The Pentagon’s pursuit of advanced weaponry to counter global threats is facing a roadblock as major defense contractors are shying away from projects that could potentially lead to financial losses.
What Happened: The reluctance of defense contractors to take on high-risk Pentagon projects has been brewing for some time, reported The Wall Street Journal on Tuesday. This issue came to a head when Northrop Grumman Corporation (NYSE:NOC) announced a $1.2 billion charge for the initial production of the B-21 Raider, a long-range bomber designed to carry nuclear weapons.
Inflation, pandemic-related supply chain issues, and labor shortages disrupted the cost estimates for the project. This has led to the first batch of planes being more expensive to produce than initially anticipated.
Despite a surge in orders for military equipment from the U.S. and its allies, defense contractors are hesitant to take on projects with high potential for cost overruns. This has led to companies like Northrop Grumman and L3Harris Technologies Inc (NYSE:LHX) missing out on significant programs.
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