Amer­i­can War In­dus­try Faces Hard Lim­its

Trillions - - Contents -

A new Pen­tagon re­port says it could be hard for the United States to keep up with the es­ca­lat­ing strain of hav­ing to fight more wars ev­ery year.

The March 2018 edi­tion of the An­nual In­dus­trial Ca­pa­bil­i­ties re­port, cre­ated cour­tesy of the Pen­tagon’s Of­fice of Man­u­fac­tur­ing and In­dus­trial Base Pol­icy, dropped a bomb of sorts on those who are an­tic­i­pat­ing more years of con­tin­ued es­ca­lat­ing war.

Over the past 20 years, the United States has con­tin­ued a pol­icy of sup­port­ing more re­gional wars around the world ev­ery year. Some are ones the coun­try is di­rectly in­volved in. Oth­ers are ones where it is a ma­jor sup­plier of weapons and mu­ni­tions to help oth­ers wage bat­tle and profit U.S. war cor­po­ra­tions. The com­bi­na­tion of those for “twenty years of in­ter­mit­tent con­flict,” as the re­port says, has cre­ated se­ri­ous stresses on the sup­ply chain for U.S. builders of more and big­ger weaponry, air­craft, tanks, am­mu­ni­tion and spare parts.

War is very big busi­ness and is, in fact, Amer­ica’s largest in­dus­try by far; thanks to ag­gres­sive and ris­ing spend­ing trends on be­half of the U.S. De­part­ment of De­fense (DOD) and other coun­tries, the war in­dus­try con­tin­ues to be the hottest ma­jor sec­tor in Amer­i­can busi­ness. This is hap­pen­ing in a ma­jor way be­cause of con­tin­ued war­fare on mul­ti­ple fronts and with vary­ing ad­ver­saries through­out the Mid­dle East. As a busi­ness seg­ment, war con­tract­ing sig­nif­i­cantly out­per­formed its sec­ond-closed com­peti­tor, the aerospace sec­tor, at a rel­a­tive ra­tio of 347 to 247, ac­cord­ing to the re­port. Tech­nol­ogy com­pa­nies came in third on the list.

As the re­port notes, how­ever, “Fac­tors such as ob­so­les­cence, for­eign de­pen­dency, fluc­tu­at­ing de­mand, in­dus­try con­sol­i­da­tions, and loss of de­sign teams and man­u­fac­tur­ing skills for crit­i­cal de­fense prod­ucts con­tinue to threaten the health of the in­dus­trial base, limit in­no­va­tion, and re­duce U.S. com­pet­i­tive­ness in the global mar­kets.” The re­port goes on to say that be­cause of these is­sues, “while U.S. na­tional de­fense de­mands for ma­te­ri­als are sel­dom un­met, there ex­ist risks to their sup­ply now and risks are an­tic­i­pated in the fore­see­able fu­ture.”

One of the ma­jor fac­tors of con­cern is what the re­port la­bels as “high U.S. im­port reliance on for­eign coun­tries who may be­come ad­ver­saries and cut off peace­time sup­ply dur­ing fu­ture con­flicts.” An ex­am­ple of this is Dechlo­rane, a flame re­tar­dant that hap­pens to be used in all of the mil­i­tary’s mis­sile sys­tems. It is cur­rently pro­vided by only one sup­plier, Oc­ci­den­tal Chem­i­cal, which is lo­cated in Bel­gium. An­other is dimeryl di­iso­cyanate, one of the crit­i­cal chem­i­cals used in Sidewinder and AMRAAM air-to-air mis­siles, both of which are part of the stan­dard weapons sys­tems used on U.S. fighter jets through­out the world. There is one

man­u­fac­turer mak­ing the chem­i­cal right now, but that man­u­fac­turer has put the Pen­tagon on no­tice that it plans to exit the busi­ness soon. There is no other man­u­fac­turer any­where who is mak­ing it.

A sec­ond con­cern is that many of the new tech­nolo­gies mil­i­tary providers are us­ing de­pend on scarce ma­te­ri­als with lit­tle abil­ity to ramp up pro­duc­tion.

Yet an­other prob­lem for the U.S. de­fense sup­ply is con­tin­ued in­dus­try con­sol­i­da­tion. One di­rect re­sult of this is that ap­prox­i­mately 97% of mis­sile and mu­ni­tions pro­cure­ment gets awarded to only two con­trac­tors: Lock­heed Martin and Raytheon. Fur­ther, 98% of al­most all sec­ond- and third-tier sup­pli­ers of mu­ni­tions com­po­nents are sole sources. This in­dus­try con­sol­i­da­tion has three ma­jor neg­a­tive ef­fects, all of which are highly un­de­sir­able for the DOD: (1) The lack of com­pe­ti­tion tends to raise the cost of prod­ucts, (2) it some­times leaves the DOD beg­ging for a com­pany to bid at all and (3) it keeps the coun­try at risk of a sole-source sup­plier choos­ing to exit an in­dus­try at pre­cisely the wrong time.

