LOCKHEED POSTS Q1 PROFITS: Despite the damage inflicted on the global economy by the coronavirus pandemic, U.S defense industry giant Lockheed Martin posted healthy sales and earnings figures for the first quarter of 2020.
The company beat industry forecasts, reporting net sales of $15.7 billion, compared to $14.3 billion in the first quarter of 2019, and net earnings of $1.7 billion, or $6.08 per share, an 1.5% increase over last year. In addition, fueled by sales of its premier F-35 Joint Strike Fighter jet, Lockheed’s aeronautics division saw profits soar by 15% to $87 million.
But the first quarter financial report was cautious about the company’s prospects for the rest of the year. “The ultimate impact of COVID-19 on the corporation’s financial outlook for 2020 remains uncertain,” the report said.
PENTAGON SEES THREE-MONTH DELAY: Lockheed’s stronger-than-expected earnings came a day after the Pentagon’s top acquisition officer warned of a three-month delay in “key milestones” for major acquisition programs and said the department is streamlining payments to help struggling defense contractors with their cash flow.
“We expect payments at the higher progress payment rate to start this week, helping provide $3 billion in increased cash flow to industry,” Ellen Lord, the Pentagon’s undersecretary of defense for acquisition and sustainment, said Monday. “I commend Lockheed Martin and Boeing for both publicly committing to ensure this cash flow goes quickly down the supply chain to small businesses who need it most.”
Lord said three areas are most affected by the coronavirus slowdown: the aviation supply chain, ship-building, and small space launch. “Out of 10,509 major prime companies,” she said, “106 are closed, with 68 companies having closed and reopened. Out of 11,413 vendor-based companies, 427 are closed, with 147 having closed and reopened.”
“Right now, there isn’t any specific COVID penalty that we see for a specific program. However, we do anticipate about a three-month slowdown at slower rates in terms of execution than we saw before,” Lord told reporters. “And we are just now looking at key milestones that might be impacted.”
WARY BOEING WORKERS RETURN: After a three-week furlough to scrub and disinfect its massive production facilities in Washington state, Boeing is bringing back some 27,000 employees in the Puget Sound region this week.
“At all of its sites, the company has taken extra precautions and instituted comprehensive procedures to keep people safe and fight the spread of COVID-19,” Boeing said in a statement.
Scores of Boeing workers have tested positive for the virus, and at least one worker has died, according to the Washington Post. “So as the factories returned to work, union officials urged members to hold their employer accountable by speaking up and, if necessary, pulling the red card,” which is used by workers on the factory floor to alert managers to unsafe working conditions,” the Washington Post reported.
“The health and safety of our employees, their families, and communities is our shared priority,” said Stan Deal, president and CEO of Boeing Commercial Airplanes. “Personal protective equipment is readily available, and we have all of the necessary safety measures in place to resume essential work for our customers.”
Good Wednesday morning, and welcome to Jamie McIntyre’s Daily on Defense, written and compiled by Washington Examiner National Security Senior Writer Jamie McIntyre (@jamiejmcintyre) and edited by David Sivak and Tyler Van Dyke. Email here with tips, suggestions, calendar items, and anything else. Sign up or read current and back issues at DailyonDefense.com. If signing up doesn’t work, shoot us an email, and we’ll add you to our list. And be sure to follow us on Twitter: @dailyondefense.
Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what’s going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue!
HAPPENING TODAY: Deputy Defense Secretary David Norquist and Air Force Gen. John Hyten, vice chairman of the Joint Chiefs of Staff, brief reporters at the Pentagon on the Defense Department’s COVID-19 efforts. Livestream 11 a.m. at defense.gov.
ALSO TODAY: Army Col. Eric Allely, Maryland National Guard state surgeon, briefs reporters via telephone from the Pentagon on the guard’s statewide COVID-19 efforts. Livestream 1 p.m. at defense.gov.
