The Insider

By Nickolai Sukharev
August 8, 2024 at 12:18 PM

(Editor’s note: Rheinmetall reported their quarterly financial information in Euros. This story uses the conversion rate to the U.S. dollar as of Aug. 8, 2024.)

Rheinmetall reported a 33% sales increase for the first half of 2024, a $1.04 billion increase from the same period last year, company executives reported during a quarterly earnings presentation today.

“The supercycle is clearly accelerating,” Armin Papperger, the company’s CEO, said in a release accompanying the call. “Positive margin effects are significantly increasing our profitability.”

The company reported $4.1 billion for the first six months of 2024, up from $3.8 billion during the same period in 2023, with 76% of their sales coming from outside Germany.

Resulting from the sales increase, the company reported a 62% backlog increase and Papperger added that he expects more contracts from military clients.

Ammunition production experienced $20.7 billion backlog amid increased orders from Germany and Ukraine.

Papperger added that future contracts for the company’s wheeled platforms, based on the Boxer armored personnel carrier, could be potentially worth $60.3 billion in the next 10 years.

“We see a real growing demand for wheeled vehicles,” Papperger said during the call. “There is [the United Kingdom, Germany and the Netherlands along with] a lot of other nations who are looking for different variants.”

Last month, the company announced a joint venture with Leonardo DRS, that would transfer production of the Panther tank, a variant of the Leopard 2, and the Lynx, an infantry fighting vehicle, to Italy.

Papperger labeled the venture “an important decision” potentially worth up to $21.8 billion.

He noted the company is seeing demand for the Skyranger, an air defense system, fitted to older Leopard 1 tank hulls, which were originally produced during the Cold War.

Currently, the company intends to submit the RCH-155, a 155mm howitzer turret fitted to a Boxer wheelbase, for the U.S. Army’s howitzer performance demonstrations, which succeed the now-cancelled Extended Range Cannon Artillery program.

The company expects additional contracts for the Global Mobile Artillery Rocket System and short-range air defense systems.

Since Rheinmetall will be the only producer of F-35 Joint Strike Fighter fuselages outside the United States, Papperger noted that the company will see additional demand as more countries place orders for the aircraft.

Rheinmetall is currently competing for the XM30, a replacement for the Army’s Bradley fighting vehicle, and the Common Tactical Truck, a replacement from program for the Army’s heavy tactical trucks.

By John Liang
August 7, 2024 at 2:24 PM

This Wednesday INSIDER Daily Digest has news on the Air Force integrating systems across the enterprise, plus Boeing's Next Generation Automatic Test System and much more.

We have one more deep-dive story from last week's Life Cycle Industry Days conference:

Air Force 'not just talking about' integrating systems across enterprise

DAYTON, OH -- The Air Force will be making fundamental changes to its capability development strategy to prioritize integration so all of the service's systems can work together, a key part of the Air Force modernization plan for a potential conflict with China.

The Next Generation Automatic Test System is a "mobile diagnostic tool" that offers "fault detection and isolation of electronic line-replaceable units (LRU) in the field":

Boeing developing Next Generation Automatic Test System for Apache

Boeing is developing a version of its Next Generation Automatic Test System (NGATS) for the Army's Apache helicopter, according to the company.

The Pentagon's No. 2 civilian official spoke this week at the National Defense Industrial Association's annual emerging technology conference, where she first publicly launched the Replicator program last year:

Hicks says Replicator signals 'golden age' if Congress gets on board

Deputy Defense Secretary Kathleen Hicks said the fledgling Replicator program represents a breakthrough in Pentagon acquisition that could herald a "golden age" of defense innovation and production if Congress is willing to extend greater trust.

A carrier strike group exercise will take place at the end of 2025 involving the United States and foreign allies:

Upcoming GIDE exercise to connect U.S. force with foreign allies

The next Global Information Dominance Experimentation series is going to culminate in a "worldwide joint activity" next year, according to a top official at the Chief Digital and Artificial Intelligence Office.

Senate appropriators have taken issue with many of the Planning, Programing, Budgeting and Execution Reform Commission's recommendations:

Senate appropriators withhold support from budget reform commission's key recommendations

The Senate Appropriations Committee is clear in its version of the fiscal year 2025 defense spending bill that it does not support the kind of broad overhaul recommended by a key reform commission to update the Pentagon's sprawling, 1960s-era budgeting system.

