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Lockheed Martin’s Herculean Efforts to Profit From Defense Spending: The Epic Story of the C-130

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The Military-Congressional-Industrial complex at work:

Bipartisanship in Washington is a rare thing these days.  However, no beltway battle in recent memory has been quite as partisan as the one over sequestration and its $85 billionin across-the-board government spending cuts.  Yet, for all the rancor between Democrats and Republicans over that so-called meat ax or poison pill, there has been one point of unity, one response that everyone in Washington can seemingly get behind: hyperbole.

The Department of Defense has, of course, spent more than a decade fighting ruinous wars and hasn’t convincingly won a conflict over a significant foe (sorry, Grenada; sorry, Panama) since World War II.  Yet the mere possibility that it would have to put its civilian employees on 22 days of unpaid leave drove Pentagon chief Leon Panetta to hit the panic button, channel Chicken Little, and declare the sequestration future “the most significant military readiness crisis in more than a decade.”

Not to be outdone, Virginia Republican Congressman Rob Whittman insisted that the budget cuts would put “men and women’s lives… at stake.”  Representing a district heavy in defense contractors, he claimed, according to Business Insider, that, in addition to putting military personnel at risk, the sequester will “cost 200,000 jobs and create a wave of uncertainty for [his] state.” Meanwhile, two Air Force generals announced that the cuts would ripple through the entire defense establishment with dire results. “The impacts to the industrial base grow in magnitude as the reductions cascade down through the network of companies that support each program,” they told members of Congress.

About the only big-time military-industrial player who doesn’t seem worried is the one that seemingly has the most to lose: top defense contractor Lockheed Martin.  Even after sequestration took effect, Lockheed expressed confidence and touted its “broad portfolio of products and technologies, a robust and durable strategy and the industry’s best team.”  The defense giant further boasted that it would “continue to meet our customers’ evolving needs and generate value for our shareholders.”  In fact, just weeks before, Lockheed had all but ignored sequestration worries, offering a corporate forecast that didn’t even bother to take the coming cuts into account.  It projected that the company would meet analysts’ estimates for 2013 by raking in between $44.5 and $46 billion in net sales.  Hardly gloom and doom.

Is Lockheed Martin a military-industrial ostrich with its head in the sand?  Is it the Pollyanna of weapons makers? Or does it have an ace in the hole?  In his latest piece,TomDispatch regular Jeremiah Goulka suggests that Lockheed might not just be sequester-proof, but impervious to almost any effort to even modestly rein it in.  His investigation of one of the most resilient aircraft of modern times raises questions about whether Lockheed is truly interested in meeting its “customers’ evolving needs” or is simply interested in “generat[ing] value” at taxpayer expense. Nick Turse

Lockheed Martin’s Herculean Efforts to Profit From Defense Spending
The Epic Story of the C-130
By Jeremiah Goulka

When I was a kid obsessed with military aircraft, I loved Chicago’s O’Hare airport.  If I was lucky and scored a window seat, I might get to see a line of C-130 Hercules transport planes parked on the tarmac in front of the 928th Airlift Wing’s hangars.  For a precious moment on takeoff or landing, I would have a chance to stare at those giant gray beasts with their snub noses and huge propellers until they passed from sight.

What I didn’t know then was why the Air Force Reserve, as well as the Air National Guard, had squadrons of these big planes eternally parked at O’Hare and many other airports and air stations around the country.  It’s a tale made to order for this time of sequestration that makes a mockery of all the hyperbole about how any spending cuts will “hollow out” our forces and “devastate” our national security.

Consider this a parable to help us see past the alarmist talking points issued by defense contractor lobbyists, the public relations teams they hire, and the think tanks they fund.  It may help us see just how effective defense contractors are in growing their businesses, whatever the mood of the moment.

Meet the Herk

The C-130 Hercules is a mid-sized transport airplane designed to airlift people or cargo around a theater of operations.  It dates back to the Korean War, when the Air Force decided that it needed a next generation (“NextGen”) transport plane.  In 1951, it asked for designs, and Lockheed won the competition. The first C-130s were delivered three years after the war ended.

The C-130 Hercules, or Herk for short, isn’t a sexy plane.  It hasn’t inspired hit Hollywood films, though it has prompted a few photo booksbeer, and a “Robby the C-130” trilogy for children whose military parents are deployed. It has a fat sausage fuselage, that snub nose, overhead wings with two propellers each, and a big back gate that comes down to load and unload up to 21 tons of cargo.

The Herk can land on short runways, even ones made of dirt or grass; it can airdrop parachutists or cargo; it can carry four drones under its wings; it can refuel aircraft; it can fight forest fires; it can morph into a frightening gunship.  It’s big and strong and can do at least 12 types of labor — hence, Hercules.

Too Much of a Good Thing

Here’s where the story starts to get interesting.  After 25 years, the Pentagon decided that it was well stocked with C-130s, so President Jimmy Carter’s administration stopped asking Congress for more of them.

Lockheed was in trouble.  A few years earlier, the Air Force had started looking into replacing the Hercules with a new medium-sized transport plane that could handle really short runways, and Lockheed wasn’t selected as one of the finalists.  Facing bankruptcy due to cost overruns and cancellations of programs, the company squeezed Uncle Sam for a bailout of around $1 billion in loan guarantees and other relief (which was unusual back then, as William Hartung points out his magisterial Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex).

Then a scandal exploded when it was revealed that Lockheed had proceeded to spend some $22 million of those funds in bribes to foreign officials to persuade them to buy its aircraft.  This helped prompt Congress to pass the Foreign Corrupt Practices Act.

So what did Lockheed do about the fate of the C-130?  It bypassed the Pentagon and went straight to Congress.  Using a procedure known as a congressional “add-on” — that is, an earmark — Lockheed was able to sell the military another fleet of C-130s that it didn’t want. . .

Continue reading.

Written by LeisureGuy

11 March 2013 at 10:23 am

Posted in Business, Congress, Military

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