White House plan to cut 10% of US defense budget may inflict losses on Israeli subcontractors involved with US defense forces, but its industrial stimulus package stands to benefit Israeli pharmaceutical companies
Published 2.19.09, 09:20 AM
The White House stands to cut its 2010 defense budget by 10%, the Bloomberg wire service reported over the weekend. According to the report, the Pentagon's budget will stand at $527 billion and the budget allotted to the US Military for the acquisition of new equipment will stand at $115 billion – a $17 billion cut.
The proposed cuts to the US defense budget also include a 62% cut in the funds allotted to the development of the new F-35 fighter jet, from $8.6 billion to $3.2 billion; as well as a near-50% cut in development funds for the US Navy's new F-18 fighter jet.
The cuts are sure to affect the Israeli subcontractors engaged in the projects. Elbit Systems LTD, a longtime partner of the US defense forces, which together with Vision Systems International is manufacturing helmet mounted cueing systems – also known as "smart helmets" – for the F-35 and F-18 jets, may lose its $100 million contract altogether.
Elbit's subsidiary Cyclone Aviation Products, which manufactures the jets' fuel tanks, as well as several other components, may also suffer as a result of the budget cuts.
Elbit does, however, stand to profit for the US Military's future withdrawal from Iraq. The US Military is bound to have many of its equipment upgraded and revamped. Cutting developments budgets may also lead to the overhauling of many other existing systems, which in return may yield up to $200 million in revenue for Elbit.
The Obama administration's industrial stimulus package does, however, have a silver lining for other Israeli ventures, as $19 billion out of the $787 billion bailout plan approved by the US Congress over the weekend, are to go into medical and pharmaceutical avenues, where Israeli pharmaceutical equipment companies, the likes of DB Motion, and cleantech companies such as Better Place, are considered major players.