Defense Business Brief: Army IED-hunting planes leave Middle East; Senate approves corporate buyback tax; Pentagon invests in black powder factory; and more.

One year after the chaotic U.S. withdrawal from Afghanistan, we have yet another example of how the Pentagon’s future priorities are shifting away from counterinsurgency battles.

A small fleet of Army Dash-8 intelligence planes that have hunted for roadside bombs over Afghanistan and Iraq for more than a decade flew their final mission for U.S. Central Command on July 31, the service announced this week. 

The fleet, managed by defense firm Leidos, were equipped with hyperspectral, electro-optical/infrared, and high-resolution imagery sensors. The Army is now looking “to transition the sensor capabilities to other efforts.”

The planes “proved to be one of the most highly sought-after assets in CENTCOM,” which oversees U.S. military operations in the Middle East and Afghanistan, the Army said in a statement.

In recent years, the Pentagon has been moving away from weapons designed for counterinsurgency battles and more toward new types of technology to counter China.

The Senate-passed Inflation Reduction Act, the smaller version of President Biden’s Build Back Better social safety net, includes a 1 percent excise tax on stock buybacks. The tax would “incentivize big corporations to invest in their workers rather than wealthy executives and shareholders,” Senate Finance Committee Chairman Ron Wyden, D-Ore., the author of the legislation, said in a statement. 

“The excise tax on stock buybacks makes it a tiny bit less tax-efficient to return capital to investors in this way,” Capital Alpha Partners analyst James Lucier wrote in an Aug. 5 note to investors.

Here’s how much the defense firms have spent on share repurchases in the the first six months of 2022:

Lockheed Martin: $2.4 billion

Raytheon Technologies: $1.8 billion

Northrop Grumman: $640 million

General Dynamics: $1.1 billion 

L3Harris Technologies: $729 million

Boeing: None

But don’t expect a big shift in share repurchases even if the buyback tax is enacted. “We don’t expect managements to throttle back on these, even if the excise tax on buybacks is enacted,” Capital Alpha Partners analyst Byron Callan wrote in an Aug. 7 note to investors.

The Senate bill did not include language that would allow companies to write off research-and-development expenses. But there’s still hope that lawmakers will pass legislation later this year.

“Significant bipartisan support remains for restoring full expensing retroactively for 2022, but the provision still needs a legislative vehicle,” according to accounting firm Grant Thornton. “The best opportunity may be a year-end bipartisan agreement on other expiring and expired tax “extender” provisions.”

The Pentagon this week said it would invest $3.5 million in a Louisiana factory that makes black powder used as propellant in weapons. 

“The $3.5 million investment by the Department of Defense will allow the facility, owned by Estes Energetics, through its Goex subsidiary, to reopen after an accident shut down production,” the Pentagon said. “The total cost of the project is $5.3 million over two years, and it will allow production to resume at the Minden, Louisiana, facility in two years or less.” 

The money will allow Goex to hire up to 30 additional workers, the Pentagon said. The black power is used in artillery, firearms, rocketry, pyrotechnics and other weapons systems.

Northrop Grumman is teaming with Firefly Aerospace to replace Russian and Ukrainian-made engines on the Antares rocket with motors made by the American startup. “Through our collaboration, we will first develop a fully domestic version of our Antares rocket, the Antares 330, for Cygnus space station commercial resupply services, followed by an entirely new medium-class launch vehicle,” Scott Lehr, Northrop vice president and general manager, launch and missile defense systems, said in a statement.

Making Moves

The Aerospace Industries Association named Steven Jordan Tomaszewski its senior director of National Security Space. Tomaszewski was previously at The Aerospace Corporation, “where he provided objective technical advice to senior Department of Defense executives in the Office of the Under Secretary of Defense for Intelligence and Security,” according to AIA.

Barry Pavel, founding director of the Atlantic Council’s Scowcroft Center, is leaving the think tank and is joining the RAND Corp. where he will be vice president and director of the national security research division. Matthew Kroenig will become acting director of the Scowcroft Center while there is a search for a permanent director, the Atlantic Council said in an email.

Correction: Due to an editing error, last week’s Defense Business Brief incorrectly stated that a 2021 F-35 sale to Finland fell through. The web version of the newsletter has been updated.

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