Defense Daily

Hegseth Directs Army Scrap ‘Outdated’ Systems, Cuts Include JLTVs, AH-64Ds, Gray Eagles

Defense Secretary Pete Hegseth has directed the Army to cut “outdated weapon systems” as part of a new “comprehensive transformation strategy,” with the service’s leaders confirming plans to cancel procurement of Joint Light Tactical Vehicles, Humvees, the AH-64D Apache attack helicopter and Gray Eagle drones. 

Hegseth’s memo outlines a series of initiatives aimed at ensuring the Army prioritizes “defending our homeland and deterring China in the Indo-Pacific region,” to include accelerating fielding of unmanned systems and launched effects and service leaders affirming commitment to modernization efforts such as the new Future Long Range Assault Aircraft and the upgraded M1E3 Abrams tank.

“To build a leaner, more lethal force, the Army must transform at an accelerated pace by divesting outdated, redundant, and inefficient programs, as well as restructuring headquarters and acquisition systems. Simultaneously, the Army must prioritize investments in accordance with the administration’s strategy, ensuring existing resources are prioritized to improve long-range precision fires, air and missile defense including through the Golden Dome for America, cyber, electronic warfare, and counter-space capabilities,” Hegseth writes.

Army Secretary Dan Driscoll and Gen. Randy George, the Army chief of staff, said the service will pursue a new “Army Transformation Initiative” (ATI) to carry out the priorities laid out in the memo.

“This initiative will re-examine all requirements and eliminate unnecessary ones, ruthlessly prioritize fighting formations to directly contribute to lethality, and empower leaders at echelon to make hard calls to ensure resources align with strategic objectives. To achieve this, ATI comprises three lines of effort: deliver critical warfighting capabilities, optimize our force structure, and eliminate waste and obsolete programs.”

David Fitzgerald, the Army’s acting under secretary, said last month the service was “systematically reviewing” its portfolio of legacy programs and current requirements (Defense Daily, March 25). 

“We cannot afford to continue robbing modernization by continuing to pay for things we no longer need,” Fitzgerald said at the time. “As we free up resources and [make] hard choices, we will redirect them to the transformation of our force. The Army’s transformation plan is not just about spending on different things, it’s about spending differently.”

The memo directs the Army to end procurement of “obsolete weapon systems,” and Driscoll and George have confirmed that will include canceling plans to continue producing “outdated crewed attack aircraft” such as the AH-64D, “excess ground vehicles” like the Humvee and JLTV and “obsolete UAVs” like the Gray Eagle.

“We will also continue to cancel programs that deliver dated, late-to-need, overpriced, or difficult-to-maintain capabilities. Yesterday’s weapons will not win tomorrow’s wars,” Driscoll and George write in a new letter to the force. “This is a first step. We have already directed a second round of transformation efforts to be delivered in the coming months.”

The JLTV cancellation, in particular, is a major pivot for the Army after the service awarded AM General a potential 10-year, multi-billion dollar deal just over two years ago to build the new JLTV A2 and take over as prime contractor from Oshkosh Defense [OSK]. AM General has said it remained on track to support the Army’s plan to begin fielding the JLTV A2 in mid-2026 (Defense Daily, Feb. 9 2023). 

The Army has mostly been buying the newer AH-64E model aircraft for its Apache fleet, and in March 2023 signed a multi-year contract with Boeing [BA] for deliveries of the upgraded configuration that will run through 2027 and could be worth up to $3.8 billion (Defense Daily, March 17 2023).

Driscoll said Thursday that President Trump and Hegseth have “empowered the Army to go make the hard decisions and the hard changes to reallocate our dollars to best position our soldiers to be the most lethal that they can be.”

“These are hard decisions. These are legacy systems that have been around for a long time. There’s a lot of momentum, there’s a lot of lobbyists around them. But with the leadership of [Trump and Hegseth] and our chain of command, we have been empowered to go do what’s right,” Driscoll said in a Fox News interview

Hegseth has also previously directed Pentagon officials to find eight percent of the department’s budget that can be cut and shifted to Trump administration priorities (Defense Daily, Feb. 20).

