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U.S. arms makers look overseas as domestic demand shrinks

As the U.S. government eyes cuts in military purchases, defense contractors' sales overseas are likely to hit a record this year. The boom is drawing fire from arms-control advocates, who worry that weapons could end up in the wrong hands.

June 15, 2011|By W.J. Hennigan, Los Angeles Times
  • A Boeing C-17 built for the United Arab Emirates Air Force is shown in Long Beach in May. Boeing delivered a second C-17 to the UAE last week. The Long Beach C-17 assembly line had been expected to shut down at the end of next year.
A Boeing C-17 built for the United Arab Emirates Air Force is shown in Long… (Gary Friedman, Los Angeles…)

With the Pentagon's appetite for new weapons shrinking, U.S. arms makers are finding lucrative markets overseas as demand for American-made weaponry hits an all-time high.

Despite intense international competition, U.S. arms manufacturers are expected to sell a record $46.1 billion in military hardware to foreign governments in 2011, a nearly 50% jump from $31.6 billion last year.

The boom is drawing fire from arms-control advocates, who worry that weapons are going to volatile regions of the world and could end up in the wrong hands.

Pentagon officials defend the sales, saying they are carefully regulated by the U.S. State and Defense departments to protect national security and are key tools in maintaining good ties with U.S. allies.

"As a country continues to strengthen its ability to defend its borders, to protect itself and, potentially, to operate with partners in the region or with the U.S. — all of that strengthens the U.S. from a security perspective," Navy Vice Adm. William E. Landay III, who oversees foreign military sales, told reporters last week.

India signed a deal Wednesday for the purchase of 10 Boeing C-17 military cargo jets that will be built in Long Beach, highlighting the growing number of multimillion- and billion-dollar sales to foreign governments around the world.

The largest-ever U.S. foreign arms deal was announced last October, when Saudi Arabia ordered $60 billion in military hardware in a multiyear pact. The Saudis' laundry list of weaponry included Raytheon Co.'s 2,000-pound bunker-busting bombs, Boeing's F-15 fighter jets and Sikorsky Aircraft Corp.'s Black Hawk helicopters.

More deals are in the works. Australia wants two dozen Navy Seahawk helicopters valued at $1.6 billion. Saudi Arabia is eager to get $330 million in thermal-imaging and night-vision equipment. And Britain is looking to purchase $137 million in upgrades for its U.S.-made ship-mounted guns. Orders are also in from Morocco, Iraq and the United Arab Emirates.

Egypt is one of the largest customers for U.S. arms. But questions about its purchases were raised by critics in recent months when a column of American-made Abrams tanks rolled into Tahrir Square as protesters rallied against President Hosni Mubarak's regime. And both Bahrain and Tunisia bought U.S.-manufactured guns before their security forces fired on protesting crowds this spring.

Jeff Abramson, deputy director of the Arms Control Assn. in Washington, points out that the U.S. loses control of a weapons system once a sale is made.

"Who knows what will happen there and whether to sell arms to the region was wise?" he said. "We've made decisions in the past that don't look so good today."

At the same time, the sales spell jobs and corporate profits in the United States. These multibillion-dollar purchases translate into years of work for thousands of highly skilled manufacturing workers and keep weapons production lines humming at a time when unemployment runs at 11.9% in California.

Before India's order for 10 planes, Boeing's C-17 assembly line in Long Beach was expected to shut down at the end of next year. Last week, Boeing delivered a second C-17 to the United Arab Emirates Air Force.

Workers in Long Beach will be busy mainly filling foreign orders through 2014. The sales are also good for small Southland machine shops that supply parts.

Long Beach isn't alone in benefiting from exports. Orders from South Korea, Singapore and Saudi Arabia saved the production line of Boeing's F-15 fighter jet in St. Louis.

Chicago-based Boeing's pricey military and civilian airplanes together make the company the nation's largest exporter overall. Its military sales are "a business segment that once was perceived as icing on the cake," said Mark Kronenberg, Boeing's vice president of international business development. "Now it's essential."

Foreign sales currently make up 18% of Boeing defense sales, compared with 7% six years ago, he said. The company's defense unit has a goal of making overseas sales hit 25% within the next five years. It also plans to beef up its international sales team to 100 by the end of the year. In 2005, it numbered just 10.

Boeing booked $6 billion in foreign military sales last year, compared with $7 billion for Lockheed Martin Corp. Century City-based Northrop Grumman Corp. reported nearly $2 billion.

Since the Sept. 11 attacks, the Pentagon budget has more than doubled, to $729 billion. But now after one of the biggest military buildups in decades and amid growing concern about the federal budget deficit, defense companies are bracing for a long stretch of cuts in purchases by the U.S. government.

"Every defense contractor is looking at the international market and saying they need to be more aggressive," Kronenberg said. "We spend hours in countries talking with everybody from military officers all the way to top leadership to see what their needs are."

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