The Insider

(UPDATE: Blair's prepared testimony is now available -- see link below.)

Today, Congress will receive its first glimpse into the Obama administration's views on the slate of national security threats facing the United States, and how the White House plans on addressing those threats in the near and long-term.

Newly minted Director of National Intelligence Dennis Blair is set to testify before members of the Senate Select Intelligence committee, less than a month after the Senate confirmed his nomination to become the top U.S. intelligence official in January.

The former U.S. Pacific Command chief replaces former DNI Mike McConnell and is the first brand-new member of President Obama's national security appointees to assume his position under the new administration. Bush appointee Defense Secretary Robert Gates was asked to remain at the Pentagon by the White House.

While details are scant regarding the current threat assessment Blair plans to present to lawmakers today, issues regarding the nuclear ambitions of Iran and North Korea, the continuing spread of influence across the globe by violent extremist organizations like al Qaeda and the continuing hunt for Osama Bin Laden are likely to top the list.

However, Blair's testimony does coincide with a number of significant changes to intelligence and national security policy taken on by the new administration in recent weeks.

This week, Obama launched a new soup-to-nuts review on U.S. policy in Afghanistan and Pakistan, which is expected to dramatically increase the number of American troops in that country.

Last month, the White House issued a slew of executive orders which set a timetable for the closure of the U.S. detention facility at Guantanamo Bay, Cuba and set new standards for interrogation tactics used against suspected terrorists.

For some background, click here to view the testimony from Blair's confirmation hearing.

Click here for Blair's prepared testimony on the intel community's latest worldwide threat assessment.

The Senate tonight unanimously confirmed Leon Panetta as director of the Central Intelligence Agency, Sen. Diane Feinstein's office just announced.

Milan Vodicka, a Czech journalist, is using the platform of The Wall Street Journal's op-ed page today to warn the United States against turning its back against his country on missile defense, after so much political capital was spent getting the agreement to base an X-band radar there.

If the United States builds a radar system in the Czech Republic as part of the missile defense program developed by the Bush administration, it's likely that the Russians will target the Czech Republic with their tactical nuclear missiles. But many Czechs are fearful of an even greater danger than Russia: The possibility that the U.S. may decide not to deploy the defense system. Unfortunately, Vice President Joseph Biden suggested this prospect last week in Munich when he said, "We will wait for what the experts say and then we will see."

Czech politicians and their Polish counterparts have invested a lot of political capital in the missile defense project. If the Obama administration doesn't follow through, supporters of the missile shield would feel abandoned by the U.S.

What's worse, Czech and Polish leaders would lose credibility among their opponents and, most importantly, Russia. Moscow would see the failure to build the radar system as proof of its influence over Central Europe, and as recognition of its veto power over European security policy.Mr. Biden doesn't seem to appreciate that the missile defense project isn't just about American interests. It's about the Czechs and the Poles, too.

But the juiciest line comes later:

It's beginning to look as though the Americans were taking us for a ride. Now that there's a new driver in the White House, they think they can just drop us off at the curb.

Last week, we reported on a presentation by Stanford academic Dean Wilkening, who argues that Bush-era plans to station ballistic missile defense assets in Poland and the Czech Republic offer European nations less protection from Iranian missiles than defense officials have claimed publicly. Inside Missile Defense was able to interview Wilkening yesterday, and today's issue features an updated version of the story.

Textron's sales of the V-22 Osprey and other products to the Defense Department may be one of the few things keeping the company's debt rating from truly tanking, according to a report issued yesterday by debt-rating agency Fitch Ratings:

Fitch Ratings has downgraded the Issuer Default Ratings (IDR) and long-term debt ratings for Textron Inc. (TXT) and Textron Financial Corporation (TFC) to ‘BBB-’ from ‘BBB’. In addition, the short-term IDRs and commercial paper ratings have been downgraded to ‘F3’ from ‘F2’. The Rating Outlook is Negative.

At the same time, Fitch has downgraded and simultaneously withdrawn its ratings for TXT’s preferred securities due to the small amount outstanding. Debt and preferred securities totaled nearly $11 billion at Jan. 3, 2009, including $2.5 billion at TXT and $8.3 billion at TFC. . . .

The downgrade of TXT’s and TFC’s ratings recognizes execution risks related to TFC’s plans to exit its non-captive finance business, as well as difficult economic conditions that could pressure TFC’s asset quality and financial performance at TXT’s manufacturing businesses. These factors could lead to liquidity pressures in 2010 in the absence of asset sales or capital market transactions. Other developments considered in the ratings include the full drawdown of the company’s committed bank facilities and the recently announced management changes, which emphasize the broad challenges facing the company.

Here's what Fitch had to say about Textron's manufacturing business, of which the V-22 is a big part (through its Bell Helicopter subdivision):

At TXT, the ratings incorporate Fitch’s view that TXT’s manufacturing businesses will generate positive free cash flow, albeit at lower levels than in the past due to weaker demand at Cessna and for the Industrial segment. In late January 2009, TXT lowered its estimate for deliveries in 2009 to 375 aircraft, a nearly 20% reduction from the 467 jets that were delivered in 2008. In Fitch’s view, the reduction understates the decline in demand because the mix of low-end Mustangs has been increasing. As a result of higher deferrals and sharply lower orders, deliveries could potentially remain at lower levels for a sustained period. However, the impact is partly offset by Cessna’s large backlog that totaled $14.5 billion at the end of 2008 after peaking at $15.6 billion in September 2008. The outlook for TXT’s Bell and Defense & Intelligence segments is more stable, helping to mitigate concerns about declining demand for business jets and difficult conditions in TXT’s Industrial segment.