The Air Force is targeting an "aggressive fielding" schedule to counter small unmanned aerial systems:

Air Force wants to purchase upgraded C-sUAS on an 'aggressive fielding' schedule

The Air Force is setting its sights on modernized counter small unmanned aircraft systems fitted with modular machine learning algorithms, the latest command and control technology and more capable sensors and effectors, according to a recent request for information.

Senate appropriators want to cut $67 million from the Multi-Domain Artillery Cannon System and $165 million from the Hypervelocity Gun Weapon System programs:

Senate appropriators scrutinize Army's new-start Multi-Domain Artillery Cannon System

The Senate Appropriations Committee does not believe the Army's new Multi-Domain Artillery Cannon System effort should be funded in fiscal year 2025, pointing to what lawmakers believe is a flawed acquisition strategy for that program and the Strategic Capabilities Office's Hypervelocity Gun Weapon System -- a similar program with overlapping capabilities.

By John Liang
August 6, 2024 at 1:28 PM

This Tuesday INSIDER Daily Digest has news on lawmakers' increasing interest in deploying PAC-3 interceptors on Navy warships plus the possibility of bulking up the Air Force's aircraft fleet and more.

Three out of four congressional defense committees have signaled support in their respective fiscal year 2025 bills for a project Lockheed Martin has largely self-funded to integrate the Patriot Missile System Enhancement (MSE) with a vertical launch system used widely across the Navy’s surface fleet:

Three committees signal enthusiasm, including potentially $75M, for PAC-3 integration on ships

Congress is signaling interest in an industry-funded technology project that promises the ability to arm warships with Army guided-missile interceptors, as well as the potential for land-based versions of Aegis launchers to fire the most advanced version of the Patriot missile for its integrated air and missile defense and sea control missions.

Across the services, lawmakers would tack on $300.6 billion to support the sustainment of operations, weapons, training and other activities, an effort to strengthen military readiness, address inflation and promote innovation, among other areas:

Senate defense spending bill would make 500 more aircraft available in FY-25

The Senate Appropriations Committee wants to bulk up the Air Force's fleet by giving the service an additional $3.4 billion to make about 500 more aircraft available as lawmakers and the Pentagon weigh priorities to deter Russia and China, according to a report accompanying Senate appropriators' version of next year's defense spending bill.

The U.S. defense industrial base has had to adjust to the Pentagon's new munitions production requirements following a major increase in U.S. military aid to Ukraine following the ongoing Russian invasion, something that has caught the eye of congressional appropriators:

Lawmakers seek munitions 'surge capacity' requirements -- and costs -- from DOD

The Senate Appropriations Committee wants the Pentagon to provide Congress with future "surge capacity" costs for critical munitions as well as estimate how much industry cost-sharing or co-investment can be expected to support potential increases in production.

Senate appropriators are asserting DARPA has "routinely under-budgeted for indirect costs and anticipated program initiation cost":

DARPA under fire from Senate appropriators over alleged financial misrepresentation

Senate appropriators are calling for a quarterly audit of the Defense Advanced Research Projects Agency for its attempts at flexible budgeting, which lawmakers allege the agency has undertaken without congressional approval.

Senate appropriators want wants Congress' top auditor to look into whether the Defense Department skirted the law regarding rejiggering the Homeland Defense Radar-Hawaii for use on Guam:

Congress directs inquiry into whether DOD broke law by moving Hawaii radar to Guam

Congress is directing an investigation into whether the Pentagon broke the law by repurposing the Homeland Defense Radar-Hawaii for use on Guam, the latest twist in an ongoing battle of wills -- and funding -- between the executive and legislative branches over the sensor project.

By Dan Schere
August 6, 2024 at 8:00 AM

Booz Allen Hamilton has been awarded a $506 million contract that will support the Army's Future Vertical Lift Cross Functional Team and Program Executive Office for Aviation "to enhance military capabilities through innovative technology solutions," the company announced today.

