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Posts Tagged ‘Lockheed’

How Lockheed’s $7.9B stock buyback bonanza is paid for by you

Posted by M. C. on August 3, 2023

The arms industry titan pockets billions a year in federal contracts then turns around and uses it to enrich its shareholders.

Bolstered by new sales related to the War in Ukraine, the company seems committed to continuing the use of buybacks. In their most recent release of financial information, Taiclet said that they “are confident in our return to growth and ability to reward our shareholders over the long run with reliable free cash flow per share expansion and cash deployment.” 

https://responsiblestatecraft.org/2023/08/01/how-lockheeds-7-9b-stock-buyback-bonanza-is-paid-for-by-you/

Written by
Brett Heinz

The value of Lockheed Martin’s stock grew by 37 percent last year, representing an incredible financial gain for investors in the nation’s largest military contractor.

This spike was hardly the result of changing market conditions, however: the S&P 500 ended the year with growth of -20 percent. Instead, this growth came from stock buybacks. In 2022, the company bought back more of its own stock than in any other year in its history: $7.9 billion, equivalent to 12 percent of its sales income. 

According to Lockheed’s 2022 annual report, 73.5 percent of the company’s sales last year were to the U.S. government, most of which were for the Department of Defense. In other words, if these buybacks come proportionately from the different revenue streams of the company, U.S. taxpayers underwrote $5.8 billion in Lockheed buybacks. 

This is without including Foreign Military Sales, roughly another 19.2 percent of the total, which are sold to foreign governments through the U.S. government.

When contractors who receive most of their money from government sales issue buybacks, it is ultimately taxpayer dollars being redirected towards shareholders’ pockets. Data from Lockheed Martin’s annual reports suggests that company outdid itself in 2022, offering its investors a record level of taxpayer-backed buybacks equivalent to the prior four years combined.

This isn’t a new phenomenon.

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Big mouths for weapons spending are mum on industry backers – Responsible Statecraft

Posted by M. C. on April 4, 2023

Even with appropriations and requests needlessly sky high, think tank experts underwritten by defense firms are calling for more.

AEI does not publicly provide a list of its funders and did not respond to multiple requests for comment about its funding. But the moderator of a public AEI event last year noted that “both Lockheed and Northrop provide philanthropic support to AEI. We are grateful for that support.”

The American Enterprising Institute

https://responsiblestatecraft.org/2023/03/29/think-tanks-pushing-for-bigger-dod-budget-dont-disclose-industry-funding/

Written by
Ben Freeman and Yameen Huq

Earlier this month, President Biden requested the largest defense budget in U.S. history. Even adjusting for inflation, this $842 billion budget — which will likely increase with congressional add-ons and additional spending for the war in Ukraine — could ultimately give the Pentagon more taxpayer money than when the U.S. had more than 100,000 troops on the ground at the height of the Iraq and Afghan conflicts. 

But you’d have no idea that was the case if you read Pentagon contractor funded think tanks’ commentary about the budget, which have been clamoring for even more Pentagon spending, often without disclosing that the beneficiaries of it fund their organizations. 

“For defense, this is a pretty substantial step backwards,” a scholar at the Center for Strategic and International Studies (CSIS) told The Hill. This amounts to a “$28 billion cut to programs and activities” after you account for a troop pay raise and inflation, an American Enterprise Institute (AEI) expert told Defense News, which added that the AEI expert was pushing for a DOD budget of at least $882 billion. That $882 billion figure is, perhaps coincidentally, the exact amount of Pentagon funding another AEI scholar promoted in a recent op-ed for Breaking Defense.

Unsurprisingly, think tank arguments for increasing Pentagon funding have also found their way into mainstream media outlets. The day before the Biden administration released its fiscal year 2024 budget, the Washington Post published an article bemoaning the defense industry’s limited capacity to “build things to kill people,” as the head of a munitions facility told the Post. The piece cited CSIS research on the defense industry’s struggles to replace stockpiles of the tens of billions of dollars in munitions the U.S. has given Ukraine.