COVID COUNT: The current number of confirmed cases of COVID-19 among U.S. military members, DOD civilian employees, contractors, and their dependents is 5,575 as of Tuesday, an increase of 88 cases. Of those, 1,483 have recovered, 245 are in the hospital, and the death toll remains at 22.
The majority of the Navy’s coronavirus cases are among the crew of the aircraft carrier USS Theodore Roosevelt, currently docked at Guam. According to the Navy’s latest update, 710 sailors from the ship have tested positive, and 3,872 have tested negative. Of the 710, 42 sailors are exhibiting symptoms, and nine are hospitalized, though none are in intensive care. Of the ship’s 4,865 crew, 4,158 have been moved ashore.
URGING CAUTION ON KIM: With even President Trump unsure of the state of Kim Jong Un’s health, Korea experts are urging a high degree of skepticism about reports suggesting the North Korean dictator is near death after cardiac surgery.
“I can only say this. I wish him well — because if he is in the kind of condition that the reports say, that the news is saying, that’s a very serious condition, as you know,” Trump said, calling the reports, including one from CNN, unconfirmed. “When CNN comes out with a report,” he said, “I don’t place too much credence in it.”
CNN, citing an anonymous U.S. official “with direct knowledge,” reported that U.S. intelligence was monitoring reports that Kim was “in grave danger” after undergoing a previous surgery.
Yesterday morning, national security adviser Robert O’Brien confirmed that the United States is monitoring the reports very closely. “As you know, North Korea’s a very closed society,” O’Brien told Fox and Friends. “There’s not a free press there. They’re parsimonious with the information that they provide about many things, including the health of Kim Jong Un. So we’re monitoring those developments closely.”
WHAT THE EXPERTS SAY: Jessica Lee, a senior research fellow for East Asia at the Quincy Institute, noted that the first reports of Kim’s supposed perilous medical condition came from Daily NK, a South Korean media company that relies on North Korean informants for its stories, which has issued a correction to its original report, clarifying it was based on a single source.
“From time to time, unauthorized stories and rumors about Kim Jong Un’s health abound,” said Lee. “This latest episode highlights a broader challenge of navigating U.S.-DPRK relations in the absence of reliable information. There’s far greater room for miscalculation, misunderstanding, and miscommunication in the absence of direct dialogue. President Trump and Kim Jong Un should resume nuclear talks.”
Over at the Heritage Foundation, Bruce Klingner, a former CIA Korea deputy chief, also urged caution. “We need to wait for more definitive information. While the recent reports of Kim Jong Un’s ill health could be true, over the years, there were a number of false health reports about Kim Jong Un; his father, Kim Jong Il; and his grandfather, Kim Il Sung.”
“Some will speculate that Kim Jong Un’s death could lead to an explosion (lashing out at South Korea) or implosion (regime collapse, internal civil war, and potential loss of control of nuclear weapons),” Klingner says. “But the regime will instead likely have an orderly transition of power.”
Center for the National Interest’s Korea expert Harry Kazianis says he hopes the rumors are not true. “While North Korea might be the roguest of rogue states and has murdered millions of innocent lives, having a stable North Korea is something we should all hope is our current reality. Anything else is too grim to contemplate,” he says.
“If Kim were to die, we could see a situation where a power struggle breaks out for temporary or permanent control resulting in an armed conflict or even a civil war of some sorts,” Kazianis says. “Considering the fact that North Korea is armed to the teeth with every type of weapon of mass destruction known to man — dozens of nuclear weapons, 5,000 tons of chemical weapons like VX and biological weapons — millions of lives could very well hang in the balance.”
ANOTHER REPORT CONFIRMS RUSSIAN INTERFERENCE IN 2016 ELECTION: Without much fanfare, the Republican-controlled Senate Select Committee on Intelligence has released the fourth of five planned reports on the committee’s bipartisan review of the intelligence community’s assessment that Russia conducted a multifaceted campaign to interfere with the U.S. presidential elections in 2016.