Under the five-year contract, Booz Allen will “champion” a modular open systems approach (MOSA) strategy that drives the “development, integration and fielding of critical technologies to empower the nation’s warfighters,” the company stated in the announcement.

Booz Allen was awarded the contract under the Defense Department’s Defense Technical Information Center (DTIC), as a multiple award contract task order. The Army awarded the task order in collaboration with the Air Force’s 774th Enterprise Squadron to “develop and create new knowledge for the enhancement of the DTIC” repository, according to the company.

The effort will involve enhancing the quality of current Army weapon systems and evaluating new technologies that could be used across a range of programs, according to Booz Allen. It includes support for experimentation events such as the service’s Project Convergence and Experimental Demonstration Gateway Events (EDGE).

Under the contract, the Army and Booz Allen will “develop and integrate” critical combat systems that support the service’s aviation modernization initiatives in future multidomain operations.

Supporting the effort will be a group of 20 businesses and universities that Booz Allen has assembled, the company said today. Booz Allen’s role will be to provide expertise in digital engineering, analytics, cyber, exercise planning and software development.

Brian Orr, vice president at Booz Allen who leads the company’s Army aviation portfolio, said in a statement that the contract will help “close the gap between science and technology discovery and experimentation, and rapid deployment of critical technology to the battlefield.”

By Vanessa Montalbano
August 5, 2024 at 1:58 PM

Boeing on Friday delivered the first production MH-139 Grey Wolf helicopter to the Air Force, months after the program's per-unit costs grew enough to breach Nunn-McCurdy law, according to a company news release issued today.

“This aircraft will directly support ongoing U.S. Air Force modernization efforts,” Akeem Khan, Boeing’s MH-139 executive director and program manager, said in a statement. “Delivering this asset for the MH-139A fleet is critical to the future of national security as the Grey Wolf will play a crucial role in the U.S. nuclear triad for decades to come.”

The helo, which was delivered to Malmstrom Air Force Base, MT, is one of 13 aircraft in the 2023 low-rate initial production contract with the Air Force. The service in fiscal year 2024 awarded Boeing a $178 million contract to produce and sustain another seven MH-139s -- on top of six which are already being used for testing -- bringing the total number of aircraft Boeing is currently on the hook to deliver to 26.

The April Nunn-McCurdy breach is due to a planned reduction in the number of helicopters the service plans to buy, an Air Force spokesperson previously told Inside Defense. The FY-25 budget request only calls for a total of 42 aircraft by the end of the program in 2029 -- about half the 80 helos the service originally anticipated purchasing.

When the Air Force released its budget request in March, officials said they decided to shrink the number of aircraft in the program to stay within financial limits imposed by the 2023 Fiscal Responsibility Act. Still, the service is asking for $333.5 million to buy eight helicopters in FY-25 as part of LRIP, and two per year after that through 2029.

The Grey Wolf will primarily be used to patrol U.S. Global Strike Command nuclear silos, replacing the Vietnam War-era UH-1N Huey. Other operations may include shuttling high-ranking officials around the National Capital Region and providing the joint force some tactical airlift capabilities.

By John Liang
August 5, 2024 at 1:34 PM

This Monday INSIDER Daily Digest has continuing coverage of the Senate Appropriations Committee's fiscal year 2025 defense spending bill, plus the Army's Future Long Range Assault Aircraft program reaching a new milestone and more.

The U.S. defense industrial base has had to adjust to the Pentagon's new munitions production requirements following a major increase in U.S. military aid to Ukraine following the ongoing Russian invasion, something that has caught the eye of congressional appropriators:

Lawmakers seek munitions 'surge capacity' requirements -- and costs -- from DOD

The Senate Appropriations Committee wants the Pentagon to provide Congress with future "surge capacity" costs for critical munitions as well as estimate how much industry cost-sharing or co-investment can be expected to support potential increases in production.

It has come to Senate appropriators' attention that DARPA has "routinely under-budgeted for indirect costs and anticipated program initiation cost":

DARPA under fire from Senate appropriators over alleged financial misrepresentation

Senate appropriators are calling for a quarterly audit of the Defense Advanced Research Projects Agency for its attempts at flexible budgeting, which lawmakers allege the agency has undertaken without congressional approval.

