President Trump has approved direct federal investment for suppliers of American bomb parts and chemicals, part of as much as $250 million in direct investments by the Pentagon to fix supply chain vulnerabilities.
The government funding for those suppliers, under the Defense Production Act, is meant to lift a sub-sector of the defense-industrial base that the Pentagon deems weak. It’s also a significant step in broader plans within the administration to remedy fragile markets and foreign dependencies among the military’s suppliers.
“There will be many more of these to come to address gaps and vulnerabilities in the defense-industrial base,” Peter Navarro, director of the White House Office of Trade and Industrial Policy, said in an exclusive interview Wednesday. “This is exactly what we should be doing and an example of how the administration is more attentive to the issue.”
“A lot of these companies have only one customer, and they became fragile due to sequestration,” Navarro said. “The need this package addresses is to move to advanced manufacturing where some of the processes in use are from 60, 70, 80 years ago.”
The White House announced Wednesday that Trump signed four memos that the Pentagon would take action to strengthen the supply chain for precursor materials, inert materials, energetic materials and advanced manufacturing techniques for the production of chemicals.
It’s the latest move since more than a dozen working groups from across government completed a study of how to reinforce gaps in the defense-industrial base.
Which companies in the munitions sub-sector would receive the funding and how much would be available were unclear, but Navarro said the total would be in the “hundreds of millions, not the billions, which is a lot of money when you’re targeting sub-tiers of the supply chain.”
The Pentagon did not immediately provide details in response to requests.
Ellen Lord, the Pentagon’s chief weapons buyer, told reporters in December that the Pentagon plans to invest $250 million over the following 12 months to remedy industrial base weak points. The funds would be authorized through the Defense Production Act’s Title III, as well as the manufacturing technology and industrial base analysis and sustainment programs.
Navarro said these investments would not be “ongoing aid” but more akin to “venture capital and seed money” to help munitions manufacturers, in some cases, make the leap to advanced manufacturing techniques.
“We don’t give away money to companies,” he said. “There is a bidding process, and the winning bid will receive the seed money.”
Though the Pentagon has made massive bomb purchases in recent years, suppliers have been strained by the start-and-stop nature of procurement over the last two decades and the lack of new designs being internally developed.
Among other issues, the Pentagon relies on single suppliers for solid-propellant rocket motors, thermal batteries and small turbine engines, while excess capacity has weakened fuze makers. For products in the second and third tiers of the munitions supply chain, 98 percent are single or sole-source.
The Pentagon’s Office of Manufacturing and Industrial Base Policy reported earlier this year that some key suppliers are foreign-owned, with no indigenous capability to produce vital parts and materials.
Dechlorane Plus 25, a component in the insulation of weapons, is solely supplied by a Belgian firm, and the Chinese manufacturer of a precursor chemical is going out of business. Dimeryl diisocyanate, a key propellant ingredient in systems like the AIM-9X and AMRAAM missiles, has one producer, and it informed the Pentagon it was about to exit the business.
Navarro, known for his hard-line views on China and trade, said the U.S. is “heavily dependent on foreign countries, particularly China, for chemicals.”
Whereas President Barack Obama ramped up precision-guided munition production for the Air Force and allies to support suppliers, the Trump administration’s approach will likely be to directly incentivize U.S. firms to reintroduce U.S. sources of materials or products.
Navarro lauded the president for accessing the tools at his disposal, reckoning Trump has the best appreciation of the defense-industrial base of any president since President Dwight D. Eisenhower.
“This was in President Trump’s National Security Strategy, that economic security is national security,” Navarro said. “When we close the gap in munitions sub-sector, we’re not only improving capabilities for the war fighter but creating good jobs and good wages for the American economy.”
Pentagon officials have said that this year the administration would remediate as many as a third of the 300 gaps and vulnerabilities identified in a defense-industrial base study, ordered by Trump and released in October.
Those weak spots were a mix of sole-source suppliers who could disappear from the market, suppliers that have already decided to leave the defense market and suppliers that are foreign-owned and could potentially pull the plug at a critical time.
When that report was released, the administration announced it would invest $70 million for a plant that produces gun components to launch modernization and risk-mitigation programs and $1 million to a facility that produces the Abrams tank, to procure better tooling.
Defense Production Act authorities are intended to help ensure the nation has an adequate supply of, or the ability to produce, essential materials and goods necessary for the national defense, as outlined by a recent Congressional Research Service report.
Under the statute, the president may provide appropriate financial incentives to develop, maintain, modernize, restore and expand the production capacity of domestic sources for critical components, critical technology items, materials and industrial resources essential for the execution of the U.S. National Security Strategy.