Lockheed Martin Nabs First Big Win From German Defense Spending Spree
Sign up for smart news, insights, and analysis on the biggest financial stories of the day.
A month after German Chancellor Olaf Scholz announced a $110 billion spending spree on upgrading the country’s armed forces, US defense contractor Lockheed Martin became the first big winner.
Germany announced Monday that it plans to buy F-35 warplanes from Lockheed to replace its aging Tornado bombers, a relic of an earlier era of conflict with Russia.
The Biggest Takeoff Since Hasselhoff
Germany received its first Tornado Bombers in 1981, years before the fall of communist East Germany and David Hasselhoff singing “freedom” in a light-up leather jacket above a soon-to-be-toppled Berlin Wall. In more recent years, allies have accused reunited Germany of failing to meet NATO’s 2% of GDP target for defense spending, which stirred debate at home because of shame over the country’s Nazi past. Russia’s invasion of Ukraine prompted the recent 180.
Germany considered spending funds from its military refresh on either Lockheed’s F-35s or Boeing’s F/A-18 Super Hornet. Lockheed, whose planes have better stealth capabilities, won out. The F-35s will be used as part of Germany’s “nuclear sharing” role, which refers to NATO countries that don’t have nuclear arsenals but take part in planning the deployment of nuclear weapons.
Belgium, the Netherlands, and Italy have also chosen the F-35s for their nuclear sharing duties. While it’s a big deal for Lockheed, all the defense news of late has already priced in major gains for the company:
- Lockheed rose 1.6% in pre-market trading Monday, but then evened out — the stock is already up 28% on the year because conflict means business.
- The number of F-35s Germany plans to order is still unknown — a single F-35 costs $100 million and Germany plans to replace 90 Tornado bombers, but that could ultimately be with a mix of different aircraft.
What’s War Good For? Spending, and not just in Germany. On Saturday, US president Joe Biden greenlit $200 million in US military aid for Ukraine, bringing the total amount of US support to $1.2 billion since January 2021, according to the White House. For context, the US distributed roughly $11 billion overall in military aid in fiscal year 2020 (the most recent year for which data is available).