“We will introduce long-range missiles and modernized UAS into formations, field the [General Dynamics Land Systems [GD]] M1E3 tank, develop the [Bell [TXT]-built] Future Long-Range Assault Aircraft, and close the C-sUAS capability gap. Command and control nodes will integrate artificial intelligence to accelerate decision-making and preserve the initiative,” Driscoll and George write. 

The memo also directs the Army to field long-range missiles capable of striking moving land and maritime targets by 2027, with the service already pursuing a version of the Lockheed Martin [LMT] Precision Strike Missile that integrates a multi-mode seeker, and to field unmanned systems and launched effects with every division by the end of next year.

Driscoll and George said the new ATI transformation strategy builds on the ongoing and currently expanding Transforming in Contact initiative, which has focused on testing new operating concepts with select Army units and providing troops with new technology, such as drones and electronic warfare capabilities, to gather feedback and inform rapid fielding decisions.

“We don’t have a challenge with the innovation. The innovation’s happening down with our soldiers. We’re changing formations,” George said in the Fox News interview. “We’re watching what’s happening. We know we need to change. If there’s one thing, we just can’t go fast enough. We’ve got to speed [up] that change.”

Hegseth’s memo also directs the Army to achieve “electromagnetic and air-littoral dominance” by 2027, to integrate improved C-UAS capabilities into maneuver platoons by 2026 and maneuver companies by 2027, to enable “AI-driven” command and control at the headquarters-level by 202 and to bring advanced manufacturing and 3D printing capabilities to operational units by 2026.

Matthew Beinart Reporter: Cyber Security/IT/Military Defense Daily Ph: 240-477-2677 Email: [email protected] | Twitter: mbeinart22

New Memo Orders Army To Merge Futures Command And TRADOC, Pursue Acquisition Reforms

Defense Secretary Pete Hegseth’s new memo directing sweeping changes within the Army calls for merging the service’s modernization-focused Futures Command with Training and Doctrine Command (TRADOC), prioritizing acquisition reforms and adjusting force structures.

“I am directing the Secretary of the Army to implement a comprehensive transformation strategy, streamline its force structure, eliminate wasteful spending, reform the acquisition process, modernize inefficient defense contracts and overcome parochial interests to rebuild our Army, restore the warrior ethos, and reestablish deterrence,” Hegseth writes in the memo.

The wide swath of initiatives are part of a new “comprehensive transformation strategy” for the Army that includes ending procurement of “outdated weapon systems,” with Army leaders confirming cuts will be made to programs such as Joint Light Tactical Vehicles, Humvees, the AH-64D Apache attack helicopter and Gray Eagle drones (Defense Daily, May 1). 

The merging of the Austin, Texas-based Futures Command, established in 2018 and now led by Gen. James Rainey, with TRADOC, led by Gen. Gary Brito and based at Fort Eustis in Virginia, is part of an effort to downsize, consolidate, or close redundant headquarters, according to the memo.

The two organizations will merge into a single command “aligns force generation, force design and force development under a single headquarters,” Army Secretary Dan Driscoll and Gen. Randy George, the Army chief of staff, wrote in a letter to the force on the transformation initiative.

It remains to be seen who will be at the helm of the new organization, as the directive is a major change for Futures Command, which has overseen requirements development for the service’s modernization efforts. 

Hegseth in the memo also endorses the Army’s recent push to seek flexible funding authority that would allow it to move money within select capability areas rather than having funds tied to rigid budget line items allowing the Army to more rapidly procure promising technologies. 

The Army secretary is directed to work with the Pentagon comptroller on the effort to “consolidate budget lines and shift from program-centric funding to capability-based funding across critical portfolios…to ensure rapid technology adaptation,” according to the memo.

