Wall St. And Business Wednesdays: War Profiteers by Frida Berrigan

Raytheon is the fourth largest defense contractor in the United States,
behind Lockheed Martin and Boeing. The Massachusetts-based conglomerate
received more than $7 billion in Pentagon contracts in FY 2002. By its
own accounting, the company is involved in over 4,000 weapons programs.
As Tom Culligan, Raytheon Vice President for Business Development, put
it, "As a top tier defense electronics company, our forte is to be a
provider to major platform manufacturers, which means you see Raytheon's
brand name everywhere - from tanks and rifles to ships, aircraft and
UAVs [unmanned aerial vehicles]."

Raytheon's best-known product is probably the Patriot air defense
missile, which received massive publicity during the 1991 Gulf conflict
when it was used to defend against Iraqi Scud missiles. Analyses
performed after the conflict by Dr. Theodore Postol of MIT and the
Israeli military indicated that the Patriots were far less accurate than
U.S. officials had originally claimed, and that in fact they had missed
their targets more often than not. However, since 1991 the Pentagon has
spent $3 billion improving the Patriot missile, and now that war in Iraq
is imminent, neighboring countries are clamoring to buy them.

Another high visibility system produced by Raytheon is the Tomahawk
land attack missile, which company promotional materials describe as
"the U.S. Navy's weapon of choice." As evidenced from this passage on
their web site, the company is proud of the Tomahawk's combat record:
"Tomahawk has played a crucial role in several theater operations
including: Operation Desert Storm, Bosnia, Iraq and Kosovo. Over 300
Tomahawks were used in Operation Desert Storm alone. Since Desert Storm
in 1991, more than 1,000 Tomahawks have been fired." More than 50 of the
missiles- which (depending on their capabilities) cost between $600,000
to $1 million each- were fired in the opening salvo of the war against
terrorism in Afghanistan. The U.S. is expected to use even more- as
many as 800- in the first hours of the attack against Iraq.

Other Raytheon missile systems include the AIM-65 Maverick, an
air-to-surface missile that the company describes as "the most widely
used precision guided munition in the free world-- integrated on
virtually every fighter aircraft in the free world"; the AIM-9
Sidewinder air-to-air missile; and the top-of-the-line AIM-120 AMRAAM
(Advanced Medium Range Air-to-Air Missile), which has been sold to the
U.S. armed forces along with more than 20 other nations, including
recent controversial offers to Thailand and the United Arab Emirates.

Raytheon also specializes in radar, surveillance, and targeting systems
that are used on most U.S.-produced combat aircraft, including the Air
Force F-15, F-16, and F-22 fighter planes; the Navy's V-22 "Osprey"
tilt-rotor aircraft; and the U.S. Special Forces AC-130U and AC-130H
airborne gun ships which have been heavily utilized in the war in
Afghanistan. Raytheon calls this latest line of equipment "the
Terminator family of targeting systems."

Raytheon manufactures the "bunker buster" GBU- 28, a 5,000-pound bomb
and missiles like the TOW, Maverick and Javelin, all of which were used
in "Operation Enduring Freedom" in Afghanistan. In addition to the
missiles, Raytheon also builds sensors and radars for unmanned and
manned reconnaissance airplanes used extensively in Afghanistan.

The company is also a major arms exporter, with billions in overseas
arms sales in the past decade to a client list that includes Israel,
Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia, Oman, Singapore,
Greece, Taiwan and South Korea.

As the fourth largest defense contractor, and a company that not only
makes missiles but also the new high tech weapons of war like defense
electronics and information systems, Raytheon is well positioned to
benefit from war in Iraq. Already the company has won a number of
lucrative contracts from the U.S. military, and there is a lot of
interest in their missiles and weapons from foreign markets as well.

"Raytheon makes missiles, and it makes defense electronics, and it
makes information systems, and this budget is heavily oriented to all
three," said Loren Thompson, defense analyst with the Lexington
Institute. In January 2003, Raytheon reported that is fourth quarter
operating profit doubled. Raytheon CEO Daniel Burnham boasts that the
"market is higher today than we thought a year ago. We are perfectly
aligned with the defense department's priorities."

As analyst Robert Friedman of Standard & Poor notes, "Raytheon seems to
be getting their hands around things and stanching the red ink. It helps
that the missile and electronics businesses are growing solidly. But the
company was starting from a low base. Thus, the fact that Raytheon
reported loses of $15 million for the fourth quarter is a significant
improvement over the $162 million in losses reported a year earlier.

Despite this rosier picture and a host of new contracts from the U.S.
military in preparation for war in Iraq, Raytheon has announced layoffs
in both its civilian and military sectors. At the end of February, the
company announced 300 layoffs at its Andover, MA plant, saying that the
Patriot missile system's poor overseas sales made this a necessity. In
the past year, the company has laid off more than 1,400 people. It is
planning on laying off as many as 600 jobs at its Kansas aircraft
division in 2003.

The 2004 Military Budget Includes Billions for Raytheon
· The Navy has requested $1.2 billion to develop future ships like the
DDX destroyer. Raytheon integrates the electronics for those vessels.

· The Air Force requested $80 million for 325 AGM-154 JSOW missiles, a
major increase from last year's request of $12.2 million for 18
missiles. Their request for AIM-9X air-to-air missiles is $69.1
million, for 386 missiles, a $13.2 million increase from last year.

· The Army's budget request includes $140.7 million for 901 Javelin
anti-tank missiles, which Raytheon co-produces with Lockheed Martin,
$26.4 million for 200 TOW 2 missiles, and $7.3 million for the new
SLAMRAAM (surface launched medium range anti-air missile).

Like other major weapons makers, Raytheon has made a significant
"investment" in political influence and access in Washington. Since
1996, the firm has made more than $3.3 million in soft money and
Political Action Committee (PAC) donations, ranking fourth in donations
among major defense contractors in the run up to the year 2002
elections, the most recent cycle for which full statistics are
available.

Because it has major facilities in New England, the company has
traditionally had clout with key Democrats in the Massachusetts
delegation. But the company's pattern of contributions in recent years
has leaned heavily toward Republicans, moving from a 35%/65%
Republican/Democratic split in 1994, the year before the Republicans
took control of the House of Representatives, to a 58%/42%
Republican/Democratic split during the most recent election cycle, which
culminated in the 2002 mid-term Congressional elections.

In order to keep its Democratic contacts active, Raytheon served as a
major corporate sponsor of a fundraiser for the conservative "Blue Dog"
Democrats, a group that generally favors high military spending and pet
industry projects like missile defense at the 2000 Democratic National
Convention in Los Angeles.

When Massachusetts Governor Mitt Romney wanted to celebrate his
inauguration in January, he called on corporate donors to underwrite the
$750,000 gala. Raytheon generously contributed $5,000 and gave an
additional $1 million to the Democratic Party. It is crucial that
Raytheon do something to keep Massachusetts lawmakers happy, because the
company has pioneered squeezing tax breaks out of state and local
governments. In 1995 the company threatened to leave Massachusetts if
the State Legislature failed to pass a bill that would drastically
reduce Raytheon's tax burden. In exchange, Raytheon pledged to maintain
at least 90% of their payroll and property levels in the state. Since
then, the company has made thousands of layoffs and reduced its office
and factory space, but maintains that it is in compliance with the 1995
law.


Frida Berrigan is Senior Research Associate For The World Policy Institute. World Policy Institute Senior Research Fellow, Bill Hartung, will appear live in the BlackElectorate Chat Room, tomorrow, Thursday, March 27 at 1pm EST