Earlier that same week, the Wall Street Journal ran an article proclaiming “The U.S. Is Not Yet Ready for the Era of ‘Great Power’ Conflict.” As evidence, the author cited a CSIS wargame that simulated a Chinese attack on Taiwan in which “the U.S. side ran out of long-range anti-ship cruise missiles in a week.” That same CSIS study was cited in a New York Times article published last week titled “From Rockets to Ball Bearings, Pentagon Struggles To Feed War Machine.”

What goes unmentioned in any of these articles is that these think tanks clamoring for more defense funding are funded by the defense industry.

CSIS is commendably transparent about its funding and provides a publicly available list of donors on its website. And, that list is filled with defense contractors. In total, 20 different defense contractors provided the organization with a total of at least $2.2 million last year. The top defense sector donor to CSIS was Northrop Grumman, which gave the organization more than $500,000. The firm builds many of the military’s weapons, most notably munitions, the organization’s scholars have been pushing.

A spokesperson for CSIS explained that, “CSIS is an independent non-profit with a diverse funding base and the conclusions of our scholars are theirs alone,” and, “CSIS discloses our donors on our website. We also disclose funders of our research reports in the reports themselves. We do this because we believe our audience should know who supports our work.” Yet, this only applies to research reports with dedicated external funding, the spokesperson explained, not work done through general support funding like the CSIS report on the need for investing in U.S. munitions that has been widely cited in media outlets with no disclosure in the report that the munitions in question are made by the organization’s funders. 

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Opposition Builds to the F-35 Program’s Runaway Costs | Mises Wire

Posted by M. C. on March 25, 2021

https://mises.org/wire/opposition-builds-f-35-programs-runaway-costs

David Kamioner

Earlier this month, House Armed Services Committee chairman Adam Smith (D-WA) said it’s time to “cut our losses” on the F-35 Joint Strike Fighter, and added, “I want to stop throwing money down that particular rathole.”

Smith has no problem with spending money on air power as an essential component of military defense. But when it comes to the extremely expensive F-35 program, he asks “What does the F-35 give us and is there a way to cut our losses? … For what we have spent in terms of what we’ve gotten back? It’s just painful. It just hurts.”

Smith, who will sherpa the defense authorization bill, wants to make changes in the program. “[We] can’t get rid of the program. I do understand that. What I’m going to try to do is figure out how we can get a mix of fighter attack aircraft that’s the most cost-effective. Bottom line. And I’m telling you right now a big part of that is finding something that doesn’t make us have to rely on the F-35 for the next 35 years.”

The program has technical issues that come close to making it nonviable. In my own past research, I found the aircraft has major issues with reliability and that puts the service life of the airplane considerably below first reports. For example, the US Marines bought the F-35B variant. It was advertised to have an eight thousand–hour service life. Realistically it now appears that it will be closer to twenty-one hundred. Maintenance? The goal of hitting 80 percent of field metrics standards is not being met. Known cyber issues with the plane remain unresolved. There are myriad other problems both large and small with the F-35.

In American Greatness, defense analyst Mytheos Holt commented,

[T]he F-35 also has a software component. It’s called the ALIS logistical system, an entire software infrastructure that is supposed to make the plane easier to fly and maintain. In reality, according to former Air Force Secretary Heather Wilson, ALIS is a buggy mess, a system “so frustrating to use, maintainers said they were wasting 10–15 hours a week fighting with it.” It has also been shown to be extremely vulnerable to hackers when it does work.

In other words, it’s the defense industry’s equivalent of Windows 10, if it was programmed in the Ninth Circle of Hell. Lockheed Martin claims that even though the Defense Department paid for ALIS, it still has to license the technology from the company. Given that ALIS in its current state is glorified malware, this might not seem like a big deal. But it is. Because one of the things Lockheed Martin has been using its ownership of ALIS to do is prevent the U.S. government from fixing the software on its own. In other words, the Pentagon can’t use its own planes unless Lockheed feels like fixing the problem with the software.