“Agile funding, which shifts from program-centric to capability-based portfolios, will increase timely equipment fielding and accelerate innovation cycles. Adaptation is no longer an advantage — it’s a requirement for survival,” Driscoll and George said.

The flexible funding push has started with an initial focus on drones, C-UAS and electronic warfare as a “pilot program,” while Army Vice Chief Gen. Mingus said recently the strategy should eventually cover all technology that advances faster than the standard budget cycle (Defense Daily, April 22). 

Additional acquisition reforms directed in the memo include expanding the Army’s use of Other Transaction Authority agreements “to enable faster prototyping and fielding of critical technologies,” including software, implementing performance-based contracting “to reduce waste,” and expanding multi-year procurement agreements “when cost effective.”

Hegseth has also directed the Army to merge headquarters “generate combat power capable of synchronizing kinetic and non-kinetic fires, spaced-based capabilities, and unmanned systems,” to divest outdated formations and to realign forces strategically “to optimize deterrence and rapid deployment, above all to defend the American homeland and deter China in the Indo-Pacific.”

“We’re cutting headquarters. We’re cutting some of the bloat, making sure that we get after the inefficiencies so we’re completely focused on buying war-winning technologies and that’s exactly what we need to do,” George said in a Fox News interview on Thursday.

The Army is also tasked with reducing and restructuring manned attack helicopter formations and augmenting such units with inexpensive drone swarms “capable of overwhelming adversaries.”

Driscoll and George, in their letter, specify there are plans to eliminate 1,000 staff positions at Headquarters Department of the Army, the service will reduce one Aerial Cavalry Squadron per Combat Aviation Brigade in the active component and will consolidate aviation sustainment requirements and all Infantry Brigade Combat Teams will be converted to the new Mobile Brigade Combat Teams.

“We are trading weight for speed, and mass for decisive force,” Driscoll and George wrote.

The Army has tested the Mobile BCT concept as part of its Transforming in Contact initiative, which included the GM Defense [GM] Infantry Squad Vehicle as a “centerpiece” capability “to move every infantry squad much faster and much lighter” (Defense Daily, May 9, 2024). 

Additionally, the memo directs the Army to merge Forces Command with U.S. Army North and South “into a single Headquarters focused on homeland defense and partnership with our Western Hemisphere allies” and to consolidate and realign headquarters and units within Army Materiel Command, to include integrating Joint Munitions Command and Army Sustainment Command “to optimize operational efficiency and streamline support capabilities.”

Matthew Beinart Reporter: Cyber Security/IT/Military Defense Daily Ph: 240-477-2677 Email: [email protected] | Twitter: mbeinart22

HII’s Earnings, Sales Dip In First Quarter; Cites CVN-30 Supply Chain Hiccup

HII [HII] on Thursday posted first quarter declines in its top and bottom-lines driven by lower sales across the company’s operating segments, and higher interest expense and taxes.

Net income fell nearly 3 percent to $149 million, $3.79 earnings per share (EPS), from $153 million $3.87 EPS) a year ago. The results handily topped consensus estimates of $2.88 EPS.

Higher interest expense and taxes more than offset higher operating income, which was up on work at the Mission Technologies and Newport News Shipbuilding Segments. Mission Technologies benefited from performance on cyber, electronic warfare, space, and unmanned systems while Newport News’ income increased on contract incentives for the Navy’s Virginia-class nuclear attack submarine program, and volume on the Columbia-class nuclear missile submarine.

Segment operating margin increased 20 basis point improvement to 6.3 percent.

Sales also dipped nearly 3 percent to $2.7 billion from $2.8 billion a year ago. The company registered declines in amphibious assault ships, aircraft carriers, Naval nuclear support services, and C5ISR work.

Newport News, which works on the Navy’s aircraft carriers and submarines, was behind plans in the quarter due to poor weather, and supply chain issues related to construction of the USS Enterprise (CVN-80) Ford-class carrier, Chris Kastner, HII’s president and CEO, said on the company’s earnings call. Delays in receiving “major equipment” to go inside the hull of the carrier slowed overall construction, which should pick up this summer once the equipment is delivered, he said.