Prod­ucts the re­port high­lighted in this cat­e­gory in­clude solid rocket en­gines, fuses, small tur­bine en­gines and ther­mal bat­ter­ies.

A fur­ther chal­lenge is the lack of in­vest­ing in fa­cil­i­ties and spare parts for the de­fense in­dus­try from 2000 to 2016. Fa­cil­i­ties such as U.S. naval ship­yards have been sub­jected to “overuse and un­der­fund­ing” for so long that ships have been wait­ing longer and longer for re­pairs. As the re­port notes, “In­ad­e­quate fa­cil­i­ties and equip­ment led to main­te­nance de­lays that con­trib­uted in part to more than 1,300 lost oper­a­tional days … for air­craft car­ri­ers and 12,500 lost oper­a­tional days for sub­marines.” Fighter jets are also not im­mune to this. Be­cause of sup­ply and main­te­nance prob­lems, the F-35 stealth fighter fleet is not con­sid­ered “mis­sion ca­pa­ble.” Pos­si­ble So­lu­tions

One way the DOD has dealt with the lim­ited num­ber of con­trac­tors it can ap­proach for bids is by ex­pand­ing the def­i­ni­tion of what it con­sid­ers its Na­tional Tech­nol­ogy and In­dus­trial Base (NTIB). That group­ing pre­vi­ously in­cluded only the United States and Canada. As of FY 2017, it now in­cludes Aus­tralia and the United King­dom of Great Bri­tain and North­ern Ire­land. The Pen­tagon plans to ex­pand col­lab­o­ra­tion within this new, broader NTIB to al­low for closer work­ing to­gether “in tech­nol­ogy, en­gi­neer­ing and man­u­fac­tur­ing.” That may help with the cur­rent ca­pa­bil­ity short­falls, but in­creas­ing the num­ber of con­trac­tors will take time.

A sec­ond way the DOD in­tends to han­dle the in­dus­try-con­sol­i­da­tion and sole-source is­sues is by be­com­ing more in­volved in the ap­proval process for de­fense in­dus­try merg­ers and ac­qui­si­tions. Many who have looked at the in­dus­try are con­cerned that this is an ac­tion that should have been taken long ago and that it is now too late.

An­other so­lu­tion be­ing con­sid­ered is fur­ther in­vest­ment in ad­vanced tech­nol­ogy in­sti­tutes that could help de­velop a fu­ture gen­er­a­tion of com­pet­i­tive war­fare so­lu­tions, along with the man­u­fac­tur­ing tech­nol­ogy to de­velop them. One of these is Ad­vanced Ro­bot­ics for Man­u­fac­tur­ing (ARM), de­vel­oped in part­ner­ship with Carnegie Mel­lon Uni­ver­sity and based in Pitts­burgh. And there’s BIOFABUSA, sup­ported by the Ad­vanced Re­gen­er­a­tive Man­u­fac­tur­ing In­sti­tute (ARMI), which is lo­cated in Manch­ester, New Hamp­shire. It has the mis­sion to “make prac­ti­cal the large-scale man­u­fac­tur­ing of en­gi­neered tis­sues and tis­sue-re­lated tech­nolo­gies.” Both are promis­ing of­fer­ings that should greatly aug­ment the DOD in the fu­ture, but bring­ing these up to their full ca­pa­bil­i­ties will also take years.

These are just two of a to­tal of 14 man­u­fac­tur­ing in­sti­tutes that work both in­di­vid­u­ally and on a shared-tech­nol­ogy ba­sis to ad­vance mil­i­tary equip­ment ad­vanced man­u­fac­tur­ing tech­nolo­gies across the coun­try.

De­spite the op­ti­mism of the de­fense in­dus­try as a whole for its ex­pected con­tin­ued abil­ity to out­per­form the rest of Amer­i­can in­dus­try for some time, the longterm trend is con­cern­ing for those who see the “for­ever war” as part of mod­ern life. With U.S. ca­pa­bil­ity lag­ging in this area and the fed­eral debt weigh­ing down the coun­try’s abil­ity to con­tinue to in­vest in the in­dus­try, it is likely that sooner rather than later Amer­ica is go­ing to face the re­al­ity that it can­not con­tinue wag­ing war the way it has in the past.

Per­haps Amer­i­cans will some­day wake up to rec­og­nize the fact that be­ing a na­tion of war is not only morally wrong but is un­sus­tain­able and that be­ing a na­tion of peace is in­fin­itely bet­ter.

Imag­ine the kind of coun­try the U.S. could be if it had in­vested the $30 tril­lion blown on the war in­dus­try on ed­u­ca­tion, health care, R&D, green en­ergy, erad­i­ca­tion of poverty and in­fra­struc­ture.

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