The unclassified report, “Review of the Intelligence Community Assessment,” concludes that the U.S. intelligence community presented “a coherent and well-constructed intelligence basis for the case that Russia engaged in an attempt to interfere with the 2016 U.S. presidential election.”
“The [assessment] reflects strong tradecraft, sound analytical reasoning, and proper justification of disagreement in the one analytical line where it occurred,” said Chairman Richard Burr, a North Carolina Republican. “The Committee found no reason to dispute the intelligence community’s conclusions.”
“The [assessment] correctly found the Russians interfered in our 2016 election to hurt Secretary Clinton and help the candidacy of Donald Trump,” said Democratic Vice Chairman Mark Warner of Virginia. “There is certainly no reason to doubt that the Russians’ success in 2016 is leading them to try again in 2020, and we must not be caught unprepared.”
The Rundown
Washington Examiner: ‘Exhaustion’ and ‘attrition’ in military medical response to coronavirus as Defense Department discusses widespread testing
Washington Examiner: Iran saber-rattling in the Persian Gulf despite coronavirus woes
AP: Iran’s Guard says it launched satellite amid US tensions
Washington Examiner: Trump says hospital ship deployed to New York is on its way back to Virginia
Politico: Navy Extends Isolation For USS Theodore Roosevelt Sailors, May Delay Ship Departure
Washington Examiner: ‘Good luck’: Trump wishes Kim Jong Un well amid reports of health scare
Washington Examiner: US has comprehensive plans in place for when Kim Jong Un dies: Report
Yonhap News Agency: U.S. flies spy plane over Korean Peninsula to monitor N. Korea
New York Times: U.S. Warships Enter Disputed Waters of South China Sea as Tensions With China Escalate
Reuters: China Says Vietnam’s Claims In South China Sea Are Illegal, ‘Doomed To Fail’
USNI News: COVID-19 Pandemic Giving China a Firmer Foothold in Europe
Reuters: Russia’s Confirmed Coronavirus Cases Surge Past 52,000
Air Force Magazine: USAF Colonel on Night of Al-Asad Attack: ‘I Didn’t Believe Anyone Would Survive’
USNI News: COVID-19-Related Supply Chain Disruptions Slowing F-35 Production
Breaking Defense: 50 Vendors Vie For Air Force Flying Car
Air Force Magazine: Lockheed May Still Play a Role in Upgrading Raytheon LRSO, Once it’s Operational
Calendar
NOTE: Many events in Washington have been canceled or moved online in the wake of the COVID-19 pandemic, but the Pentagon has been conducting almost-daily pop-up briefings, which are often only announced at the last minute. Check https://www.defense.gov for updates to the Pentagon’s schedule.
WEDNESDAY | APRIL 22
8 a.m. — George Washington University’s Project for Media and National Security “Defense Writers Group” conference call with Air Force Chief of Staff Gen. David Goldfein. https://nationalsecuritymedia.gwu.edu/
10 a.m. — Information Technology and Innovation Foundation’s Center for Data Innovation webinar “How to Deepen Transatlantic Ties In Artificial Intelligence and Cybersecurity,” with Jan Havranek, policy adviser in the NATO Office of the Secretary General’s Policy Planning Unit; Jose-Marie Griffiths, commissioner of the U.S. National Security Council on Artificial Intelligence; Cameron Kerry, visiting fellow in governance studies at the Brookings Institution; Florian Pennings, cybersecurity policy manager for European Union government affairs at Microsoft; and Eline Chivot, senior policy analyst at the ITIF Center for Data Innovation. https://itif.org/events/2020
3:30 p.m. — New America webcast: “COVID and Climate Change in the Pacific.” with former Oceanographer and Navigator of the Navy Rear. Adm. David Titley; former Deputy Assistant Defense Secretary for Stability and Humanitarian Affairs Anne Witkowsky; Erin Hughey, director of disaster services at the Pacific Disaster Center; Joseph Green, acting director of applied science at the Pacific Disaster Center; Francis Gassert, fellow for resource security at New America; and Sharon Burke, director of resource security at New America. https://www.newamerica.org/resource-security/events
