The Denver Post January 30, 2002
Defense hike would boost Colo. firms
By Anne C. Mulkern, Denver Post Business Writer,
The nation's war on terrorism will soon generate billions of dollars for the businesses that build the machinery of high-tech combat, including many in Colorado. President Bush is expected on Monday to ask for a $ 48 billion increase in defense spending, a 15 percent increase from the current budget. Total spending on defense probably will top $ 380 billion.
Companies such as Lockheed Martin Corp., Raytheon Corp., Ball Aerospace and Boeing Co. are well positioned to scoop up that money as they compete for contracts to make missiles, ammunition, communications systems, satellites, and the rockets that launch those satellites into orbit. 'That's a huge increase for one year,' said Paul Nisbet, aerospace analyst with JSA Research in Providence, R.I. 'Any contractor that relies heavily on defense is going to be well taken care of.'
The president's budget must be approved by Congress, but it is not expected to hit much opposition. The chairman of the Senate Appropriations Committee - Robert Byrd, D-W.Va. - is one of the few questioning the size of the increase.
'I'm becoming a little nervous as I hear that we're going to spend more and more and more on the military,' Byrd said at a recent budget committee hearing. 'It's going to have to come out somewhere, out of somebody else's hide.'
But with most Americans supporting the war, analysts said, Byrd and other dissenters probably won't be able to gather enough support to stop the increase from passing.
'I assume it's just going to sail right through,' said John Pike, director of Globalsecurity.org, a nonprofit defense policy think tank. 'As long as Bush is the commander in chief fighting a war, the Democrats are not going to fight a defense budget increase.' Specifics of the president's proposal will not be released until next week. Because contracts will be issued over several years, aerospace companies won't know right away who will benefit and by how much.
But the increase signals an important shift for the industry, analysts said. After years of stalled and declining spending on aerospace products, there's a surge in demand that's likely to last for several years. Significant increases in defense spending, which began last fall after Sept. 11's terrorist attacks, should continue for at least six years, Nisbet said. 'We've let our inventories of weapons and ammunitions dissipate over the years, and now everything's got to be brought back up,' he said.
About $ 30 billion of the proposed increase is expected to go to new equipment, such as missiles, airplanes, ships and tanks, and for research and development of new weapons. Another $ 5 billion will go to ammunition.
A good portion of the work could come to Colorado. The state's defense and space industry employs about 100,000 people working on missiles, satellites, communications systems and surveillance devices. One of the biggest winners is expected to be Lockheed Martin, which currently employs 5,200 people at its space systems division in metro Denver.
Of the largest aerospace companies, Lockheed is best situated to win big contracts, said Loren Thompson, analyst with the Lexington Institute, a Virginia defense industry think tank. 'Lockheed has been in the spy-satellite business for half a century,' he said.
The government will need more satellites, including global positional satellites and other spacecraft used for spying; it will need to launch those satellites; and it will need experts who can service those products and other military equipment. Lockheed already produces in all three areas, he said.
Half of Lockheed's Denver business is launch vehicles, while the other half is spacecraft production and support. 'There is a lot of interest in space surveillance, and we're very involved in that,' said Walter Faulconer, manager of business development for Lockheed's space systems unit.
But there will be enough money to spread around, analyst Pike said.
Other companies that could benefit include: Raytheon Corp., with 2,000 employees in Aurora and Colorado Springs. It produces information systems that control satellites. TRW Inc., which has 1,000 people in Denver and Colorado Springs working on several satellite and space system projects. Ball Aerospace in Boulder, which employs 1,800 people who make antennas and guidance systems for missiles, as well as satellites.
Though the defense budget is expected to balloon, funding for NASA is expected to be flat or even cut. That means some space programs could be jeopardized. But aerospace companies involved in space programs will still gain more than they lose, analysts said. The Defense Department's funding increase alone is three times the total NASA budget. 'Whatever they lose at NASA will be more than covered by the increase in defense spending,' analyst Thompson said.
Copyright 2002 The Denver Post Corporation