The Senate Appropriations Committee wants Congress' top auditor to investigate and provide a written finding as to whether the Defense Department skirted the law regarding rejiggering the Homeland Defense Radar-Hawaii for use on Guam:

Congress directs inquiry into whether DOD broke law by moving Hawaii radar to Guam

Congress is directing an investigation into whether the Pentagon broke the law by repurposing the Homeland Defense Radar-Hawaii for use on Guam, the latest twist in an ongoing battle of wills -- and funding -- between the executive and legislative branches over the sensor project.

Senate appropriators want to add $14 million to the Defense Innovation Unit:

Defense spending bill adds fund for DIU OnRamp hub expansion

Senate appropriators want to add money to the Defense Innovation Unit's fiscal year 2025 budget request, pushing DIU to sustain its engagements with "non-traditional" contractors, according to a report accompanying the upper chamber's version of the defense spending bill.

The Air Force has released a report into an investigation of a fatal CV-22 Osprey crash:

Gearbox failure caused fatal CV-22 crash, Air Force investigation finds

A CV-22 Osprey crash last year off the coast of Japan is linked to a severe failure of one of the aircraft's gearboxes as the crew was preparing for an emergency landing, killing the eight airmen on board, according to an Air Force investigation released Aug. 1.

The eventual replacement aircraft for the Black Hawk helicopter went through a successful preliminary design review in April, according to a service announcement:

Army's FLRAA moves to milestone B

The Army's Future Long Range Assault Aircraft program has been approved for entering the engineering and manufacturing development stage, or milestone B, according to the service.

While the Navy completed its first land-based demonstration of the Transportable Re-Arming Mechanism (TRAM) last month, the service has yet to set a date, pick a location or select the ships that will participate in an at-sea test:

SECNAV requesting $80 million for TRAM development, though planned at-sea demonstration has yet to occur

Navy Secretary Carlos Del Toro is asking for an $80 million "congressional add" to fund a developing at-sea re-arming capability, though the system has yet to complete an at-sea demonstration scheduled for this summer, a Navy spokesperson told Inside Defense.

By Nick Wilson
August 5, 2024 at 1:03 PM

The Marine Corps is interested in procuring a commercially available, ground-based, long-range cruise missile system to fill operational capability gaps, according to a recent request for information.

The Marine Corps and its Marine Air Ground Task Force may need a new long-range fires capability to meet current and future operational demands, including supporting sea control and countering seaborne fast-attack vessels, the July 31 notice states.

“Accordingly, the Marine Corps is interested in readily available ground-based, long-range cruise missile systems that can attack land and maritime targets designed to provide precision kinetic fires employing the Tomahawk Land Attack Missile (TLAM) and using its Tactical Tomahawk Weapons Control System (TTWCS) for fire control,” the notice states.

The service prefers systems that can be integrated into its remotely operated ground unmanned expeditionary (ROGUE) vehicle, the notice continues, and systems that can load Tomahawk missiles without non-organic support and operate alongside other weapon and surveillance systems currently in use.

“A complete system would be composed of fire and weapons control, kinetic launch, and reload and resupply system,” the RFI adds.

The notice asks respondents to provide information on their system’s range, size, weight, launch platform requirements and procurement and sustainment costs. Responses to the RFI are requested by Aug. 12.

By Tony Bertuca
August 5, 2024 at 5:00 AM

Senior defense officials are scheduled to speak at several events this week.

Tuesday

DefenseOne hosts its DOD Cloud Workshop.

The annual Space and Missile Defense Symposium is held in Huntsville, AL. The event runs through Thursday.

Wednesday

The National Defense Industrial Association hosts its annual Emerging Technologies for Defense Conference. The event runs through Friday.

The Center for Strategic and International Studies hosts a discussion on "preserving the free flow of commerce in the Red Sea and beyond."

Thursday

The Center for a New American Security hosts a discussion on the potential for managing a protracted conflict with China.

By John Liang
August 2, 2024 at 2:42 PM

Aside from the Air Force's B-52 radar modernization program nearing a major cost growth breach, the bulk of this Friday INSIDER Daily Digest deals with the Senate Appropriations Committee's fiscal year 2025 defense spending bill.

