sales had risen 40% to $12.4 billion.  Over the past five years, the average annual gross profit has been 2.1 billion.[xvi]  The TRW acquisition will approximately double each of the figures.[xvii]

            Northrop’s primary customer is the United States government.  The sales percentages breakdown is:[xviii]

US Government - 78%

Other Customers - 22%

 

            Northrop Grumman Corporation employs 100,000 people in the United States and abroad.

 

 

The Boeing Company

 

Boeing C-16 Globemaster

 
            The Boeing Company, headquartered in Chicago, Illinois, will now be the world’s third largest military contractor behind Lockheed and Northrop.  Boeing, however, can still boast about being the largest manufacturer of satellites and commercial jetliners in the world, America’s largest exporter in terms of sales, and the 78th largest economy in the world.[xix]

 

            Boeing’s five major business units are Commercial Airplanes, Integrated Defense Systems, Boeing Capital Corporation (financial services), Connexion by Boeing (in-flight entertainment) and Air Traffic Management (air traffic control systems).  However, 99% of Boeing's revenue comes from the first two units: Commercial Airplanes (60%) and Integrated Defense Systems (39%).[xx]  The latter includes Military Aircraft & Missile Systems (21% of total) and Space & Communications (launch services, missile defense, space exploration—18% of total).[xxi]  Familiar Boeing products include the C-17 Globemaster and the 747 commercial transport.

            In 2001, total sales were $58 billion and for the nine months ending 9/30/02, sales had fallen 5% to $40.4 billion.[xxii]  Over the past five years, the average annual gross profit has been $6.9 billion.[xxiii]

            Approximately half of Boeing sales are foreign and half domestic.[xxiv]  Boeing has very strong commercial relations with China, which accounts for 10% of Boeing’s business.[xxv]

            The Boeing Company employs 171,000 people in the United States and abroad.

 

 

ARMS SALES DEPENDENCY

 

            In addition to being the largest military contractors in the world, Lockheed Martin, Northrop Grumman and Boeing are also the largest arms-producing companies in the world.  The dependency of the companies on their arms sales, combined domestic and foreign, are as follows:

 

Sales figures are in millions of US dollars.[xxvi]

COMPANY

SECTOR

ARMS SALES 2000

ARMS SALES 1999

TOTAL SALES 2000

% ARMS SALES/TOTAL

Lockheed

Ac El Mi

18,610

19,790

25,329

73

Boeing

Ac El Mi

16,900

16,000

51,521

33

Northrop[xxvii]

Ac El Mi SA/A Sh Oth

15,590

15,800

32,509

48

Key to abbreviations: Ac = aircraft, El = electronics, Mi = missiles, SA/A = small arms/ammunition, Sh = ships, and Oth = other

 

            Lockheed is the most dependent on arms sales, which comprised 73% of its total sales in 2000.  Notice that “arms” is a very broad term including aircraft and electronics and not merely missiles and ammunition.  Northrop is the next most dependent on arms sales at 48%.  The current makeup of Northrop Grumman is much less dependent now than before Northrop acquired Litton Industries, Newport News and TRW, when Northrop’s percentage arms sales of total sales was 87%.  Boeing is the least dependent on arms sales, largely because commercial aircraft sales comprise the majority of their revenues.

 

 

 

DEFENSE FOREIGN MILITARY SALES DEPENDENCIES

            The previous arms sales dependencies section included domestic arms sales.  The dependencies of the top three US defense contractors on defense foreign military sales are considered in this section for the fiscal year 1999, a fairly representative year in terms of post Cold War arms sales.[xxviii]  Total purchases in 1999 totaled  $6.2 billion. The dependencies on defense foreign military sales were as follows:

 

Dependencies on Foreign Military Sales, Value

Amounts in millions of US dollars, FY1999

RANKING

COMPANY

AMOUNT

MARKET SHARE

1

Boeing

1,417

22.8%

2

Lockheed Martin

1,079

17.4%

3

Raytheon

   814

13.1%

4

United Technologies

   265

  4.3%

5

Northrop Grumman[xxix]

   239

  3.8%

Rankings are based on prime contracts of $25,000 or more for military R&D, services and products sold to non-U.S. governments.[xxx]

 

