For those who missed it live, here is the replay of my ~45 minute dialogue with the Hon. Ryan D. McCarthy, former Secretary of the Army and principal architect of the US Army's ongoing modernization program and its prioritization of resources.
We discussed the role of the Army in US strategy towards China and Russia, questioning the role of ground forces and how the Army fits.
We then discussed how the Army has embraced new acquisition authorities to speed up capability delivery and what that means for defense contractor.
Finally, we covered how the Army will deal with much rumored budget pressures to include cuts will be made,
Call your Hedgeye sales rep if you want to discuss these types of defense policy influences on defense company revenues.
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Army modernization investment (RDT&E + Procurement) is big business and saw a ~33% increase in budget authority under the Trump Administration and McCarthy's leadership compared to the second Obama Administration.
The trigger for the increased investment particularly in RDT&E was the 2018 National Defense Strategy to reorient the Army towards "peer" competition (Read: Russia and China) and move away from "irregular" warfare which had dominated US military programs since 2001. The Army's modernization program focuses on eight ("6+2") priority areas supported by 31 specific programs of record.
- Long Range Precision Fires: Strategic Long Range Cannon, Precision Strike Missile, Extended Range Cannon Artillery
- Next Generation Combat Vehicle: Optionally Manned Fighting Vehicle, Robotic Combat Vehicle, Armored Multi-Purpose Vehicle, Mobile Protective Firepower
- Future Vertical Lift: Future Attack Recon Acft, Future Long Range Assault Acft, Future Unmanned Acft System, Open Systems Architecture
- Network: Unified Network, Common Operating Environment, Interoperability, Command Post Mobility/Survivability
- Assured Position, Navigation and Timing: User Equipment, Enterprise Enablers, Situational Awareness
- Air and Missile Defense: Maneuver Short Range Air Defense, Indirect Fire Protection Capability, Lower Tier Air and Missile Defense Sensor, Army Integrated Air and Missile Defense
- Soldier Lethality: Next Gen Squad Weapons, Integrated Visual Augmentation System, Enhanced Night Vision Goggles
- Synthetic Training Environment: One World Terrain, Training Managem
For 43 months, first as Undersecretary of the Army (where he was the Acting Secretary of the Army for the first critical 100 days) and then as Secretary of the Army, Ryan McCarthy was the principal architect of the Army's shift in modernization strategy and created the Army Futures Command to lead it. He led the prioritization of resources (85% of Army R&D now goes into these eight priorities) through an innovative process known as "Night Court".
Prior to his service as Sec Army, Mr. McCarthy was the Lockheed Martin VP for F-35 Sustainment and Customer Solutions from 2011 to 2017. From 2007 to 2011 he was Special Assistant to Secretary of Defense Robert Gates and from 2005 to 2007 Professional Staff Member in the House of Representatives. He came to civilian government service from HSBC where he was a VP for Customer Relations. After his graduation from VMI in 1997, Mr. McCarthy served as an Army infantry and Ranger officer for five years to include combat duty in Afghanistan. Mr. McCarthy also has an MBA from the U of MD.