The first quarter results were significantly better than HII’s 2024 fourth quarter, which saw a steep drop in net income and a modest decline in sales (Defense Daily, Feb. 6, 2025).

HII maintained its outlook for 2025, with sales forecast to be between $11.8 billion and $12.2 billion. Guidance for operating margin in the shipbuilding business remains between 5.5 and 6.5 percent, and between 4 and 4.5 percent at Mission Technologies.

HII continues to expect more than $50 billion in contract awards through the end of 2026, some of which it has already received, driving at least 4-plus percent annual growth to be at $15 billion in sales in 2030.

On Wednesday evening, the Navy awarded HII $1.3 billion for the company’s work on two Block V Virginia-class subs. General Dynamics [GD], the prime contractor for the program, received $12.4 billion for the two subs, with options that would increase the value to $17.2 billion.

The Navy’s goal is ultimately to acquire two Virginia-class vessels annually, although current production rates hover just above one per year.

Kastner described the Block V contract as a “first step” toward achieving the company’s medium and long-term objectives and the submarine production target because the funding covers “targeted investments in workforce, equipment, facilities, training that will accelerate the throughput.”

Later this year, HII is expecting awards related to the Block VI submarines and the second Columbia-class vessel, both of which the company is the major subcontractor to GD.

“We’ve identified additional investments that could potentially be applied to further accelerate…as I said before, it’s going to take a while,” he said. “You just don’t build a building overnight. You don’t build a workforce overnight. But I absolutely think that these are the right investments to get at the build rate.”

In the first quarter, HII hired 1,000 craftsmen across its shipyards, a little fewer than planned, due to a new focus on hiring experienced personnel, Kastner said. The emphasis on experienced workers is helping to lower attrition, although not enough to get to pre-pandemic levels, he said.

Still, attrition is “moving in the right direction” at Newport News and Ingalls Shipbuilding, he said.

The company tallied $2.1 billion in orders and backlog stood at $48 billion, down a percent from $48.7 billion at the end of 2024. Free cash was a $482 million outflow in the quarter but cash guidance for the year is still between $300 million and $500 million.

Cal Biesecker Reporter: Business/Homeland Security Defense Daily Ph: 434-242-7750 Email: [email protected] | Twitter: calvinb21

Beale AFB to Be Deployment Center for CCA, As USAF Begins Ground Tests

Beale AFB, Calif.–the home of the U-2 surveillance plane–is to house the Aircraft Readiness Unit (ARU) for U.S. Air Force Collaborative Combat Aircraft (CCA) to allow them to deploy quickly, and the two CCA prototypes have begun ground testing of their propulsion, avionics, autonomy and ground control, the Air Force said on Thursday.

A year ago, the Air Force decided to narrow the CCA Increment 1 field to General Atomics and Anduril Industries, and the service has said it plans to conduct flight tests of the General Atomics YFQ-42A Gambit and Anduril YFQ-44A Fury prototype CCAs this summer before an Increment 1 down-select in fiscal 2026 and the start of Increment 2 development that year (Defense Daily, Apr. 24, 2024).

The Air Force release on Thursday did not re-iterate this summer as the plan for the beginning of CCA flight tests but used the wording “later this year.”

Air Force Chief of Staff Gen. Dave Allvin said in the Air Force statement that General Atomics and Anduril “are meeting or exceeding key milestones” for CCA. David Alexander, the CEO of General Atomics-Aeronautical Systems, Inc. (GA-ASI) said that GA-ASI will display a YFQ-42A model YFQ-42 model at the Beale Air and Space Expo on June 7.

CCAs are to be autonomous wingmen for Air Force aircraft, including the future Boeing [BA] F-47 and the Lockheed Martin F-35 fighters.