            Boeing is the most heavily invested in defense foreign military sales with $1.4 billion in sales.  Although half of Boeing's total sales are to foreign markets, a high percentage of  those sales are for commercial aircraft and other non-defense products.  The $1.4 billion in foreign military sales only accounts for 2.44% of Boeing's total sales.[xxxi]  Lockheed is the a close second with $1.1 billion in foreign military sales.  Northrop Grumman is actually ranked 5th behind missile giant Raytheon and jet engine and helicopter manufacturer United Technologies.  As a percentage of the total sales, the dependencies of the companies on foreign military sales are as follows:

 

 

 

 

Dependencies on Foreign Military Sales, Percentage

Amounts in millions of US dollars, FY1999[xxxii]

COMPANY

FMS 1999

TOTAL SALES 1999

FMS/TOTAL SALES

Lockheed Martin

1,079

24,999

4.32%

Boeing

1,417

57,993

2.44%

Northrop Grumman

   239

24,585

0.97%

 

            As the above table illustrates, the percentage of Foreign Military Sales out of the Total Sales for each of the companies is rather small.  Arms sales account for a fraction of each of the companies revenues (73%, 48%, and 33% for Lockheed, Northrop and Boeing, respectively), and Foreign Military Sales account for a much smaller percentage of that total (under 5% for all companies).  However, although the percentage is small, when the actual dollar amount is calculated, the combined annual Foreign Military Sales of $2.7 billion is still worth consideration.

 

 

SECTION II: US ARMS INDUSTRY

 

WORLDWIDE ARMS SALES

            We have seen that the United States is home to the largest military contractors in the world and that these companies dominate domestic defense sales, worldwide defense sales and US arms sales.  So far we have only considered the sale of US arms to the world.  This subsection examines to what extent The United States controls the market of worldwide arms sales.  In essence, just as the discussion of the three US defense contractors was justified by establishing their complete dominance of the worldwide defense industry, this section in part justifies the consideration of the US arms sale market by establishing the US’ dominance of the market.  Naturally, we are also interested in the role of the US in the worldwide arms market towards the end of analyzing the future of Lockheed, Northrop and Boeing.

            The United States is the clear leader in worldwide arms sales, due mostly to the larger size and capabilities of the US companies.  Of the 100 largest arms-producing companies, 43 are US companies, including the 8 of the 10 largest. 

            The aggregate arms sales (including domestic procurement and exports) of the100 largest arms-producing companies in the OECD (Organization for Economic Cooperation and Development) and developing countries totaled approximately $157 billion in 2000. US arms sales accounted for 60% of that total.  West European OECD accounted for 31%, other OECD (Japan, Canada, Australia, Turkey) accounted for 6%, and “developing countries” (Israel, India, Singapore and S. Africa) accounted for 4%.[xxxiii]  A summary table follows:

            SHARE OF ARMS SALES, FY2000[xxxiv]

            Region                          Market Share

            US                                 60%

            West Europe OECD      31%

            Other OECD                  6%

            Developing Countries      4%

 

 

            The United States has a larger share of the worldwide arms market than the rest of the world combined and double the market share of all of the Western Europe OECD combined.  Trends show that the US market share increased rather dramatically through the late 1980s and early 1990s and have been slowing increasing up to 60% over the past few years.  One can attribute the trend, in part, to the increasing power of the US military contractors. For the same reasons, one could expect continued increasing dominance of the US in the worldwide arms market.

 

 

 

 

US Market Share of Worldwide Arms Sales[xxxv]

 

 

 

US ARMS SALES TO FOREIGN COUNTRIES

            In this subsection, background information on the conditions under which US arms are sold to foreign countries is examined.  Additionally, the total value of the Foreign Military Sales in comparison to all US military sales is considered in the Post Cold War era.

