Defence giants Lockheed and Northrop see billion-dollar deals as Pentagon accelerates missile arsenal production

The United States Department of Defense penned a new deal with defence giants Lockheed Martin and Northrop Grumman in an effort to ramp up production capacity for parts used in missile defence systems.

The deal, which will impact the Patriot PAC-3 and THAAD missile interceptor systems, was announced on Monday.

“Building the Arsenal of Freedom requires robust, dynamic supply chains at every level of the industrial base,” said Michael P. Duffey, Undersecretary of War for Acquisition and Sustainment, in a release.

The deal will triple Patriot production and quadruple THAAD system production. While the agency did not release the terms of the agreement, the US Army on Wednesday awarded Lockheed Martin a contract worth more than $58bn to produce Patriot interceptor missiles.

That deal converted a previous one-year, $4.7bn contract the Pentagon issued in April into a seven-year agreement for interceptors.

Northrop Grumman announced that its share of the agreement exceeds $3bn.

“Our long-term investments in breakthrough manufacturing technologies and resilient supply chains let us pivot from steady production to a production surge in record time,” Ben Davies, corporate vice president of Northrop Grumman, said in a media release.

The company said that, because of investments made in 2021, the Falls Church, Virginia-based defence giant has nearly tripled production capacity at its Allegany Ballistics Laboratory in West Virginia, while production at its Maryland facility has increased by 25 percent.

The new deal comes as Pentagon negotiators have pushed to accelerate production agreements, as US involvement in several conflicts, including with Iran, and its continued military assistance to Ukraine, have put pressure on US stockpiles.

Ukraine, a key US ally, is running low on Patriot interceptors, the country’s only weapon capable of intercepting ballistic missiles.

On Wall Street, both companies’ stocks surged as US markets opened for the week. Northrop Grumman rose more than 1 percent in early trading, while Lockheed Martin gained 0.7 per cent.