This is bad enough, but it gets worse when you imagine that ALIS actually worked as advertised. In that situation, Lockheed arguably could refuse to license the F-35s to anyone they like, for any reason.

Yes, the planes American taxpayers spent $1 trillion to build might not even be ours, thanks to a quirk of intellectual property law.

It gets even worse. Apparently, even when US government documents get uploaded into ALIS, they come back with Lockheed Martin’s proprietary markings. In other words, Lockheed is trying to assert ownership not just over ALIS, but also over the data that is fed into it.

One does not have to be a libertarian purist to have issues with such a program. Competent analysts know that the military has traditionally been slow to embrace new technology, despite having the largest research and development budget on the planet. Especially when it comes to communications, the armed services can lag far behind the private sector. In the 1980s, during my army service, the military had progressed from walkie-talkies and bulkier longer-range communications systems like the PRC-77 to rudimentary software. In the artillery, the TacFire system was used for targeting and, given the mission, communication of data.

Over the decades military progress shadowed private sector initiative, though usually a step or two behind. As, over the past several years, the armed forces have used Zoom for communications, the market has advanced beyond that standard to more sophisticated software. An example of that improvement is Kumospace, a state-of-the-art comms tool. Comparable to its peers like Zoom, but significantly more cutting edge, Kumospace leads the field in video chat, group chat, virtual interview, and remote work functions. As a military veteran I can tell you: those aspects of military communications can not only enhance capabilities to carry out peacetime operations, but also could spell the difference between life and death in a wartime environment. Author:

David Kamioner

David Kamioner is a veteran of US Army Intelligence and has spent decades in political operations, non-profits, and education. His work has been featured in Real Clear Policy. He is currently a Contributing Editor at LifeZette and regularly writes for other publications as well.

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Joint Chiefs Chair Retires, Immediately Becomes Paid F-35 Cheerleader | The American Conservative

Posted by M. C. on March 7, 2020

https://www.theamericanconservative.com/articles/joint-chiefs-chair-retires-immediately-becomes-paid-f-35-cheerleader/

Former Chairman of the Joint Chiefs, Gen. Joseph Dunford. Credit: Chairman of the Joint Chiefs of Staff/Flickr

Jason Paladino

In 2015, things weren’t looking great for the Marine Corps’ F-35B fighter jet. Reports from the Government Accountability Office (GAO) and Department of Defense inspector general had found dozens of problems with the aircraft. Engine failures, software bugs, supply chain issues, and fundamental design flaws were making headlines. The program was becoming synonymous in the press with “boondoggle.”

Lockheed Martin, the program’s lead contractor, desperately needed a win.

Luckily for Lockheed, it had a powerful ally in the commandant of the Marine Corps, General Joseph Dunford. Five years later, Dunford would be out of the service and ready to collect his first Lockheed Martin paycheck as a member of its board of directors.

Back in 2015, the F-35 program, already years behind schedule, faced a key program milestone. The goal was to have the F-35B ready for a planned July initial operational capability (IOC) declaration, a major step for the program, greenlighting the plane to be used in combat. The declaration is a sign that the aircraft is nearly ready for full deployment, that things are going well, that the contract, awarded in 2006, was finally producing a usable product. The ultimate decision was in Dunford’s hands.

About a week before the declaration, some in the Pentagon expressed serious doubts about the aircraft. The Project On Government Oversight (POGO) obtained a memo from the Director of Operational Test and Evaluation that called foul on the test that was meant to demonstrate the ability of the F-35B to operate in realistic conditions.

Dunford, however, said he had “full confidence” in the aircraft’s ability to support Marines in combat, despite the testing office’s report stating that if the aircraft encountered enemies, it would need to “avoid threat engagement”—in other words, to flee at the first sign of an enemy.