            In addition to Direct Commercial Sales (DCS), the United States government provides military equipment, services and training to foreign countries through a variety of programs such as the Foreign Military Sales (FMS) program and the Foreign Military Financing Program.  The International Military Education and Training (IMET) program also provides equipment, training and services through a grant basis.  Money granted under the Foreign Military Financing Program may be used to purchase military items through the FMS program or, in rare cases, directly from the US company (DCS).  Of course, there are a host of restrictions on all transfers of U.S. military items imposed and regulated by the U.S. government.[xxxvi]

            Altogether, the value of US military sales, production and contracts, both foreign and domestic, in the post-cold war era (1992-present) has averaged $94.1 billion a year.  The standard deviation is rather low, as sales are holding relatively steady.  Of that $94.1 billion total, 82.8% has been domestic and 17.2% as an export.  Foreign Military Sales (FMS) deliveries account for 84.9% of the export value (14.6% of the total value) while commercial exports licensed under the Arms Export Control Act account for 15.1% of the export value (2.6% of the total value) of all military items.[xxxvii]  Thus the vast majority of the value of US military sales, production and contracts comes from domestic procurement rather than export.

 

US FOREIGN MILITARY SALES BY REGION

 

            This subsection provides a breakdown of the US arms sales recipient by region.  In examining these figures, the effect of unified US arms sales buying freeze by region — for instance, by members of the Middle East (or more realistically, the Arab League— can be considered.

US ARMS DELIVERIES TO ALL COUNTRIES IN THE FOLLOWING REGIONS FOR 1992-2001[xxxviii]

All amounts are in millions of US dollars

REGION

DCS[xxxix]

FMS[xl]

TOTAL

annual AVG

% TOTAL[xli]

Middle East/South Asia[xlii]

861

54,292

55,153

5,515

41.8%

East Asia/Pacific[xliii]

5,937

28,956

34,894

3,489

26.4%

Europe

4,378

25,641

29,993

2,993

22.7%

International[xliv]

7,034

578

7,612

761

5.8%

Americas

1,309

2,800

4,109

411

3.1%

Africa

26

154

180

18

1.4%

 

            The Middle East and South Asia are the largest recipients of US arms, with 42% of US arms deliveries since 1992 going to that region.  Within the Middle East, the largest recipients of U.S. military items in the Middle East in the post-Cold War period are Saudi Arabia, Israel, Egypt, and Kuwait.[xlv] Together these four countries account for 94.4% of the arms deliveries to the region.

            The breakdown of US arms deliveries to these top four recipient countries in the Middle East are as follows:

 US ARMS DELIVERIES TO THE MIDDLE EAST FOR 1992-2001[xlvi]

All amounts are in millions of US dollars

COUNTRY

DCS[xlvii]

FMS[xlviii]

TOTAL

annual AVG

% TOTAL[xlix]

Saudi Arabia

259

30,511

60,770

3077

74.0%

Israel

85

9,456

9,542

954

11.6%

Egypt

206

6.127

6,334

633

7.7%

Kuwait

30

5,410

5,440

544

6.6%

 

            The largest recipient of US arms in the 1992-2001 period was Saudi Arabia.  Saudi Arabia received 29% of all US foreign arms deliveries, compared to the next biggest recipient, all countries in East Asia and the Pacific at 26%.

            The grand total of all US foreign arms deliveries in the period 1992-2001 was 131,941 million ($132 billion), .  Although $132 billion is certainly a lot of money, the value of US arms deliveries is small in comparison to the combined export and domestic value.

 

 

 

 

 

TOTAL VALUE OF US ARMS PRODUCTION, FOREIGN AND DOMESTIC

VALUE OF OUTPUT OF US ARMS PRODUCTION INDUSTRY

In millions of US dollars at current prices[l]

 

Value of US military sales, production and contracts

FISCAL YEAR

DOMESTIC

EXPORT - FMS

EXPORT - DCS

EXPORT TOTAL

TOTAL

% EXPORT/TOT

1992

84,400

10,089

2,667

12,756

97,156

13.1%

1993

82,000

11,282

3,808

15,090

97,090

15.5%

1994

76,900

9,363

3,339

12,702

89,602

14.2%

1995

74,600

11,818

3,173

14,991

89,591

16.7%

1996

74,300

11,389

1,563

12,952

87,252

14.8%

1997

72,700

15,448

1,818

17,266

89,966

19.2%

1998

77,280

12,618

2,045

14,663

91,943

15.9%

1999

81,190

16,802

654

17,456

98,646

17.7%

2000

82,000[li]

11,421

478

11,899

93,899

12.2%

average

78,374

12,248

1,838

14,419

92,794

15.5%

 

            As evidenced by the above table, domestic business accounts for the vast majority of the value of the US arms production industry.  The $132 billion total (previous section) of all US foreign arms deliveries in the period 1992-2001 is less than the value of any two years of domestic US arms sales, production and contracts.  The total value of US arms production, foreign and domestic, in the period 1992-2001 is approximately $930 billion.  Exports account 16% of that total.

