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  • Lockheed Martin is the top grossing defense firm in the world, and the

  • U.S. government supports that business to the tune of over $37.7

  • billion. It surpasses its closest competitors, Boeing and Raytheon, by

  • nearly $20 billion in arms sales.

  • These funds are granted by Congress to provide equipment that enables the

  • U.S. military to protect the country at home and abroad.

  • So why is Lockheed the defense darling of the U.S.

  • government? And how did it beat out its competitors?

  • One of the top priorities of all administrations is the protection and

  • safety of the American people.

  • To ensure that, politicians work with defense contractors to provide

  • equipment to the military.

  • This partnership provides a unique opportunity for private corporations to

  • execute the will of the government and requires a delicate balance.

  • President Eisenhower, in his farewell address, coined the term

  • military-industrial complex.

  • And what he was talking about was the close connection and collaboration

  • between arms contractors and uniformed military.

  • In the councils of government, we must guard against the acquisition of

  • unwarranted influence, whether sought or unsought, by the

  • military-industrial complex.

  • The political incentives of the U.S.

  • Congress and the Department of Defense tended to work together in a way

  • that created enormous incentives to increase military spending.

  • For example, when there's a major weapons program like, say, the F-35,

  • which is the current Air Force combat aircraft, is being purchased,

  • members of Congress might have questions about this plane like is it

  • performing well? Are we getting a good deal for our money and so forth.

  • They are reluctant to vote against it because it means going up against

  • potential jobs in their states.

  • The Congress people in whose district those companies are located and the

  • Defense Department that then gets to use the equipment that is purchased

  • in this way. And Eisenhower believed that that complex of the military,

  • the industry and the government, the Congress in particular, created a

  • tendency for the United States to overspend on national security.

  • For most of the defense industry, their biggest source of business is the

  • Department of Defense. So they kind of live and die with the defense

  • budget as it increases, the revenue increases, as it decreases, the

  • revenue decreases.

  • Waging an actual war is a very expensive project.

  • The 9/11 attacks in 2001 were a shock to the American psyche, led to a

  • substantial ramping up of U.S.

  • military spending in the years after 2001, partly because of the immediate

  • issue of terrorism and partly because of the closely related but second

  • order problems of the wars that the counterterrorist program led to in

  • Afghanistan and Iraq.

  • The price tag gets huge.

  • And so American defense spending has grown radically since 2001 and

  • remains very high.

  • And Lockheed Martin is the top-contracted company by the U.S.

  • government. In 2018 alone, the company sold $37.7

  • billion worth of contracts to the U.S.

  • government, making up 70% of their net sales.

  • The other 28% came from foreign military sales and 2% came from commercial

  • and other customers.

  • Lockheed's total revenue in 2018 was about $53 billion.

  • By contrast, Lockheed's next biggest competitor, Boeing, was awarded about

  • $23 billion from government contracts the same year.

  • So even though Boeing is a much larger company with $101 billion in total

  • revenue in 2018, only a small portion of its business relies on defense

  • contracts. Boeing might be a prominent example where they do get a lot of

  • revenue from the commercial business falling, in fact, it's about two

  • thirds of its revenue from commercial aviation, about a third from its

  • defense business. Boeing mostly makes planes for commercial airlines, but

  • it also has a robust business making military aircraft and other weapons.

  • The next largest competitor is Raytheon.

  • Raytheon is a prominent defense firm that offers services in everything

  • from cybersecurity to missile defense.

  • 68% of Raytheon's net sales came from the U.S.

  • government in 2018, which means about $18.4

  • billion. They list their principal U.S.

  • government customer as the U.S.

  • Department of Defense, as does Lockheed Martin.

  • However, before Lockheed Martin got this very crucial customer, it

  • struggled to define its identity.

  • Glenn L. Martin opened his aviation company on August 16th, 1912.

  • The company went on to become one of the earliest suppliers of the U.S.

  • military, making aircraft for both the army and the navy.

