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[Music]
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It's a global business uh focusing on
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defense products almost exclusively
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um
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managed about uh $6 billion
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12,000 people
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uh covering products from sizes as small
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as 15 kg over eight tons
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uh products that uh address uh missile
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defense, airto-air combat, air to
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ground, surfacetoair with all the
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services, army, navy, air force, coast
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guard, and homeland security for
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countries and allies around the world.
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Uh I think everyone's aware there are
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two elements. One is that Secretary
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Gates and certainly the support of the
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administration is focusing DoD
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investments in a priority in the war we
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fight today as opposed to a future
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potential conflict a global kind of
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conflict. Uh that's a major uh driver.
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The other of course is the missile
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defense and the new administration when
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they came into office uh shifted gears
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not just about Europe but really what is
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the investment and therefore the kind of
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technology uh this is a major effect on
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our business
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in the like 10 20%. Uh fortunately it's
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been a positive effect in a policy
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sense. one does have to wait and see
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what the administration actually
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resources to turn it into business. Uh
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by positive, if one looks at it, they
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shifted uh to a naval variant of missile
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defense as far as future growth and
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protecting Europe and landbasing it. Uh
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that product, the missile, the
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interceptor and the kill vehicle is all
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technology developed and built and uh
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continuing to develop and matter of fact
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even with some of our allies such as
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Japan. So um on the other hand we lost
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business. I was taken away in the
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product called kinetic energy
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interceptor KI uh somewhat in multiple
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kill vehicles another development
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program. And then going back to the more
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traditional uh components of our
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business. There was a program called uh
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uh multi- uh range munition which is a
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guided 120 artillery shell. That program
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was also cancelled. So, a win and a
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loss.
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Well, I'd really say uh uh in our
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business, two years is pretty much
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already um poured in concrete with the
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exception as I mentioned this spring
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when the administration came in should
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there be a decision to cancel a
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particular program. So, the first
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challenge is the one we focused on and
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the corporation has is just the
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performance of your business. Are you
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delivering a product early? Is it
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meeting uh or exceeding all the
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requirements and is it within budget? If
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you obtain those uh elements then the
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chance of your business being cancelled
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by the government is greatly reduced not
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removed. Should you fail to accomplish
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those then it's issued. So that goes on
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um in a daily and certainly could
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affects the two years. At the longer uh
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range as I just mentioned will the uh
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department of defense actually um
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uh resource their investment strategy in
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this missile defense area and that will
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just begin to take place in 11 and 12
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and so we don't really know the results
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and then that would flow into our
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business a couple years later. Finally,
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world events of course uh does Iran
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continue its march toward nuclear
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capability?
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Um does North Korea uh continue uh
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because that affects the regions around
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them and you already see that as they
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begin build up and then what is the US
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policy with regard to that? Do they
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invest in more defense? Does the western
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world get together and find a way to get
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Iran to back off? those in the next five
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years those will be the biggest drivers.
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All of the uh businesses uh are
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threatened by cyber warfare. First and
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foremost is just the security of your IT
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systems which in our business include
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systems that control the manufacturing
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quality testing of products as well as
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your information security. So from that
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perspective
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um
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obviously a lot of our business is
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highly classified uh some of it's
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exported so securing information that
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may be in those products is extremely
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important and since it's a evolving
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world uh that as well the corporation as
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you may or may not know in Rathon has is
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probably an industry leader they started
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down this path several years ago and
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have actually bought commercial
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companies to bring them in to to gain
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that expertise not only in information
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operations but information assurance
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the problem is how do you know you're
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ahead because you know uh it's still
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evolving you read about things today
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that whether it's Google and China and
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Iran that a few years ago would have
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been a little bit hard to imagine but I
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think it's uh by working both sides
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understanding how uh you could and would
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be attacked or taken advantage any job
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commercially or actually as a form of uh
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warfare. And then uh simulating those,
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doing the testing, building the ranges,
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and then uh at the same time developing
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the techniques to one make sure you're
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aware if anyone is intruding in any way
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and that your product's going to
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continue to perform.
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We are a uh global business and I use uh
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what I think are pretty standard uh uh
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academia definitions of global. Do we
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sell around the world? Yes. Do we build
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at least components for our products in
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various places in the world and use them
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throughout our delivery process? Yes. I
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mean obviously that's again governed by
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a lot of export uh regulations as it
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should. Do we partner in uh countries?
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And because uh for us, if a country is
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going to spend a half a billion or a
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billion dollars, not just buying our
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product, but the logistics, the
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training, their their people in one
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thing or another, it's a very serious
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investment. Uh there's always been this
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um in the international offsets, but you
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need to partner with industry. It's very
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important to them that they have some
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depot capability to maintain it. uh
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obviously they like to have an
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industrial base that includes
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engineering and production. Uh to the
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extent they want to pay the additional
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cost of that then that becomes really
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the determining factor and in effect you
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build a constituency. So better to give
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uh 30 40 or 50% of the business up and
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then retain uh the market because our
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business is very long-term takes about a
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decade to get a product the thought
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requirement developed produced in let's
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say the US inventory in an international
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uh market and you should be able to
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improve that product and keep it there
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for 30 or 40 years.
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Well, it's pretty broad so let me
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explain this. We're in over we have over
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50 countries that are customers. But in
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our business, they may buy some product
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one year and not buy a similar product
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for another five or eight years. Okay,
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that's one item. But uh we have uh
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industrial relationships in South Korea,
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uh in Japan, we have landed companies in
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Australia, in the UK, and various places
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in Europe. uh all the European countries
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we do business with, there's some kind
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of industrial participation. Uh again
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through offset programs uh as we move
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farther out into what used to be Eastern
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Europe, those things are beginning to
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develop. But again, it's very much a
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cost value trade because obviously
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there's a lot of expense and capital to
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build facilities and test equipment and
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stuff.