 

US MILITARY SPENDING

 

            It is very clear from the previous section that the US spends far more on its own arms production industry than the rest of the world combined.  However,  it was also established that the US arms industry dominates the worldwide arms market, which begs the question, how much does the United States spend on its military in comparison to the rest of the world?

 

MILITARY BUDGET[lii]

All figures are in billions of US dollars

COUNTRY

BUDGET (Billions US$)

YEAR

U.S

343.2

2002

NATO

 

 

United Kingdom

34.5

2000

France

27.0

2000

Germany

23.3

2000

Other NATO

62.3

2000

Asia/Pacific Allies

 

 

Japan

45.6

2000

South Korea

12.8

2000

Australia

7.1

2000

Total US &  Allies

555.8

 

Potential Enemies

 

 

Iran

7.5

2000

Syria

1.8

2000

Iraq

1.4

1999

North Korea

1.3

2000

Libya

1.2

2000

Cuba

0.8

1999

Sudan

0.4

2000

Total US Enemies

14.4

 

Other Countries with Significant Militaries

 

 

Russia

56.0

1999

China

39.5

1999

India

15.9

2000

Taiwan

12.8

2000

Pakistan

3.3

2000

 

 

            Although military budget is not equivalent to military strength, it is more than clear that no military power, singular or combined, in the world rivals the power of the United States’ military.  Not only does the United States have more money, more equipment, more resources, and more top defense contractors, the United States has the infrastructure to tie its resources together.  All the F-16’s in the world cannot help if you do not have the intelligence, reconnaissance, surveillance, communication and leadership to back them up.  The Center for Strategic and International Studies has enumerated some of the qualitative weaknesses in regions such as the Middle East in the report, “The Conventional Military Balance in the Gulf in 2000."[liii]  Besides the weaknesses identified above, over-centralization of the effective command structure, lack of strategic assessment capability, slow tempo of operations, and inability to fight modern night and all-weather warfare, are among the long list of additional weaknesses identified in the report.

            Since it is clear that no military could stand up to the US military, it can be asked why any country would continue to buy US (or any other country’s) arms?  If a unified UN peacekeeping force could both suppress any offensive action by a rogue nation and likewise protect any nation against invasion or foreign oppression, the need for foreign countries to continue to buy US weapons comes into question.  Of course, one can expect that the US would play a major role in arming the unified peacekeeping force, but what effect on the US defense contractors would it have if groups such as the Arab League decided to stop buying US arms?

 

ECONOMIC EFFECT OF FMS FREEZE BY REGION

 

Let us reconsider the chart from the section on US foreign military sales by region:

 

US ARMS DELIVERIES TO ALL COUNTRIES IN THE FOLLOWING REGIONS FOR 1992-2001[liv]

All amounts are in millions of US dollars

REGION

DCS[lv]

FMS[lvi]

TOTAL

annual AVG

% TOTAL[lvii]

Middle East/South Asia[lviii]

861

54,292

55,153

5,515

41.8%

East Asia/Pacific[lix]

5,937

28,956

34,894

3,489

26.4%

Europe

4,378

25,641

29,993

2,993

22.7%

International[lx]

7,034

578

7,612

761

5.8%

Americas

1,309

2,800

4,109

411

3.1%

Africa

26

154

180

18

1.4%

 

 

The effect of the Middle East and South Asia freezing all purchases of US arms would deliver an annual loss of approximately $5.5 billion, counting both direct commercial sales and foreign military sales.  If every country in the world stopped buying US arms, including all of the US’ allies, the annual loss would be roughly $13 billion.