The $150 billion DoD reconciliation bill has $678 million to accelerate CCA (Defense Daily, Apr. 28).

Frank Wolfe Email: [email protected] |

DIU To Issue Solicitation For Low-Collateral Effects Counter-Drone Solutions

The Defense Innovation Unit (DIU) next week plans to issue a solicitation seeking commercial solutions to more safely defeat small drones, the head of the unit said on Thursday.

The commercial solutions opening for low collateral defeat drone capabilities will be aimed at the use of these systems in highly populated areas, Doug Beck told the House Armed Service’s Subcommittee on Tactical Air and Land Forces.

Beck said the Federal Aviation Administration (FAA) will be part of the low collateral effects effort. The agency is also part of the Defense Department’s ongoing Replicator 2 Initiative that was announced last September and is largely focused on protecting domestic military installations from drone threats, he said (Defense Daily, Sept. 30 and Oct. 14, 2024).

A major concern of the DoD and U.S. government in general with using counter-drone solutions in domestic operations is minimize local impacts that would arise from using kinetic interceptors and non-kinetic defeat systems that could disrupt commercial aircraft or nearby civilian infrastructure.

Lt. Gen. Robert Collins, the principal military deputy to the Army’s research and acquisition chief, told the panel that the service is looking at using unmanned aircraft systems that deploy nets to capture potential threat drones in mid-air “without having significant challenges in spectrum de-confliction.”

Being able to better sense the presence of drones in populated areas is a key focus area of DIU, Beck said. In addition to the sensors, such as acoustic and radar, this also includes wireless communications and artificial intelligence to fuse the data to rapidly understand the situation and make decisions, he said.

Cal Biesecker Reporter: Business/Homeland Security Defense Daily Ph: 434-242-7750 Email: [email protected] | Twitter: calvinb21

Some Democratic Lawmakers Ask for DoD IG Review of Golden Dome

A group of 42 congressional Democrats–five senators and 37 representatives–are asking the Pentagon Inspector General’s (IG) office to investigate the planned Golden Dome missile defense project.

A Jan. 27 executive order from President Trump directed the development of the U.S. missile defense shield, to include space-based interceptors–a project “experts estimate could cost trillions” of dollars, according to the Thursday letter to acting DoD IG Steven Stebbins.

Signatories include Sens. Elizabeth Warren (D-Mass.) and Tammy Duckworth (D-Ill.)–members of the Senate Armed Services Committee, and Reps. Greg Casar (D-Texas)–a member of the House Committee on Oversight and Accountability’s military and foreign affairs panel, John Garamendi (D-Calif.)–the ranking member of the House Armed Services Committee’s readiness panel, and Jill Tokuda (D-Hawaii)–a member of the HASC readiness panel.

The letter expressed conflict of interest concerns related to top Trump adviser, Elon Musk, the CEO of SpaceX, and SpaceX’s position as a front-runner for Golden Dome contracts.

A special government employee (SGE) at the Trump administration’s Department of Government Efficiency (DOGE), Musk “is subject to” U.S. Office of Government Ethics (OGE) “regulations governing the conduct of executive branch employees,” the letter said. “One of those standards, OGE regulation 5CFR Section 2635.702, prohibits using public office for private gain. Mr. Musk is also subject to the criminal prohibition in 18 U.S.C. Section 208 against participating in a particular matter in which he has a financial interest, which carries a penalty of up to five years in prison.”

“If Mr. Musk were to exercise improper influence over the Golden Dome contract, it would be another example of a disturbing pattern of Mr. Musk flouting conflict of interest rules,” according to the letter. “DOGE has directed cuts to agencies that regulate his companies and gained sensitive data about Americans and his companies’ competitors.”

Frank Wolfe Email: [email protected] |

AeroVironment Completes BlueHalo Acquisition; Creates Two Operating Segments

AeroVironment [AVAV] on Thursday said it completed its $4.1 billion acquisition of BlueHalo, significantly diversifying and expanding its defense business with the addition of space, electronic warfare and cyber technologies to position itself as a mid-tier alternative to traditional defense prime contractors.

