Grundman cited in Defense News, “Top 100: Defense Revenues Down, but Industry Prevailing”

27 July 2015 • 0 Comments

Commenting on the publication of Defense News’s annual Top 100 Global Defense Companies, Steve Grundman was quoted, saying, “‘On an outlay basis, I think we have one more year to go,’ said Steve Grundman, a former Pentagon industrial policy chief who is now a consultant and a member of the Atlantic Council. ‘I think 2015 will be the bottom for budget authority–I don’t think we’ll go lower than the 2015 budget authority–but the outlay dip will lag a year, so 2016 is probably the bottom of the outlay cycle.’. . . But the market is likely to stay down for quite some time, said Grundman. ‘This ‘long bottom’ might be flat to 1 percent real growth for about three or four years until the end of the decade,’ he said. . . . But despite the years-long downturn, the defense industry remained robust, which reflects how quickly defense firms responded to the new spending landscape. ‘To the credit of the current cast of captains of this industry, it is astonishingly healthy financially. Here, five years into a significant downturn in its primary customer’s spending, these are all essentially healthy companies,’ Grundman said. That give them the freedom to pursue a variety of business strategies, from mergers and acquisitions to create large-scale efficiencies, as in the Orbital-ATK and Harris-Exelis mergers, or to refocus their business models by shedding businesses that don’t fit core competencies or exist in market segments loaded with competition, he said. ‘Unlike the 1990s, I don’t think this industry is going to rush behind a single restructuring thesis. I actually instead believe there’s going to be a diversity of strategies, even among the big six,’ he said. ‘I think there are going to be some, like Lockheed Martin, that galvanize their strategy behind big platforms: We make tactical airplanes, helicopters and exquisite satellites, and we’d very much like to make bombers and tactical combat vehicles; indeed, they’d love to have a big platform in each domain.'”


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