The Restructuring of America’s Aerospace and Defense Industry and how the ripple down consequences will impact the Embedded Industry
The Aerospace and Defense Industries of the United States are poised to undergo one of the most significant changes since the end of the Cold War; perhaps the most significant since World War II. We believe that observers (embedded vendors included) who expect small changes are mistaken, will fostering a false and dangerous sense of security across much of the industry and government.
The impact to our economy goes far beyond our current financial problems and involves fundamental structural changes taking place in the industry and in the market. As in prior shifts of this nature, there will be winners and losers – however these shifts may be profound, creating more dramatic winners and losers than in the last cycle.
The impact of major primes shifting financial challenges to their vendors (and by association to embedded sub-vendors) will reach down into the value chain, in some cases devastating naïve second and third tier vendors.
That the DoD will experience an 18% to 40% reduction in discretionary funding is a certainty. Such luminaries as Ken Krieg, former Deputy Secretary for Defense Acquisition, and Booze & Company have affirmed this to be the case.
Steve Roemerman, CEO of Lone Star Aerospace, has written a definitive paper “Restructuring America’s Aerospace and Defense Industry; How will it happen and what will it mean to Lower Tiers and Supporting Embedded Industries”. Steve, a former TI and Raytheon Senior VP, is a recognized strategy advisor to government and industry organizations, and is currently a senior advisor to the Navy, Marines, Air Force and NASA. EMF frequently partners with Lone Star Aerospace who uses the EMF Dashboard to develop embedded technology ROIs
Roemerman, whose forecasts parallel Krieg and Booze, details the consequences and offers twelve specific suggestions for the lower tier and their suppliers. According to the Congressional Budget Office, the share of the US gross domestic product (GDP) allocated to defense spending declined from 5.6% in the 80’s to 3.8% in the 90’s and 3.1% in the new millennium.