Following the close of the transaction, AV is realigning from three operating segment to two, Autonomous Systems, and Space, Cyber and Directed Energy.

Autonomous Systems includes AV’s prior businesses, uncrewed systems, loitering munitions, and the MacCready Works innovation arm that focuses on artificial intelligence and autonomy. It also includes BlueHalo’s counter-unmanned aircraft systems solutions.

Trace Stevenson, who previously led AV’s uncrewed systems segment, is in charge of Autonomous Systems.

Space, Cyber and Directed Energy is led by Trip Ferguson who was BlueHalo’s chief operating officer. Ferguson’s segment includes space technologies, directed energy solutions, cyber solutions, and mission services.

AV last November announced its agreement to acquire BlueHalo (Defense Daily, Nov. 19, 2024). The combined company has about $1.7 billion in sales.

BlueHalo was a portfolio company of Arlington Capital Partners. David Wodlinger, a managing director at Arlington Capital, and Henry Albers, a principal with the private equity firm, have joined AV’s board, which now stands at 10 directors.

Cal Biesecker Reporter: Business/Homeland Security Defense Daily Ph: 434-242-7750 Email: [email protected] | Twitter: calvinb21

Navy Awards Billions GD And HII Billions To Finish Last Two Block V Virginia-Class SSNs and Shipyard Support

The Navy on Wednesday awarded Virginia-class attack submarine (SSN) builders General Dynamics‘ Electric Boat [GD] and HII Newport News Shipbuilding (NNS) [HII] at least $14 billion to build two SSNs and for shipyard productivity support.

The funds are divided between $12.4 billion for Electric Boat, the prime contractor for submarines, and $1.3 billion for HII. If all options are exercised, GD would end up getting over $17 billion, but the DoD contract announcement noted these awarded amounts include $2 billion in previously announced material awards, like long-lead time material and economic ordering quantity material. If all options are exercised for both shipbuilders, the total value of the contract would rise to over $18.4 billion.

This work is expected to be finished by June 2036.

While Electric Boat is the prime contractor for submarines, they generally split work with Newport News building the bow and stern sections while EB builds the midsections, including the reactor compartments, then they take turns on final assembly.

The submarine funding includes detail design and construction on the future USS Baltimore (SSN-812) and Atlanta (SSN-813), the last Block V submarines originally appropriated in fiscal year 2024. At the tail end of the Biden administration, the Navy sent an unexpected supplemental request to the Hill to account for shortfalls in the boat construction costs. 

A continuing resolution ultimately added $1.95 billion more to finish SSN-212 and -813 (Defense Daily, Dec. 18).

Block V submarines will be the first to incorporate the Virginia Payload Module (VPM), an additional mid-section part of the boat that adds four large diameter payload tubes, making each submarine able to field up to 28 Tomahawk missiles.

Beyond making up for the costs of the two SSNs, the award includes “investments to improve productivity at the shipyards, and for nuclear-powered vessel programs workforce support and investment.”

Construction costs on these two submarines ballooned by almost 20 percent due to workforce costs related to the COVID-19 pandemic and government disagreements on how to pay to increase workforce wages at the shipyard.

In December, lawmakers rebuked the Navy for a lack of transparency on dealing with the submarine shortfall and negotiating with industry on how to boost shipyard worker wages to improve production (Defense Daily, Dec. 9, 2024). 

A Navy release accompanying the contract announcement said this “ signals the Navy’s commitment to maintaining its warfighting advantage in the undersea domain” while continuing the teaming arrangement between General Dynamics and HII.

The service noted thus far the Navy has taken delivery of 24 Virginia-class submarines, with 16 more currently under contract.

