Sharon Terlep

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I would say nobody's totally insulated. The nature of supply chains today are parts go back and forth. There's nobody in this industry that is reliant entirely on the United States. That said, unlike most complicated global supply chains, the supply chain for building defense products, jets, missiles, all that type of thing is much more protected and U.S.-based than, say, cars or home appliances.

I would say nobody's totally insulated. The nature of supply chains today are parts go back and forth. There's nobody in this industry that is reliant entirely on the United States. That said, unlike most complicated global supply chains, the supply chain for building defense products, jets, missiles, all that type of thing is much more protected and U.S.-based than, say, cars or home appliances.

Absolutely. And we're hearing that privately, but also publicly. Boeing CEO Kelly Ortberg talked about there's the cost that we could incur by the parts that we have to import. But then there's the cost of having markets shut off to us because of trade wars. And like everything in this industry, that's complicated as well. The big news last week was China.

Absolutely. And we're hearing that privately, but also publicly. Boeing CEO Kelly Ortberg talked about there's the cost that we could incur by the parts that we have to import. But then there's the cost of having markets shut off to us because of trade wars. And like everything in this industry, that's complicated as well. The big news last week was China.

Some Chinese airlines started literally flying planes, sending Boeing jets back to the United States rather than paying tariffs, which was painful for Boeing financially in the short term. At the same time, the reality is China relies on U.S. parts makers and Boeing for jets, engine parts for a lot of things. And so they quietly lifted some of their tariffs on U.S. aerospace parts.

Some Chinese airlines started literally flying planes, sending Boeing jets back to the United States rather than paying tariffs, which was painful for Boeing financially in the short term. At the same time, the reality is China relies on U.S. parts makers and Boeing for jets, engine parts for a lot of things. And so they quietly lifted some of their tariffs on U.S. aerospace parts.

There is cost cutting, as you've said, and particularly in the DOD, they're coming down on these contracts and these companies that are overspending and over budget. They're trying to tighten that up. At the same time, as there's cuts throughout the entire government, President Trump has recommended a $1 trillion cut. defense budget. So that would be a 12% increase from the prior year.

There is cost cutting, as you've said, and particularly in the DOD, they're coming down on these contracts and these companies that are overspending and over budget. They're trying to tighten that up. At the same time, as there's cuts throughout the entire government, President Trump has recommended a $1 trillion cut. defense budget. So that would be a 12% increase from the prior year.

So it's one sector of the government that while there's perhaps an expectation of efficiencies, there's also an expectation that there's more spending. As much as Europe would like to be more self-reliant, the conflict there, one European industrial company CEO told us that the peacetime in Europe is over and everybody's building for it. And that's going to require some purchases from U.S.

So it's one sector of the government that while there's perhaps an expectation of efficiencies, there's also an expectation that there's more spending. As much as Europe would like to be more self-reliant, the conflict there, one European industrial company CEO told us that the peacetime in Europe is over and everybody's building for it. And that's going to require some purchases from U.S.

companies.

companies.

You saw with earnings at a time that's hard for a lot of big industrial companies, Boeing, for example, it's still burning cash, but almost half as much as it had been a year ago. So $2.3 billion in earnings. in cash burn much better than expectations. GE and RTX put estimates on how much they would lose from tariffs for GE. It was about $500 million. RTX, it was around $850 million.

You saw with earnings at a time that's hard for a lot of big industrial companies, Boeing, for example, it's still burning cash, but almost half as much as it had been a year ago. So $2.3 billion in earnings. in cash burn much better than expectations. GE and RTX put estimates on how much they would lose from tariffs for GE. It was about $500 million. RTX, it was around $850 million.

Lockheed and Northrop, both forecasts that didn't thrill investors. So you saw that in their stock price. So it is very much kind of a mixed bag out there.

Lockheed and Northrop, both forecasts that didn't thrill investors. So you saw that in their stock price. So it is very much kind of a mixed bag out there.

You'll hear executives say, this is why we do this, because a lot of times just the nature of air travel is when times of economic and geopolitical uncertainty, people are maybe less likely to travel, but that's also when defense spending goes up. So certainly a case can be made that that's good. I'm The question is, can they execute well on the defense side?

You'll hear executives say, this is why we do this, because a lot of times just the nature of air travel is when times of economic and geopolitical uncertainty, people are maybe less likely to travel, but that's also when defense spending goes up. So certainly a case can be made that that's good. I'm The question is, can they execute well on the defense side?