Espreso. Global

Call for investment in defense industry becomes trend

1 November, 2023 Wednesday
16:20

Investments can be one of the most effective ways for defense companies to take risks in expanding production

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Defense Express writes about this.

The US military-industrial complex has a number of problems that prevent it from effectively expanding its production capacity for weapons and military equipment, according to the head of the US defense department, Lloyd Austin, when talking about the state of U.S. weapons stockpiles, as well as limitations in the workforce, supply chain, infrastructure, etc.

"There are some limitations in terms of how quickly they (military-industrial companies - ed.) can do certain things. There will continue to be workforce challenges. And when you expand capacity, there’s this issue of the time it takes to build the capacity and make sure the lines are running smoothly," the Pentagon chief said.

According to him, some defense companies were even forced to require workers to take extra shifts to keep up with the required production rates: "What they’ve done in a lot of cases to meet urgent needs is double and triple shifts so that they can in some cases crank out munitions and weapons at a much greater speed."

Problems with labor, supply chains, or infrastructure are emphasized by Deb Fischer, a Republican senator from Nebraska, who emphasizes that capacity building takes time and resources, but "we can start now by making targeted investments in our munitions production base."

For example, a Republican senator from Arkansas notes that the industry currently lacks investment to speed up the production of engines for missiles used in the Iron Dome system.

“That is, today there is a tendency when the thesis that manufacturers need external investments to expand production is increasingly voiced in the public domain. For example, earlier this was emphasized by one of the largest ammunition producers in Europe, the Norwegian company Nammo, which estimated that more than $6 billion should be invested in increasing the production capacity of artillery ammunition in European NATO member states alone,” Defense Express explains. 

In the context of the issue of expanding the production capacities of defense companies, it is worth mentioning that today a number of defense companies have already fully loaded their current production capacities (for example, Lockheed Martin with GMLRS missiles) and are not going to expand, despite the fact that the demand for their products is much higher than the production volumes.

Defense Express believes that this is due to the fact that companies simply do not want to take risks, as expansion is a complex and costly undertaking, while at the same time, manufacturers are not always sure that their products will be relevant not only "today" but also "tomorrow."

The issue of expanding production could be partially resolved by means of multi-year contracts, so that manufacturers can be sure that they will not be left without orders tomorrow. And the United States is already gradually moving in this direction, having agreed on a multi-year procurement plan for Patriot and GMLRS missiles, the report states. 

However, there are disputes over the approval of multi-year procurements for missiles such as the SM-6 and AMRAAM (the latter of which is relevant to Ukraine), which are being blocked due to delays in programs and the allegedly unreasonable cost of the weapons.

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