The estimated cost for the B-52 Radar Modernization Program jumped from $2.3 billion in 2021 to about $3.3 billion in March, B-52 Deputy Senior Materiel Leader Brian Knight told reporters at the Life Cycle Industry Days conference, toeing the line of acceptable cost growth without yet requiring a notification to Congress for additional oversight:

B-52 radar modernization nears Nunn-McCurdy cost growth breach

DAYTON, OH -- The two programs designed to keep the B-52 Stratofortress bomber flying for the next few decades are facing serious headwinds, including new prices for the Radar Modernization Program nearing the Nunn-McCurdy Act cost growth thresholds, officials said this week.

The rest of our coverage looks at the Senate's FY-25 defense spending bill:

Senate appropriators would give NGAP another $280 million as Air Force calls it a priority program

The Senate Appropriations Committee approved a defense spending bill that would inject the Air Force's Next Generation Adaptive Propulsion efforts with $280 million above the service's fiscal year 2025 request, according to legislative documents.

Senate appropriations bill excludes second Virginia sub but funds shipset

The Senate Appropriations Committee's draft defense spending bill would increase shipbuilding spending by $3.4 billion but fund only one Virginia-class submarine in fiscal year 2025, teeing up a showdown between appropriators and authorizers over the future of the Virginia program.

Lawmakers look to redirect RDER toward second Replicator tranche

Senate appropriators say they want to slow the growth of the Pentagon's Rapid Defense Experimentation Reserve in favor of the Replicator program which aims to field thousands of attritable, autonomous drones by August 2025 to counter China.

Senate appropriators slash MQ-25 procurement, allotting funding solely for industrial base

Senate appropriators are proposing a major cut to the Navy's MQ-25 Stingray uncrewed aircraft program, slashing over $450 million from the service's fiscal year 2025 budget request.

Senate appropriators adding flexibility for counter UAS spending

The Senate Appropriations Committee, in its fiscal year 2025 defense spending bill, wants to give the Army more flexibility for funding counter unmanned aerial systems and is urging the service to eliminate bureaucratic red tape.

By John Liang
August 1, 2024 at 4:55 PM

General Dynamics announced today that Mark Rayha has been promoted to be the next president of Electric Boat.

Rayha, who currently serves as Electric Boat's senior vice president and chief operating officer, succeeds Kevin Graney, who announced he will retire at the end of the year.

Rayha joined GD's Land Systems business unit in 1989. He became chief financial officer of General Dynamics Mission Systems in 2015, joined Electric Boat in 2020 and served as CFO from 2021 to 2023. He became chief operating officer in 2023.

By John Liang
August 1, 2024 at 2:22 PM

This Thursday INSIDER Daily Digest has news on the Senate's version of the FY-25 defense spending bill, plus industry news from HII, Boeing and more.

The Senate Appropriations Committee today released its version of the report accompanying the fiscal year 2025 defense spending bill:

Senate appropriators advance bill to increase defense budget above spending cap

Senate appropriators are highlighting some of the key investments in their fiscal year 2025 defense spending bill, which would increase the Defense Department's budget by 3.3%, or more than $27 billion above what Congress enacted in FY-24.

Document: Senate appropriators' FY-25 defense spending bill report

HII executives discussed their company's quarterly earnings this morning:

HII claims record second-quarter revenues, SSN-798's delivery timeline shifts

Shipbuilder HII experienced record second-quarter revenues of $3 billion -- up 6.8% compared to last year’s second quarter -- and a recent boost in hiring to keep the company on track to achieve its goal of 6,000 new hires by the end of the year, according to CEO Chris Kastner on today’s earnings call.

Boeing's KC-47 tanker program continues to suffer setbacks:

Boeing's KC-46A records new Category 1 deficiency, $391 million loss in second quarter

DAYTON, OH -- The embattled KC-46A Pegasus tanker is now dealing with seven issues that could result in significant damage to the air vehicle or death of an operator, Kevin Stamey, the Air Force's program executive officer for mobility and training aircraft, told reporters Tuesday.