            Again, $13 billion is a great deal of money, but when we compare it to the value derived from domestic business of approximately $93 billion, the foreign dependency is not very high.  Furthermore, if we reconsidered the individual companies' dependency on foreign military sales we see that the impact is even less:

 

 Amounts in millions of US dollars, FY1999

COMPANY

FMS 1999

TOTAL SALES 1999

FMS/TOTAL SALES

Lockheed Martin

1,079

24,999

4.32%

Boeing

1,417

57,993

2.44%

Northrop Grumman

   239

24,585

0.97%

 

            The loss felt by a global buying freeze by any individual company is unilaterally less than 5%.  Allies of the United States account for a significant portion of the foreign arms sales so it is somewhat reactionary to envision a global buying freeze.  Furthermore, there is no clear historical trend to suggest that such a buying freeze is on the horizon for the foreseeable future.  Recall the chart on the US market share of the arms market showing an increasing US dominance.  Also consider a graph of the value of the arms exports since the end of the Cold War (presented in tabular form in the second section of the paper) with a linear trendline:

 

             Even if most of the world adopted the viability of a global UN peacekeeping force, surely the United States, with its firm command over the world arms market and with superior technology and manufacturing capabilities, would have a large role in arming the peacekeeping force.  However, even if one considers the most dramatic of possibilities—an absolute end to foreign arms sales, the individual companies would be only slightly affected.  The sale of one more B-2 Stealth Bomber would offset the loss for Northrop Grumman, for instance, five times over.

 

SECTION III: FUTURE OF US  DEFENSE CONTRACTORS

            This last section of the paper considers qualitatively, the prospects of Lockheed Martin, Northrop Grumman and Boeing.  First, the possibility of mergers is examined and then the financial future of the companies is summarized.

 

MERGERS

            The defense industry has undergone a great deal of consolidation in the past few decades.  While in 1980, there were 51 separate US defense companies, by 1997, there were five.  By 2001, there were four.[lxi]  Although consolidation in the defense industry will likely continue, it seems unlikely that there will be further consolidation among the very largest companies, namely Lockheed, Boeing, and Northrop Grumman .  In 2001, the Department of Defense rejected a proposed acquisition of Newport News by General Dynamics in the interest of competition in the US shipbuilding and nuclear technology.[lxii]  The DoD did allow Northrop Grumman to complete its hostile takeover of Newport News so General Dynamics and Northrop Grumman will probably never be allowed to merge.  In 1998, Lockheed Martin abandoned it attempted acquisition of Northrop Grumman after it became clear the  Department of Justice and the Pentagon would not allow it.[lxiii]  If Lockheed Martin and Northrop Grumman had merged, the combined company would have been the largest  in the world.[lxiv]  The attempted acquisition by Lockheed occurred before Northrop Grumman acquired Litton Industries and Newport News so a merger between the two and this point would surely not be allowed.  Likewise, mergers between Lockheed and Boeing or Boeing and Northrop Grumman are similarly out of the question.

            As we have seen in the second section of the report, the effect of a possible US arms buying freeze by other nations will have a relatively small effect, percentage-wise, on the three companies.  The majority of their revenues come from commercial sales in the case of Boeing, and/or the U.S. Government in the case of Lockheed and Northrop.

We have also seen that the US military budget is the largest in the world many times over.  Furthermore, there is no indication that US military spending is on the steep downturn, even though the Cold War has been over for a decade:

Figure taken from the CDI Almanac 2001-2002[lxv]

 

            The defense contractors could safely rely on the US government to support their business if all other customers disappeared, and the US government obviously has the ability to sustain such support.  Also, as was shown in the first section of the report, these companies have multiple lines of business beyond merely arms production and are well-diversified enough so that the faltering of one line of business would not completely cripple the company.

            It is thus concluded that Lockheed, Northrop and Boeing, as we know them today as separate companies, will be able to weather the uncertain future of the defense industry.  Their survival can be attributed in part to diverse lines of business, in part to their market dominance and superior capabilities, and in large part to their most loyal and steady customer, the US government.  It is furthermore concluded that the US government would not let the $100 billion companies employing 400,000 to fail and, given that the majority of the $100 billion comes from the government, has the power to do so.

 

 

 


ENDNOTES



[i] figures compiled from data on Yahoo! Finance, biz.yahoo.com

[ii] CIA World Factbook, http://www.daml.org/2001/12/factbook/us.html

[iii] www.fortune.com

[iv] compiled from Lockheed Martin Corporation, www.lockheedmartin.com, Hoover’s Online, www.hoovers.com, and Yahoo! Finance, biz.yahoo.com

[v] Lockheed Martin 2001 Annual Report, http://www.lockheedmartin.com/investor/annualreport/factsheet.pdf

[vi] Ibid.