“We recently re-negotiated the planned contract to deliver this critical capability, and appropriately share risk between the Navy and industry,” Secretary of the Navy John Phelan clarified in the release. “We will be looking at all future contracts with a similar lens to ensure the appropriate level of risk sharing and value to the American taxpayer.”

Rear Adm. Jon Rucker, Program Executive Officer, Attack Submarines, argued this award is the culmination of a “highly coordinated contracting effort across the nuclear shipbuilding enterprise, to promote stability at critical suppliers as the submarine industrial base ramps up to meet a historic increase in demand for submarine production.”

“We are continuing to work closely with the shipbuilders to improve construction schedules to support the Navy’s need for a larger, more lethal force,” he continued.

Mark Rayha, president of General Dynamics Electric Boat, said this modification “validates the unique and important role submarines and submarine shipbuilders play in our national defense” after working for two years with Congress, the Navy and presidential administrations to secure funds to increase workforce wages as well as invest in shipyard capacity improvements.

Jason Ward, Newport News Shipbuilding vice president of submarine construction that the company, “[appreciates] the teamwork that resulted in these critical national security assets being put under contract.”

During a quarterly earnings call on May 1, HII CEO Chris Kastner said the industrial base funds connected to this two-boat contract is the “product of really a couple years of effort by the Navy and the shipbuilders to evaluate the investments that were required to get at accelerating throughput. You see that in the award of that contract it was very thoughtfully put together. It’s a wage support and workforce development support. It’s very targeted investments to increase the submarine build rate. So that’s all very positive. “

He added the submarine and maritime industrial base funding that has been applied to the supplier base is “also very positive. And you see a build-up of the infrastructure in ship building that will support the growth that we think is ahead of us. So it’s really, I would think, an industry-wide all hands-on deck effort to identify a build-out of that industrial base.”

During the call, Executive Vice President and Chief Financial Officer of HII Thomas Stiehle argued this cost-plus-incentive-fee contract is a “good mix and blend between affordability and profitability. It covers the business environment that we find ourselves operating in.”

He noted it has some constraints on parameters around the outskirts of where costs can land, but we’re happy that we were able to get that done. We worked hard with the Navy.”

Separately, on Wednesday the Navy also awarded Science Applications International Corp. [SAIC] a $136 million modification to exercise options for the production, spares, support, and repair of components for the MK 48 Heavyweight Torpedo All Up Round. 

The latest MK 48 order combined purchases for the U.S. Navy, Royal Australian Navy and Foreign Military Sales program and is set to last through May 2028.

Rich Abott Reporter: Navy/Missile Defense Defense Daily Ph: 703-522-5915 Email: [email protected] | Twitter: ReaderRabott

Leonardo DRS Opens 2025 With Strong Results

Leonardo DRS [DRS] on Thursday posted strong first quarter results with earnings and sales higher across its operating segments.

Net income increased 72 percent to $50 million, 19 cents earnings per share (EPS), versus $29 million (11 cents EPS) a year ago. Excluding impacts from income taxes, interest expense, acquisition and restructuring costs, adjusted earnings of 20 cents EPS beat consensus estimates by three cents per share. Adjusted margin increased 10 basis points to 10.3 percent.

Sales increased 16 percent to $799 million versus $688 million a year ago. The top-line benefitted from accelerated material receipts from some suppliers. Revenue drivers included tactical radars, ground and naval network computing, electric power and propulsion, and force protection programs.

The company’s electric power and propulsion efforts support Navy ship programs, and more domestic opportunities are emerging, Bill Lynn, chairman and CEO of Leonardo DRS, said on the earnings call. He declined to discuss program specifics due to “competitive reasons,” but did highlight a recent demonstration of the company’s electric propulsion technology on a medium unmanned surface vessel that showcases the versatility of its offerings as the Navy considers a mix of manned and unmanned platforms.

Lynn addressed the macroeconomic environment, highlighting the fiscal year 2025 continuing resolution that allows new program starts, funding flexibility, and a higher threshold for reprogramming authority.

