The Pentagon on Wednesday awarded Lockheed Martin a seven year undefinitized contract worth up to $35 billion to quadruple production of Terminal High Altitude Area Defense, or Thaad interceptors, part of a push to replenish missile defence stockpiles and boost output.
The award stems from a framework agreement the defence manufacturer reached with the Pentagon in January to significantly increase production over a multi-year period.
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The Donald Trump administration pushing to expand weapons production after military operations in Iran and other conflicts drew down US stockpiles. The country has supplied large quantities of weapons to allies while also using munitions in its own military operations, raising concerns about inventories of key air-defense and precision-guided weapons and increasing pressure on contractors to boost output.
The White House goal of increasing munitions production “is important because we have to replenish our stockpiles and make sure we are totally ready for whatever might emerge,” NATO Secretary General Mark Rutte told reporters Wednesday afternoon after meeting with Trump at the White House, Bloomberg mentioned in a report.
The NATO chief added that Trump had also met with executives of defense contractors at the White House on Wednesday.
Trump, along with Defense Secretary Pete Hegseth, met chief executives of major defense firms earlier in March that focused on ramping up weapons production. The meeting included CEOs and other officials from BAE Systems, Lockheed Martin, Northrop Grumman, RTX Corp, Boeing, Honeywell Aerospace and L3Harris Technologies.
Reuters reported that separate multiyear deals have been signed with RTX to boost production of Tomahawk cruise missiles and AMRAAM air-to-air missiles. The deals, announced as "framework agreements," have yet to be converted into contracts.
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Five defense industry executives, speaking to Reuters on condition of anonymity, welcomed the agreements, but said Congress must first appropriate funding before companies can invest more heavily in components and production capacity. Investing before receiving government payments under the agreements would weigh on free cash flow and could hurt second-half earnings, they added.
GM Defense, the automaker's defense business unit, and Lockheed earlier said that the US Department of Defense helped facilitate a partnership between the two companies because of growing demand for additional production capacity.
Earlier this month, the Senate Armed Services Committee approved its version of the National Defense Authorization Act, backing total defense spending of $1.15 trillion and providing multi-year procurement authority for several munitions and weapons.
(With inputs from Reuters and Bloomberg)