  • They went on from success to success through the twenties and the thirties

  • pioneering all sorts of new aircrafts, but particularly military

  • airplanes. In 1961, the second Glenn L.

  • Martin Company merged with the American Marietta Corporation.

  • It was renamed the Martin Marietta Corporation.

  • The same year, Glenn Martin launched his aviation business,

  • the Lockheed brothers launched their aviation business, the Alco Hydro

  • Aeroplane Company, which was later named Lockheed Aircraft Company.

  • Lockheed, L-o-u-g-h-e-a-d, is pronounced like Lockheed.

  • People had a hard time pronouncing it that led to the brothers legally

  • changing the spelling of their surname to Lockheed.

  • Malcolm went on to start a successful car hydraulic brake company, and

  • Alan resigned after the company was bought by Detroit Aircraft

  • Corporation. But the company didn't last long and fell into receivership

  • under the Title Insurance and Trust Company of Los Angeles, officially

  • killing Lockheed Aircraft Corp.,

  • which was a subsidiary.

  • Its assets were sold off to Robert Gross and other investors who went on

  • to form a new Lockheed Aircraft Corporation of Delaware.

  • Lockheed Aircraft Corporation changed its name in 1977 to Lockheed

  • Corporation to demonstrate they offer other services besides aviation.

  • Those two companies, the Martin Marietta Corporation and Lockheed

  • Corporation, were two prominent competitors in the defense marketplace.

  • However, that marketplace has never been completely independent of the

  • government's actions, just as President Eisenhower had warned when he

  • spoke of the military-industrial complex.

  • Military procurement had declined around 52% from 1985 to 1997 in current

  • dollar terms. Before 2001, many people believed that

  • national security had become a lot easier with the end of the Cold War and

  • that the United States could take what was referred to at the time, a

  • peace dividend. The much larger defensive efforts that the United States

  • had made during the Cold War when we had to fight Soviet Union weren't

  • necessary anymore when the Soviet Union collapsed and the Cold War ended.

  • So defense budgets tended to decline.

  • Leadership at the Department of Defense inferred that the defense industry

  • would have to shrink around 40% in order to save the industry from

  • collapsing amid declining demand from the department.

  • Officials encouraged companies to consolidate in an effort to save each

  • other. At the end of the Cold War, there were concerns about whether the

  • Pentagon budget, which was going to come down about 10 to 25 percent or so

  • was projected in real terms.

  • Could that smaller budget sustain the same number of contractors?

  • And William Perry, the secretary of defense, in the administration felt

  • the answer was no. In fact, in 1993, the government asked specifically for

  • less competition among defense contractors.

  • Look to your left. Look to your right.

  • One of your companies is not going to be here in a couple of years.

  • And then you also had the infamous Last Supper.

  • We think there are too many companies in this business and we want to

  • merge and combine with one another at reduced costs to us, overhead costs

  • at the corporate level. Norm Augustine kind of engineered the whole series

  • of mergers. Infamously or famously, Norm Augustine who at the time was the

  • head of Martin Marietta was at the table with a bunch of other industry

  • haters. And he was one of the most aggressive executives taking that

  • guidance and running with it.

  • And he became CEO of the combined Lockheed Martin and also consolidated

  • and purchased lot of other companies. Lockheed Martin absorbed large

  • companies like Ford Aerospace and Loral Corporation.

  • Basically the big winner and that consolidation after the Last Supper was

  • Lockheed Martin. It was after that that Lockheed aircraft and Martin Mary

  • had emerged. In 1958, Lockheed Martin proposed to Northrop Grumman and the

  • government actually told them not to do that.

  • They cancelled that transaction.

  • They said they wouldn't approve it and the idea was dropped.

  • So that was that's kind of, if you will, the sort of the generally

  • accepted end of the the Last Supper consolidation era.

