Money Matters - Simplified

Marines Under Fire From Pentagon Cuts

Never let it be said that President Obama lacks political instincts. When his "deficit reduction panel" outlined planned cuts to Pentagon purchasing this week, he made darn sure the news came out on Wednesday -- rather than yesterday, Veterans Day.

 

Otherwise, his panel might have made headlines for suggesting that the Pentagon axe the V-22 Osprey, and cut one-third of Textron's (NYSE: TXT) orders; kill Lockheed Martin's (NYSE: LMT) warplane, the F-35B; and cancel orders for General Dynamics' (NYSE: GD) amphibious assault craft. As it happens, the U.S. Marine Corps relies or would rely on all of these costly weapons systems.

The President's panel proposed a wholesale reduction in Pentagon hardware spending, destined to deprive BAE, Navistar (NYSE: NAV), Lockheed and General D of billions more in revenue destined for the increasingly irrelevant JLTV program. (America's Next Top Humvee ain't looking as pretty as it once was.) In the process, it seems the Marines will bear the brunt of the budgetary axe. At this rate, they may have to stage their next invasion armed with little more than M-16s and rubber dinghies.

Schadenfreude, Inc.
Ah, well. If anyone can get the job done, sans equipment, it's the Marines. Plus, the proposed cuts aren't set in stone just yet. We'll keep you updated on how this plays out. Meanwhile, there are a couple of winners we should highlight on the Pentagon funding front.

First up, the folks in Congress do recognize that if they kill the Osprey, they'll still need to find some way to get Marines to the fight. Thus, the deficit panel suggests a few United Technologies (NYSE: UTX). Black Hawk helicopters might do the trick. They're cheaper than the Osprey -- and soon, they might not even need pilots.

The other a big winner: Boeing (NYSE: BA). After losing the F-22 and F-35 competitions to Lockheed, and after Joint Chiefs Chairman Adm. Michael Mullen declared the latter plane the last manned fighter that the U.S. will ever build, it seemed that Boeing was out of the fighter game for good. But Pentagon penny-pinching has turned this theory on its head.

As plans for F-35 purchases ratchet back, we may instead buy more Lockheed F-16s, and Boeing F/A-18 variants, for some time to come. If nothing else, it's about time Boeing investors got some good news.

What do you say? Are defense spending cuts essential, or irresponsible? Scroll down, and sound off.

 

© 2010 UCLICK L.L.C.