Ignoring the issues raised internally, Dunford signed off on the initial operational capability. Lockheed Martin was thrilled. “Fifty years from now, historians will look back on the success of the F-35 Program and point to Marine Corps IOC as the milestone that ushered in a new era in military aviation,” the company said in a statement.

Lockheed’s CEO was apparently elated, declaring it “send a strong message to everyone that this program is on track.”

But problems continued to plague the “combat ready” aircraft in the months afterwards. And Dunford downplayed cost overruns and sang the aircraft’s praises at a press event in 2017. When the moderator asked routine questions submitted by the audience (Will the aircraft continue as a program? Is it too expensive to maintain?), Dunford responded by calling the questions loaded and accusing the audience member of having an “agenda.”

Retirement and a Reward

On September 30, 2019, Dunford, the military’s highest ranked official, stepped down from his position as chairman of the Joint Chiefs. He had served in the Marine Corps since 1977, working his way up to the highest tier of the armed services over 42 years.

Just four months and 11 days later, he joined the Pentagon’s top contractor, Lockheed Martin, as a director on the board.

In announcing Dunford’s hire, a January press release from Lockheed Martin quotes CEO Marillyn Hewson: “General Dunford’s service to the nation at the highest levels of military leadership will bring valuable insight to our board.”

Dunford’s consistent cheerleading of the F-35 and his subsequent hiring at its manufacturer create the perception of a conflict of interest and raised the eyebrows of at least one former senior military official.

“Here he is having been an advocate for it, having pressed it, having pushed for it …  and now he’s going to work for the company that makes the aircraft, that just, to me, stinks to high heavens,” retired Colonel Lawrence Wilkerson, who served as special assistant to Colin Powell when he led the Joint Chiefs, told POGO.

Dunford’s Rolodex of Pentagon decision-makers is valuable to defense contractors, and with just over four months to “cool off,” many of those relationships will likely be intact.

Lockheed Martin was the top recipient of Department of Defense dollars in fiscal year 2019, taking in over$48 billion, according to government data. The company spent over $13 million lobbying the federal government in 2019, according to data compiled by the Center for Responsive Politics.

The Revolving Door Spins On

“I think anybody that gives out these big contracts should never ever, during their lifetime, be allowed to work for a defense company, for a company that makes that product,” then-President-elect Donald Trump said in a December 2016 rally in Louisiana. “I don’t know, it makes sense to me.”

Fast forward more than three years and the revolving door is spinning right along, defense stocks aresurging, and Lockheed Martin has arecord backlogof unfulfilled contracts. While Trump did issue an ethics executive order for his appointees, it did not include a lifetime ban on lobbying for contractors.

A POGO analysis of the post-government employment of retired chairs of the Joint Chiefs found that only four of the 19 people who previously held the position went immediately to work for a major defense contractor within two years after leaving the government. In addition to Dunford, Admiral William J. Crowe joined General Dynamics, General John Shalikashvili joined the boards of Boeing and L-3, and General Richard Myers joined the boards of Northrop Grumman and United Technologies Corp.

Former chairmen of the Joint Chiefs have many lucrative career opportunities that don’t create conflicts, actual or implied. Retired General Martin Dempsey, who held the position before Dunford, went on to teach at Duke University and was elected chairman of USA Basketball. Admiral Michael Mullen, who preceded Dempsey, joined the board of General Motors and later telecom giant Sprint.

According to Wilkerson, then-Chairman Powell was conscious of the appearance of conflicts of interest and instilled in his employees a sensitivity.

Wilkerson recalled a conversation he had with Powell right after his retirement. “What’s next, boss?” Wilkerson asked Powell. “Well, it’ll not be some defense contractor or some beltway bandit. That practice is pernicious,” he responded. Powell spoke to various members of Congress about their responsibility to rein in the practice, and tried to raise awareness of how widespread it was becoming, according to Wilkerson.