  • By 2000, the industry had consolidated into the marketplace we know today

  • with Lockheed on top. So the way the industry is structured now, the

  • barriers to enter are huge. Unless they brought up some of the existing

  • companies, you're only going to have a couple of competitors for most

  • things you might want to do. Lockheed Martin now

  • stretches into four business segments: Aeronautics, Missiles and Fire

  • Control, Rotary and Mission Systems and space.

  • It's a company that has combined with other companies over time to gain

  • its current market position as the largest company in the world.

  • In 2019, Raytheon and United Technologies announced intention to merge to

  • have a better edge on the defense industry.

  • To protect their profits, companies like Lockheed Martin also sell their

  • aircraft to American allies when cleared by the State Department.

  • When the defense budget in the U.S.

  • started to fall, a lot of companies really amped up their work to sell

  • products overseas.

  • So depending on the company, that's probably now like 25 to 30 percent of

  • their revenue may come from international sales.

  • That's one way the government controls the defense marketplace.

  • Another way is through direct negotiations with industry CEOs.

  • In the 2017 fiscal year, the then president, Barack Obama, proposed a

  • budget of $582.7

  • billion for the Department of Defense.

  • The following year in 2018, President Trump proposed a budget of $639.1

  • billion. For the fiscal year 2019,Trump proposed a budget of $716

  • billion for national security, with $686 billion for the Department of

  • Defense. And looking to the future, Trump proposed a budget of $750

  • billion with $718.3

  • billion going to the Department of Defense for the fiscal year 2020.

  • The company was well positioned in the Obama years as well because, you

  • know, he actually spent significant money in this decade, which includes

  • most of the Obama two terms.

  • We've spent a trillion more on the Pentagon than in the prior decade,

  • which was at the peak of the Iraq and Afghan wars.

  • President Barack Obama appointed Lockheed CEO Marillyn Hewson to the

  • president's export council in September of 2013.

  • Marillyn Hewson from Lockheed Martin.

  • Obviously, one of our greatest innovators and one of those innovations is

  • the F-35 fighter jet.

  • It is the most advanced fighter in the world.

  • It's stealth. You cannot see it.

  • Is that correct? That's correct.

  • Better be correct. Right? A single F-35 can cost over $80 million and the

  • government hasn't always been happy with the F-35's performance and price.

  • Then President-elect Donald Trump thought the F-35's program delays and

  • high costs were bad for business.

  • This one from the president-elect based on the tremendous cost and cost

  • overruns of the Lockheed Martin F-35, I've asked Boeing to price out a

  • comparable F-18 Super Hornet.

  • This caused Lockheed Martin shares to fall around 2% and sent Boeing

  • shares up 0.5%.

  • In January 2017, Trump commented on the tension of his negotiation with

  • Lockheed Martin. Look at what's happening with Lockheed.

  • Number one, we're cutting the price of their planes by a lot, but they're

  • also expanding. And that's going to be a good thing.

  • Ultimately, they're going to be better off.

  • Hewson is actually in this very interesting sweet spot where the defense

  • budgets never been bigger under any presidency.

  • So that gives her company a lot of leeway to snatch up a lot of those

  • contracts. I don't see any realistic chance that there's another company

  • that's going to exceed Lockheed Martin in the next five years.

  • Lockheed Martin will be delivering 478 F-35 aircraft to the U.S.

  • government under their biggest deal yet, a $34 billion contract with the

  • Pentagon. In 2019, the U.S.

  • government also approved the sale of 32 F-35 jets to Poland for around

  • $6.5 billion so the company is poised to be successful among allies as

  • well. When you look at Lockheed's diverse portfolio and you pair that with

  • a defense budget at a tune of $700 billion, of course Lockheed is prime

  • suited to pick up more government contracts and to ride even more of a

  • successful wave.

Lockheed Martin is the top grossing defense firm in the world, and the

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美国政府为何向洛克希德马丁公司支付数十亿美元(Why The U.S. Government Pays Lockheed Martin Billions)

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    joey joey 發佈於 2021 年 05 月 16 日
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