[vii] http://biz.yahoo.com/p/l/lmt.html

[viii] compiled from data from Yahoo! Finance and Lockheed Martin Annual Income Statement, http://yahoo.marketguide.com/MGI/mg.asp?target=%2Fstocks%2Fcompanyinformation%2Fincomestmt%2Faincomestd&Ticker=LMT

[ix] data is for year 2002.  Source: Lockheed Martin, http://www.lockheedmartin.com/about/ataglance.html

[x] FY1998 US dollars, approximate.  Source: US Air Force, http://www.af.mil/news/factsheets/B_2_Spirit.html

[xi] compiled from Northrop Grumman Corporation, www.northropgrumman.com, Hoover’s Online, www.hoovers.com, and Yahoo! Finance, biz.yahoo.com

 

[xii] data from fiscal year 2001.  Source: http://www.northropgrumman.com/news/new_faq_main.html

[xiii] Northrop Grumman Annual Report 2001.  Available at http://www.irconnect.com/noc/files/2001_annual_rpt.pdf

[xiv] http://www.spacedaily.com/news/trw-02u.html

[xv] http://www.spacedaily.com/news/021016174714.95dhi4w3.html

[xvi] data compiled from Yahoo! Finance, http://biz.yahoo.com/p/n/noc.html and Northrop Grumman Annual Income Statement, available at: http://yahoo.marketguide.com/MGI/mg.asp?target=%2Fstocks%2Fcompanyinformation%2Fincomestmt%2Faincomestd&Ticker=NOC

[xvii] TRW:  Total sales, 2001: $16 billion;  Nine months ending 9/30/02: sales rose 5% to $12.07 billion.  Five-year average annual gross profit: $2.4 billion.  Source: Yahoo! Finance, http://biz.yahoo.com/p/T/TRW.html

[xviii] From NOC Annual Report 2001 available at: http://www.irconnect.com/noc/pages/annual.html

[xix] The Mojo Wire, http://www.motherjones.com/arms/boeing.html  and The Boeing Company, www.boeing.com

[xx]http://www.boeing.com/special/companyoffices/aboutus/overview/Overview_files/v3_document.htm

[xxi] compiled from The Boeing Company, www.boeing.com, Hoover’s Online, www.hoovers.com, and Yahoo! Finance, biz.yahoo.com

[xxii] http://biz.yahoo.com/p/b/ba.html

[xxiii] compiled from data from Yahoo! Finance, and Boeing Annual Income Statement, http://yahoo.marketguide.com/MGI/mg.asp?target=%2Fstocks%2Fcompanyinformation%2Fincomestmt%2Faincomestd&Ticker=BA

[xxiv] http://www.motherjones.com/arms/boeing.html, http://www.aerotechnews.com/starc/1999/120399/Boeing_WTO.html

[xxv] http://www.motherjones.com/arms/boeing.html

[xxvi] http://projects.sipri.org/milex/aprod/100largest2000.pdf

[xxvii] Data from Litton Industries, Newport News, and TRW was added to Northrop Grumman’s total to reflect the current makeup of Northrop Grumman, which is the concern of this paper.  In 2000, the year from which the data is taken, neither of these three companies had been acquired by Northrop yet.

[xxviii] This is the only year for which specific company breakdowns were available and appropriate. Also, the purpose of this section is to show the relative scale of the dependencies, and not to provide a toolbox for precise financial analysis.

[xxix] Combined with TRW

[xxx] data from Federation of American Scientists, http://www.fas.org/asmp/profiles/Government%20Executive%20Magazine.htm

[xxxi] calculated from FAS (www.fas.org, see above) and http://yahoo.marketguide.com/MGI/mg.asp?target=%2Fstocks%2Fcompanyinformation%2Fincomestmt%2Faincomestd&Ticker=BA

[xxxii] Ibid.

[xxxiii] Stockholm International Peace Research Institute, http://projects.sipri.se/milex/aprod/regional_distribution.html

[xxxiv] Figures may not add to 100% because of rounding.