While Textron's overall defense business looks safe, implementing the Pentagon's earned-value management rules has been a challenge, as Inside the Pentagon reported late last month:

When contractors fail to follow the rules, they risk losing their certification. That happened to Bell Helicopter Textron in March 2006; the company has struggled ever since to earn it back. Bell again failed to reach this goal during ((the Defense Contract Management Agency's)) most recent review of the company last November. The next such review is slated for March.

Fitch put out the rating in the wake of Textron's reshuffling of the folks in charge of its soon-to-be-defunct financing business earlier this morning. In December, the company announced it was getting out of the financing business altogether.

At the very least, yesterday’s news should make the company's presentation today at an industry conference in Miami Beach, FL, rather interesting.

Here's hoping the new under secretary of defense for policy, Michèle Flournoy, does something about her organization's Website.

The home page features an "Announcements" box right in the middle, highlighting "News, Speeches, Items of Interest."

The most recent news: March 27, 2007.

Latest "Public Statements": Sept. 28, 2006.

And the latest "Special Report": The Quadrennial Defense Review. From 2006.

At least the site does reflect that Flournoy is, finally, the under secretary following her confirmation this week -- though it spells her name without that tricky accent. Just one more update to be made.

Facing tighter budgets and a greater emphasis on fuel efficiency, the military vehicle industry has a challenging year ahead, according to industry panelists at last week's tactical wheeled vehicles conference in Monterey, CA.

“We're going to be all together facing an uncertain future with unpredictability as the main theme,” Pat MacArevey, Navistar's director of government business and government affairs, said during the Feb. 2 panel. “I think the challenge is for our industry to behave like our customer and be on our toes in an era of persistent conflict.”

In particular, the panelists -- including retired Gen. Paul Kern, president and chief operating officer of AM General; John Stoddart, executive vice president and president for defense at Oshkosh; Dennis Dellinger, president for mobility and protection systems at BAE Systems; and MacArevey -- said the industry needs to look toward lightweight materials that provide vehicle protection and increased fuel efficiency.

Additionally, Kern touched on the need to constantly improve vehicles -- in his company's case, the humvee -- to meet threats in theater, while Dellinger looked toward the need to repair damaged vehicles. He favored recap, which allows new technology insertions, instead of reset, which simply returns vehicles to their original configurations.

Stoddart suggested the companies may consider future collaborations.

“We know that collectively we can do what our national strategy calls for us to do, and don't be surprised if you see the four of us working more closely together in the future,” he said.

For more coverage of the Monterey conference, check out this week's Inside the Army.

President Obama's national security adviser, James Jones, yesterday delivered his most detailed public remarks to date on his plans for leading the National Security Council. Speaking in Munich to the annual conference on security policy, Jones said the NSC is paying increased attention to the United States' capability to counter weapons of mass destruction as well as “placing a far higher priority on cyber security.”

From the transcript:

The President has made clear that to succeed against 21st century challenges, the United States must use, balance, and integrate all elements of national influence: our military and our diplomacy, our economy and our intelligence, and law enforcement capacity, our cultural outreach, and as was mentioned yesterday, the power of our moral example, in short, our values. Given this role, the NSC is by definition at the nexus of that effort. It integrates on a strategic sense all elements of our national security community towards the development of effective policy development and interagency cooperation. But to better carry out the president’s priorities, the National Security Council must respond to the world the way it is and not as we wish it were. And it must consider the fusion of our national priorities within the broader international context and interest. The NSC’s mission is relatively simple. It should perform the functions that it alone can perform and serve as a strategic center – and the word strategic is operative here – for the President’s priorities.

Jones, retired Marine four-star general, also said the NSC must adapt to evolving challenges.

There are traditional priorities that we will manage. But we must also update our outlook and sometimes our organization to keep pace with the changing world. To give you just a few examples, the NSC today works very closely with President Obama’s National Economic Council, which is led by Mr. Larry Summers, so that our response to the economic crisis is coordinated with our global partners and our national security needs. The NSC has worked closely with the White House Counsel’s office as we implement the President’s orders to ban torture and close the detention center at Guantanamo Bay. The National Security Council is undertaking a review to determine how best to unify our efforts to combat terrorism around the world while protecting our homeland. And this effort will be led by Mr. John Brennan.

The National Security Council will be at the table as our government forges a new approach to energy security and climate change that demand broad cooperation across the U.S. Government and more persistent American leadership around the world. And the NSC is evaluating how to update our capacity to combat the proliferation of weapons of mass destruction while also placing a far higher priority on cyber security. There is no fixed model that can capture the world in all of its complexity. What’s right today will have to be different four years from now or eight years from now. And that’s precisely the point. The NSC’s comparatively small size gives it a unique capacity to reinvent itself as required and to pivot on the key priorities of our time.