Republican House could boost defense companies

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Defense corporations could be celebrating this morning – a Republican-controlled House of Representatives could mean more business coming their way.

House Republicans are more likely to advocate a stronger approach to China, according to Bloomberg.com analysis. That could be a potential boost to both Lockheed Martin and Northrop Grumman, even as Congress tries to control defense spending.

Newly empowered Republicans have already signaled their desire to focus on emerging challenges such as cyber warfare, aircraft carriers and missiles – but they also want to shift more money toward weapons programs.

The big winners in such a shift would be the makers of sea-based, anti-missile systems, submarines, destroyers and long-range drones. Alliant Techsystems Inc. could also see more government contracts. The company is developing targets to test defenses against a supersonic Chinese anti-ship missile.

House Republicans want to cut $100 billion from the nation’s discretionary spending, but have exempted military money, which makes up more than half of non-mandatory expenditures.

The White House plans to submit a flat defense budget, and analysts believe neither party will add to that budget significantly.

That news sent stocks of the top five contractors – Lockheed Martin, Northrop Grumman, General Dynamics, Raytheon and L-3 Communications – spiraling. Defense stocks are down 3.8 percent since the beginning of the year, Bloomberg said.

The Republicans will shape the Pentagon budget, focusing on weapons procurement and research, which equals $187 billion in the 2011 budget. Sec. Robert Gates is trying to maintain growth of 2 to 3 percent through 2015 in procurement and research.

China is strengthening military capabilities to extend beyond its shores toward the Indian Oceans and the Pacific. Republicans want the Pentagon to release more information on China’s strategy of developing weapons designed to deny U.S. forces access to areas near Chinese waters.