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Weapons execs lament losses from Afghanistan exit, tout DOD budget increase

Raytheon's CEO says Congress's military allotment is more ‘aligned’ with the company’s business interests.

Analysis | Military Industrial Complex

Speaking to investors on Tuesday, two of the biggest U.S. weapons manufacturers provided estimates on how the U.S. withdrawal from Afghanistan, a war that cost U.S. taxpayers over $2 trillion and took over 243,000 lives, impacted their bottom lines. Both companies also expressed enthusiasm about a bipartisan push to increase the 2022 defense budget by $29.3 billion, a five percent increase over the 2021 budget and more than $10 billion more than President Biden requested.

Approximately half of the defense budget goes to contractors like Lockheed Martin and Raytheon, both of whom explained to investors how the end of a 20 year war will impact their profits while still painting a rosy picture of ballooning defense spending driving corporate revenue and padding the bottomline for shareholders.

Raytheon CEO Gregory Hayes, who took home nearly $21 million in compensation last year, acknowledged that the end of a war was bad for the bottomline, telling investors:

Yeah. So the lost sales on the defense side, I would category — three categories of issues there. One, I think the pullout in Afghanistan, there's about a $75 million impact to full year revenue, not huge but meaningful.

But Hayes might be bullish on his long-term business prospects, despite the “not huge but meaningful” financial hit from the end of a 20 year war.

Earlier in the call, the weapons executive boasted about bipartisan support for boosting the defense budget above what the White House requested. “[As] we've said, defense spending is nonpartisan, and we're encouraged to see Congress supporting plus ups to the president's budget that are also aligned to our business and our investments in new technologies,” said Hayes, offering an unusual interpretation of the bipartisan motivation to boost defense spending.

Hayes’s assessment that the budget was “aligned” with his business and financial interests instead of national security priorities like climate change, which the Pentagon and the White House identify as existential national security threats, is a moment of candor from the weapons industry. The alignment of the defense budget with the business needs of for-profit-weapons-firms might not be a total coincidence. The weapons industry spent over $1 billion lobbying Congress between 2002 and 2020 while government funding of the top five weapons firms grew by 188 percent

Raytheon’s optimism about future profits fueled by ballooning defense budgets was shared by Lockheed Martin on its own earnings call conducted on the same day. Lockheed’s CFO acknowledged that the Afghanistan withdrawal created “a $200 million year-over-year headwind,” referring to the negative financial impact on the company from the withdrawal.

But Lockheed CEO James Taiclet, who received over $23 million in compensation last year, was quick to pin his company’s future profits to, among other factors, “the size of future defense budgets and the global geopolitical landscape.”

In other words, a defense budget that exceeds the White House’s requests and a geopolitical landscape defined by great power competition — a state of affairs that Taiclet previously used to justify Lockheed’s consolidation of the missile engine market despite concerns by antitrust regulators — is central to the company’s growth. 

Much like Raytheon’s CEO, Lockheed’s CFO spoke optimistically about the defense budget increases, not in terms of U.S. national security, but in relation to the company’s financial wellbeing, telling shareholders, “I'd say we're encouraged about the direction of the various committee markups as they reflect really good support for a number of our programs.”


Images: Casimiro PT and Daniel J. Macy via shutterstock.com
Analysis | Military Industrial Complex
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