Current ethics laws include cooling off periods that limit a former government employee’s job options. But a POGO study of the revolving door in 2018 found that current ethics regulations are insufficient, rely on self-reporting, and are full of loopholes. These cooling off periods range from a few years to a lifetime, depending on how much an individual was personally involved in the decisions to award contracts. This means top officials actually have fewer restrictions than contracting officers that were directly involved in the awards, even though they have more influence and likely more valuable connections. And the restrictions mostly prevent former officials from taking positions that involve representing or lobbying for a contractor, which is why there was no restriction on Dunford joining Lockheed’s board.

The Office of the Joint Chiefs of Staff told POGO that Dunford “has certain post-government employment restrictions,” but wouldn’t go into more detail. Dunford “at all times complied with his ethics obligations related to post-government employment,” according to the emailed statement. POGO has filed Freedom of Information Act Requests to learn more about Dunford’s ethical restrictions.

Additionally, enforcement of the regulations is rare, with only four former Pentagon employees prosecuted for violations in the past 16 years. It is impossible to know if the low frequency of prosecutions in the current system is due to inadequate enforcement or high compliance with lax laws.

Loading Boards with Political Influence

Since 2008, POGO found 42 senior defense officials “revolved” into Lockheed within two years of leaving the government.

The boards of the top five defense contractors all have at least two sitting former high-ranking military officials. General Dynamics and Raytheon had four each, Lockheed, Boeing and Northrop Grumman had two each.

The full number of revolvers is difficult to determine. POGO’s database currently contains 408 individuals who either went to work directly with defense contractors that were awarded over $10 million that year or went to work with lobbying firms that list defense industry clients. The POGO database relies on open source information. Another studyfound that between 2009 and 2011, 70% of three and four-star generals and admirals who retired took gigs with defense contractors or consultancies.

A GAOstudy found that in 2006, about 86,000 military and civilian personnel who had left service since 2001 were employed by 52 major defense contractors. The study also found that 1,581 former senior officials were employed by just seven contractors. The office estimated that 422 former officials could have worked on contracts related to their former agencies.

From 25 Hearings in One Year, to None in 60 Years

This issue is far from new. In a 1959 alone, there were 25 hearings before the House Armed Services Committee’s Subcommittee for Special Investigations on the topic of the revolving door and its malign influences. President Dwight D. Eisenhower gave his famous farewell address warning of the military-industrial complex just two years later.

An analysis by POGO did not find a congressional hearing explicitly on the issue of the Pentagon revolving door in over 60 years.

There is some hope that the law will soon start to catch up. In May of last year, Senator Elizabeth Warren (D-MA) and Representative Jackie Speier (D-CA) introduced legislation that would impose a four-year ban on contactors hiring senior officials who managed that company’s contracts, and extend existing bans. It would also require contractors to submit annual reports on the employment of former senior officials and would ban senior officials from owning stock in major defense contractors. Another bill, passed by the House in March 2019, would broaden ethics rules and expands prohibitions on former officials receiving compensation from contractors. It is sitting on Senate Majority Leader Mitch McConnell’s desk.

The American public should be able to be confident that our top military officials are making decisions in the interest of national security, not to secure a cushy board position.

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Should we stop the ‘revolving door’? | Chicago Booth Review

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Lockheed awarded $3.3B for PAC-3 missiles for Saudi Arabia, Kuwait – UPI.com

Posted by M. C. on December 28, 2018

Who would have thought that Lockheed would have to good fortune of there being so many CIA ignited war zones.

https://www.upi.com/Defense-News/2018/12/24/Lockheed-awarded-33B-for-PAC-3-missiles-for-Saudi-Arabia-Kuwait/1751545676135/

By

Lockheed Martin has been awarded a contract for Phased Array Tracking Radar to Intercept on Target Advanced Capability-3, or Patriot PAC-3, missiles for Saudi Arabia and Kuwait.

The contract, announced Friday by the Department of Defense, is worth a total of $3.3 billion for production of the missiles, with associated ground support equipment and initial spares of both PAC-3 missiles and PAC-3 Missile Segment Enhancement interceptors.

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