State-scale outbreaks threaten defence industrial base

Despite the relative success the Department of Defense has had in supporting the defense industrial base in the US, this support will arguably be required for the near and medium term. Ellen Lord indicated that Covid-19 has precipitated a three-month slowdown to all programmes. Harry Boneham, Associate Analyst at GlobalData comments that, ‘whilst the US economy is beginning to reopen, including the defense industrial base, there is a lasting impact which persists. This impact is compounded by the prospect of a potential second wave of Covid-19, threatening further slowdown.’

As the Covid-19 pandemic develops in the US, states are experiencing outbreaks of varying severity, and this may have repercussions for defence contractors. Whilst the overall number of new cases in the US has plateaued since early April 2020, individual states are experiencing outbreaks. For example, Florida recorded 5,511 new cases on the 23rd June according to the Florida Department of Health. This is in comparison to approximately 1200 new cases recorded of the 9th June, and approximately 2400 recorded on the 16th June. Whilst there is no indication that there will be a reversal to the lifting of restrictions in the state, the rise in cases may have implications for defense companies in the state such as General Dynamics Mission Systems, L3Harris Advanced Laser Systems Technology, and Lockheed Martin Missiles and Fire Control.

Systems such as the F-35 Lightning II Electro-Optical Targeting System (EOTS), produced by Lockheed Martin Missiles and Fire Control at its Ocala Operations facility in Florida may be vulnerable to delays as Covid-19 spreads within the state. This may have an effect on supply chains, as production rates fall. Lockheed Martin has previously announced a slowdown of F-35 production, citing Covid-19 disruption during the initial outbreak. However, further delays may be incurred as outbreaks emerge, such as in Florida.