Large military contractors are indicating they’re now ready to invest in their facilities and manufacturing capacity despite so much uncertainty around the Pentagon’s spending levels this current year and into Fiscal Year 2019.
Executives from some of the largest defense contractors, in earnings calls and conversations this week with Wall Street analysts, detailed their plans to increase their planned capital expenditures this year and in the next few years.
“We will spend $1.7 billion in CapEx (capital expenditures) at Electric Boat over the next several years in anticipation of increased production on the Block V Virginia submarine and the new Columbia ballistic-missile submarine,” General Dynamics chief executive officer Phebe Novakovic told analysts last week, according to a transcript of the call provided by Seeking Alpha.
“This is very much driven by an expectation of increased business,” defense industrial base analyst Andrew Hunter told USNI News.
Hunter, the director of the Defense-Industrial Initiatives Group and a senior fellow at the Center for Strategic and International Studies, said defense spending typically runs in cycles that last about a decade from spending peak to spending peak.
Military spending was down until about 2015, he said. Industry responded by not reinvesting in their facilities or increasing manufacturing capacity. Since then, Hunter said the Pentagon has steadily increased its number of contracts.
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