Although the United States occupies at least a dozen countries throughout the world, the nation is attempting to transition away from full-fledged combat, focusing more on intelligence-gathering, peacekeeping and special forces operations. Despite budget cuts, the U.S. military's procurement process still consists of heavy expenses to replace grossly outdated equipment still used by a small contingency of service members.
Nevertheless, the U.S. Budget Control Act required the Pentagon to cut $487 billion from its budget over the next decade. According to CFO, the automatic spending cuts prompted by the act's removal of provisions could possibly result in a $500 billion reduction in the organization's expenditures during the same time frame. Tim Dragelin, senior managing director for a financial advisory firm, noted that these cutbacks could coax the U.S. Congress to intervene in order to keep the country's defense manufacturing industry on its feet.
Lockheed Martin, a Maryland-based military contractor, boasted $47.2 billion in net sales in 2012. Bruce Tanner, the company's chief financial officer, adjusted the organization's spend management plan in preparation for the effects of the Budget Control Act. As a result, he has consolidated various facilities and invested capital in acquisitions.
"Sequestration adds a bit more amplitude to previous cycles, but we are prepared nonetheless," said Tanner, as quoted by the news source. "We don't wait for downturns. We're constantly assessing our portfolio and the shape and size of our business."
Pushing for intervention
In an effort to bring foreign investment in aerospace and defense to South Carolina, State Commerce Secretary Bobby Hitt recently testified before a U.S. House of Representatives panel, Charleston Business reported. Hitt presented a spend analysis showing how the Palmetto State is regaining manufacturing jobs. His major push was for small business development and how the federal government could change its policies to foster domestic economic growth.
Shirley Mills, a senior analyst with a global investment firm, acknowledged the fact that public legislatures could greatly dictate whether or not re-shoring will become a prevalent occurrence. She offered three suggestions of changes to be made to the country's policies:
- Review corporate tax laws and environmental control
- Consider implementing an energy export mandate
- Pay attention to the strategic sourcing behaviors of foreign businesses
Although the residual effects of the Budget Control Act may depress domestic production of aerospace and defense equipment, U.S. lawmakers should focus on attracting investment from overseas nations heavily entrenched in military development, such as China.