[xxxv] http://www.motherjones.com/arms/

[xxxvi] see GAO report GAO-01-1078 Military Assistance available at www.gao.gov

[xxxvii] SIPRI Military Expenditure and Arms Production Project, http://projects.sipri.se/milex/aprod/nationaldata/usa.pdf

[xxxviii] calculated from data in the Arms Sales Monitoring Project’s database, available at http://www.fas.org/asmp/profiles/sales_db.htm

[xxxix] Direct Commercial Sales

[xl] Foreign Military Sales

[xli] Percentages may not add to 100% due to rounding.

[xlii] includes India, etc.

[xliii] includes Australia, China, Japan, New Zealand, South Korea, Taiwan and all others in the region

[xliv] includes International Organizations, UN, and classified international transfers

[xlv] see also the US General Accounting Office (GAO) document GAO-01-1078, available at www.gao.gov

[xlvi] calculated from data in the Arms Sales Monitoring Project’s database, available at http://www.fas.org/asmp/profiles/sales_db.htm

[xlvii] Direct Commercial Sales

[xlviii] Foreign Military Sales

[xlix] Percentages may not add to 100% due to rounding.

[l] data compiled from SIPRI Military Expenditure and Arms Production Project, available at http://projects.sipri/se/milex/aprod/nationaldefense/usa.pdf

[li] approximate

[lii] all data is from the Center for Defense Information’s World Military Database 2002, available at http://www.cdi.org/issues/usmi/

[liii] by Anthony H. Cordesman.  Available at http://www.csis.org/pubs/download.htm

[liv] calculated from data in the Arms Sales Monitoring Project’s database, available at http://www.fas.org/asmp/profiles/sales_db.htm

[lv] Direct Commercial Sales

[lvi] Foreign Military Sales

[lvii] Percentages may not add to 100% due to rounding.

[lviii] includes India, etc.

[lix] includes Australia, China, Japan, New Zealand, South Korea, Taiwan and all others in the region

[lx] includes International Organizations, UN, and classified international transfers

[lxi] Annual Industrial Capabilities Report to Congress, http://www.acq.osd.mil/ip/docs/ind-cap-annual-report-to-congress_2002.pdf

[lxii] Journal of Aerospace and Defense Industry News, http://www.aerotechnews.com/starc/2001/051101/NG_Newport.html and Annual Industrial Capabilities Report to Congress,  http://www.acq.osd.mil/ip/docs/ind-cap-annual-report-to-congress_2002.pdf)

[lxiii] Weekly Defense Monitor, http://www.cdi.org/weekly/1998/issue29/

[lxiv] http://www.graduatingengineer.com/industryfocus/defense.html

[lxv] Center for Defense Information Almanac 2001-2002, p. 35, available at http://www.cdi.org/products/almanac0102.pdf

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BIBLIOGRAPHY

For a more specific listing, see the ENDNOTES

 

Websites

 

Center for Defense Information, http://www.cdi.org

CIA World Factbook, http://www.daml.org/2001/12/factbook/us.html

Federation of American Scientists, http://www.fas.org

Fortune Online, www.fortune.com

GraduatingEngineer.com, http://www.graduatingengineer.com

Hoover’s Online, www.hoovers.com

Journal of Aerospace and Defense Industry News, http://www.aerotechnews.com

Lockheed Martin Corporation, www.lockheedmartin.com

Northrop Grumman Corporation, www.northropgrumman.com

SpaceDaily.com, http://www.spacedaily.com

Stockholm International Peace Research Institute, http://projects.sipri.se/

The Boeing Company, www.boeing.com

The Mojo Wire, http://www.motherjones.com/arms/

US Air Force, http://www.af.mil/

US General Accounting, www.gao.gov

Weekly Defense Monitor, http://www.cdi.org/weekly/

Yahoo! Finance, biz.yahoo.com

 

 

Downloadable Reports

 

Annual Industrial Capabilities Report to Congress, http://www.acq.osd.mil/ip/docs/ind-cap-annual-report-to-congress_2002.pdf

 

The Conventional Military Balance in the Gulf in 2000 by Anthony H. Cordesman.  Available at http://www.csis.org/pubs/download.htm

 

Center for Defense Information Almanac 2001-2002, http://www.cdi.org/products/almanac0102.pdf