More on the Street

By Dan Dupont / October 10, 2008 at 5:00 AM

What's the word on Wall Street today?

In the early stages of the meltdown -- just a few days ago -- the thinking seemed to be that defense companies were going to be OK.

But worry has set in, according to today's Wall Street Journal:

As recently as a few weeks ago, the executives were relatively bullish about the long-term prospects for defense spending, regardless of which party wins the White House in November. But as the financial turmoil on Wall Street has spiraled into an international crisis, that optimism is fading.

In a note last week to employees, Boeing Co. Chief Executive Jim McNerney wrote that the world's biggest aerospace company by sales is "well positioned" to weather the financial turbulence because it has a solid credit rating and a big backlog of commercial airplane orders. But addressing how the government's financial-industry bailout might affect Boeing's more than $30-billion-a-year defense business, Mr. McNerney said: "No one really yet knows when or to what extent defense spending could be affected, but it's unrealistic to think there won't be some measure of impact."

Howard Lance, chief executive of Harris Corp., which specializes in defense communications and is expanding into the intelligence market, said in an interview this week that there is a sense in the industry that "everything is going to be subject to reconsideration," particularly big-ticket programs such as fighter jets, tanks and ships.

The story goes on to note that Rep. John Murtha (D-PA), the chairman of the House Appropriations defense subcommittee, "warned that the bailout will only increase the pressure on Pentagon officials to find ways to balance their needs for new programs with paying for ongoing military operations in Iraq and Afghanistan."

"No matter who wins the White House, the next president is going to be forced to decrease defense spending in order to respond to neglected domestic priorities," Mr. Murtha said. "Because of this, the Defense Department is going to have to make tough budget decisions involving trade-offs between personnel, procurement and future weapons spending."

Murtha told us the same thing two weeks ago.