The new Guam Defense System Joint Program Office doesn't have the funds needed to hire personnel and pay for software development associated with integrating elements of the system:

Fledgling JPO Guam Defense System is 'coalition of the willing,' eight-person shop

The new Joint Program Office in support of the Guam Defense System is hamstrung by a lack of funding, relying on a "coalition of the willing" and eight staff members to execute one of the U.S. military's most pressing engineering and software challenges while waiting for lawmakers to approve funding to hire staff and tackle the project in earnest.

The Air Force's top civilian spoke this week at the Life Cycle Industry Days conference:

Kendall: The next Air Force tanker could be part of an FY-25 quick-start

DAYTON, OH -- The Air Force's next-generation refueling fleet may come down the line sooner than previously expected, and with greater capability, after a potential injection from the service's quick-start authority in fiscal year 2025, according to service Secretary Frank Kendall.

By Theresa Maher
August 1, 2024 at 11:02 AM

The Defense Science Board will hold closed meetings throughout the last week of August to discuss the findings of a new study focused on advanced military technologies, according to a Federal Register notice.

The meetings will focus on a classified summer study on “advanced capabilities for potential future conflict,” which Pentagon technology chief Heidi Shyu commissioned the board to conduct in December.

The board is scheduled to hear from David Honey, the deputy defense under secretary for research and engineering who will provide remarks on the summer study’s objectives.

Additionally, the board will discuss strategies that support the Defense Department’s “continued development of symmetric and asymmetric capabilities that will characterize future conflicts.”

Prior DSB meetings about the 2024 Summer Study on Advanced Capabilities for Potential Future Conflict have been closed, despite the fact that the board operates under a statute designed to promote open and transparent proceedings.

By Nickolai Sukharev
August 1, 2024 at 10:43 AM

BAE Systems will build additional self-propelled howitzers for the Army after receiving a $274.4 million contract, the Defense Department announced Wednesday.

The Pennsylvania-based company will produce the M109A7 Paladin self-propelled howitzers and M992A3 ammunition carrier vehicles by an estimated completion date of Jul. 31, 2026, with work being completed in York, PA, according to the July 31 announcement.

“Fiscal [year] 2023 procurement of weapons and tracked combat vehicles, Army funds in the amount of $274,426,742 were obligated at the time of the award,” the announcement adds.

Each Paladin is paired with the M992A3 Carrier Ammunition Tracked vehicle, which stores and transports the artillery rounds.

Wednesday’s announcement follows a $579 million July 3 contract in which BAE would produce the M109A7 and M992A3 at their facilities in York, PA; Sterling Heights, MI; Aiken, SC; Elgin, OK; and Anniston, AL.

For FY-25, the Army plans to procure 20 Paladin systems for $417 million and 155 systems for $2.7 billion by FY-29, according to service budget documents.

The Army initially intended to replace a portion of the Paladins with the Extended-Range Cannon Artillery (ERCA) howitzer a modified M109 with a longer gun tube but cancelled the program in March after prototyping revealed technical issues.

Following the ERCA cancellation, the Army opted to use the remaining funds to assess existing howitzers and plans to hold capability demonstrations with industry manufacturers beginning in August 2024 at the Yuma Proving Ground in Yuma, AZ.

During a May 2 round table with reporters, Army acquisition chief Doug Bush said “around eight or nine” contractors are “interested in some form or fashion” in participating in the capability demonstrations.

By Dan Schere
August 1, 2024 at 10:39 AM

Army Special Operations Aviation Command has awarded Boeing a $115 million contract to produce two additional MH-47G Block II Chinook aircraft and begin advance procurement on future helicopters, the company announced today.

The contract, awarded in June, is being funded with fiscal year 2024 Army procurement dollars and the majority of the work is expected to be completed by July 2027, according to a Pentagon contract notice.

The MH-47G Block II features a reinforced airframe, as well as redesigned fuel tanks and “state-of-the-art avionics.” With the new order, the Army has contracted for 46 of the aircraft, according to Boeing.

By Jason Sherman
July 31, 2024 at 5:45 PM

The U.S. government awarded a $2 billion contract to Raytheon today on behalf of Poland for the Lower Tier Air and Missile Defense Sensor, a major component of Warsaw's plan to invest $15 billion into integrated air and missile defense capabilities.

The announcement does not say how many radar Poland will receive under the contract; last September Raytheon announced a deal with Poland for a dozen LTAMDS.