“As of now, we have not seen any significant changes to customer procurement behavior and the leading indicators reinforce the durability of demand,” he said.

Tariffs are a watchlist item for Leonardo DRS, he said, pointing out that the company’s footprint is largely domestic as is its supplier base. The company has told its suppliers to alert on tariff-related costs so that it can pursue remedies with government customers, he said.

The company has been relatively unscathed by China’s nearly two-year-old restrictions on rare earth minerals. However, a sole-source optic supplier on an international infrared sensing program was unable to execute on purchase orders in the first quarter due to restrictions on germanium, leading to higher costs for Leonardo DRS as it found alternative sources, Lynn said.

“Outside of this discrete supplier issue, there have not been significant challenges with respect to supply to date, but pricing has certainly become more volatile,” he said.

The company’s outlook for 2025, which is unchanged from prior guidance, factors in the germanium related suppler challenge and related higher costs, Lynn said.

Infrared sensing is a core capability of Leonardo DRS.

Orders in the quarter totaled $1 billion and backlog rose to a record $8.6 billion, up 10 percent from $7.8 billion a year ago. Free cash flow was a negative $170 million.

Cal Biesecker Reporter: Business/Homeland Security Defense Daily Ph: 434-242-7750 Email: [email protected] | Twitter: calvinb21

Coast Guard Approved For Full Production Of First Polar Security Cutter

Following a decision by the Department of Homeland Security (DHS) in late December allowing the Coast Guard to move forward with limited production of a new heavy polar icebreaker, the department this week greenlit the start of full production for the first Polar Security Cutter (PSC), the service said on Thursday.

The December decision authorized the Coast Guard to build 16 of the 85 modules that make up the PSC. Bollinger Shipyards, which is under contract for up to three PSCs, in 2023 began work on eight prototype modules to help it come down the learning curve in terms of strengthening workforce skills and refining construction methods (Defense Daily, Aug. 4, 2023).

The April 30 approval by DHS allows the Coast Guard, and Bollinger, to construct all 85 modules.

The PSC represent a major relearning of skills and expertise in the design and construction of polar icebreakers. The Coast Guard’s lone heavy polar icebreaker, the Polar Star, is nearly 50 years old, and the service’s only medium polar icebreaker, the Healy, is 25 years old. Both vessels have been plagued with mechanical and maintenance issues.

“Approval for full production enables the Coast Guard and U.S. Navy integrated program office to maintain production momentum, and for the shipbuilder to accelerate hiring to deliver this critical asset as quickly as possible to support national security initiatives,” the Coast Guard said on Thursday.

The first PSC is slated for delivery in 2030, six years behind schedule. The following two vessels are expected in 2032 and 2034.

The Coast Guard wants a mix of eight to nine heavy and medium polar icebreakers. The service recently began surveying the domestic and global maritime industrial base for a medium icebreaker, the Arctic Security Cutter, with a goal of getting the first vessel delivered withing three years of contract award.

The Coast Guard in late March awarded Bollinger nearly $952 million to complete design and construction of the first PSC (Defense Daily, March 26). The award more than doubled the cost to build the ship. VT Halter Marine, which won the PSC contract before Bollinger acquired the company, in April 2019 received a $746 million contract for the ship.

The House panel that oversees Coast Guard authorities is strongly backing the PSC and ASC programs, recommending more than $9 billion in a reconciliation program for the icebreakers (Defense Daily, April 30). That funding also covers “domestic” icebreakers, which are used on the Great Lakes and other waterways.

The Coast Guard on Thursday released a request for information seeking feedback from U.S. and allied nation shipyards on “existing or production-ready icebreaking capable vessels” for either a medium (DOMICE-M) and light (DOMICE-L) missions. A DOMICE-M vessel would be 140-feet or less in length and the DOMICE-L 65-feet or less.

Cal Biesecker Reporter: Business/Homeland Security Defense Daily Ph: 434-242-7750 Email: [email protected] | Twitter: calvinb21