4 p.m. — Politico webcast on global action needed to overcome the coronavirus pandemic, with former Secretary of State John Kerry. https://www.politico.com/live-events
4:30 p.m. — Intelligence National Security Alliance “Wednesday Wisdom” webcast with Assistant Secretary of State for Intelligence and Research Ellen McCarthy and Benjamin Brake, director of the State Department’s Office of Cyber Affairs. https://www.insaonline.org/events
THURSDAY | APRIL 23
8:15 a.m. — Armed Forces Communications and Electronics Association Cybersecurity Maturity Model Certification symposium via webcast, with Katie Arrington, chief information security officer in the Office of the Defense Undersecretary for Acquisition and Sustainment; Dwight Deneal, director of the Defense Logistics Agency’s Office of Small Business Programs; Coast Guard Rear Adm. Michael Johnston, assistant commandant for acquisition and chief acquisition officer at the U.S. Coast Guard. https://www.afcea.org/event/CMMCWelcome
11 a.m. — Atlantic Council webcast on a new report, “Moving Out: A Comprehensive Assessment of European Military Mobility,” with Army Europe Commander Gen. Christopher Cavoli and former Supreme Allied Commander Europe retired Gen. Curtis Scaparrotti. https://atlanticcouncil.org/event
1 p.m. — Heritage Foundation webinar: “Nuclear Stability or Russian Advantage: Will Extending New START Serve the U.S.?” with Tim Morrison, senior fellow at the Hudson Institute; Frank Rose, senior fellow for security and strategy at the Brookings Institution; Patty-Jane Geller, policy analyst for nuclear deterrence and missile defense at Heritage; and Michaela Dodge, research scholar at the National Institute for Public Policy. https://www.heritage.org/arms-control/event
2 p.m. — Hoover Institution webcast: “COVID-19: Geopolitical and Geoeconomic Implications,” with former national security adviser retired Lt. Gen. H.R. McMaster, senior fellow at the Hoover Institution. https://www.hoover.org/events/hr-mcmaster
2 p.m. — The Korea Economic Institute of America webinar: “Diplomacy or Readiness? U.S.-South Korea Military Exercises and Denuclearizing North Korea,” with Terence Roehrig, director of the Naval War College Asia-Pacific Studies Group; and Kyle Ferrier, director of academic affairs at KEI. http://www.keia.org/event/diplomacy-or-readiness
3 p.m. — SETA Foundation webinar: “U.S. Global Leadership in the Age of Coronavirus,” with Patrick Cronin, chair for Asia-Pacific security at the Hudson Institute; Charles Kupchan, professor of international affairs at Georgetown University; and Kilic Kanat, research director at SETA. https://tinyurl.com/y8n96kwr
WEDNESDAY | APRIL 29
8 a.m. — Northrop Grumman Corporation webcasts its first quarter 2020 financial results conference call, with Kathy Warden, chairman, chief executive officer, and president; and Dave Keffer, chief financial officer. http://investor.northropgrumman.com
9 a.m. — General Dynamics webcast its first quarter 2020 financial results conference call on www.gd.com
10:30 a.m. — The Boeing Company releases its financial results for the first quarter of 2020 during a conference call, with David Calhoun, president and chief executive officer; and Greg Smith, chief financial officer and executive vice president of enterprise performance and strategy. Webcast at https://services.choruscall.com
QUOTE OF THE DAY
“Look, the president’s always very complementary in his dealings with foreign leaders. If the American people can be on the phone calls that he has with our adversaries and our friends, he’s a real gentleman. He was the same way with President Xi.”
Robert O’Brien, national security adviser, on Fox and Friends, explaining why President Trump did not call out China for lack of transparency over the seriousness of the coronavirus epidemic.
