Executive for Weapons Manufacturer Admits Publicly That 'Perceived' Threats Are Great for Business
Although unemployment is finally starting to fall, the economy overall remains sluggish, as many Americans struggle to regain their economic footing after the Great Recession. There is one industry, however, that has boomed throughout: defense contractors. A recent internal investor call hosted by General Dynamics explains part of the reason why: fear.
In the company's fourth-quarter 2014 conference call with investors, which took place on Jan. 28, 2015, Erin Linnihan, vice-president for investor relations, took questions from a variety of investors about topics relating to the firm's fiscal outlook. At one point, an investor asks about international demand, particularly relating to the falling price of oil. Linnihan remarks that she is a “big believer” in how “threats” and “perceived threats” boost business. The quoted section starts at 34:35.
Q: Question, on just the uh, the international demand, I know you gave us some good color […] How are we thinking about the international demand for some of the defense […] any risk tied to some of the lower price of oil on that?
LINNIHAN: The lower price oh – oil. Um, you know, I've been a big believer and I think history has demonstrated that demand for defense products is driven by threat and perceived threat. And you just have to open up the paper to see that the world is an increasingly unsafe place. So we see an increased level of interest in parts of Europe and the Middle East as you might anticipate. Governments begin to rethink their spending priorities in light of some of the the threats that they see, both actualized and potential. So we have a pretty robust pipeline that's continuing.
For the record, the world is not actually more unsafe. The world is actually safer than it has ever been, but it is in the interests of defense contractors to play up “perceived threat.” Sadly, that tactic is working. President Obama's request for a defense budget is the largest in modern history in nominal terms.
As The Intercept's Lee Fang reported earlier this month, General Dynamics investors aren't the only ones wondering about the impact of international conflict on their bottom line. In an investor call at Lockheed Martin, one bank analyst worried that a deal with Iran would depress weapons sales.
