WASHINGTON — The federal government has been shut down for a month, however for essentially the most half, the CEOs of a few of America’s high protection corporations say they’re not seeing a monetary impression to their enterprise — not but, that’s.
Authorities funding expired on Oct. 1, too late to place a dent into third quarter earnings, which protection executives have detailed over the previous two weeks. However though CEOs are usually not sounding the alarms to traders, they cautioned {that a} extended shut down will trigger delays to contract awards that might whittle away projected income for the yr.
“The federal government shutdown is clearly the problem. It’s disappointing the place we’re, and we’d like Congress to get collectively and resolve this case,” mentioned L3Harris CEO Chris Kubasik, who known as the shutdown “baffling” throughout an earnings name with traders on Thursday.
L3Harris is already seeing impacts to money assortment and delays within the timing of contract awards, Kubasik mentioned. For instance, the federal government might want to reopen to maneuver ahead on packages just like the Area Improvement Company’s Tranche 3 monitoring system and Missile Protection Company’s Hypersonic and Ballistic Monitoring Area Sensor.
“There’s clearly an incongruency inside the authorities. The DoW [Department of War] desires to go quick,” he mentioned, utilizing a secondary title for the Protection Division. “They meet with us on a regular basis, [telling us] we’ve obtained to go faster, after which Congress can’t fund the DoW. So we’re sort of caught between these two conditions.”
The corporate stays assured it is going to be in a position to meet its monetary steering for the yr and is at present projecting that the federal government will reopen in November, Kubasik mentioned. “Then we’ll have a busy December to compensate for every thing.”
Northrop Grumman CEO Kathy Warden famous that Northrop’s newest monetary steering for 2025 already bakes in a number of the delays the corporate anticipates by way of getting packages underneath contract, and that it doesn’t venture any “vital impression” on monetary outcomes as long as the shutdown is resolved “within the close to time period.”
“We’re assuming that this solely goes a number of extra weeks, say round mid-November,” Warden mentioned final week. “If it goes past that, we might begin to see some further delays in getting funding on contract, and even delays in receiving fee earlier than yr finish that might impression our money flows for the yr. We don’t anticipate that at the moment, but it surely’s actually one thing we’re watching. And so we’re very hopeful, as I mentioned, that the federal government will comply with reopen quickly, even when underneath a unbroken decision.”
On the identical time, she added that the shutdown is already slowing down the Pentagon’s capability to make choices on packages.
For instance, though the Pentagon’s fiscal 2026 funds has but to be permitted by lawmakers, the reconciliation laws handed by Congress earlier this yr consists of $4.5 billion to extend the B-21’s manufacturing price that’s already obtainable for the Pentagon to execute. Nevertheless, discussions with the Air Pressure to outline the specifics of the ramp-up plan — together with the max manufacturing price and the timing for the manufacturing acceleration — have “been held up a bit” due to the federal government shutdown, Warden mentioned.
Leonardo DRS is one other firm that’s anticipating the shutdown to final now not than November.
“Because it begins to go longer than that, the individuals who pay us and provides us the awards aren’t there. And so that you’ll begin to see delays in awards and delay in pay,” mentioned its CEO Invoice Lynn, who’s retiring later this yr. “However it might actually should preserve going for an extended interval — the place we’re already mainly longer than we’ve ever seen — but it surely must be a historic size earlier than we’d see an impression.”
Basic Dynamics CEO Phebe Novakovic mentioned an extended shutdown would have explicit impression on short-cycle packages the place contracts must be renewed extra regularly, though she wasn’t keen to say at what level the corporate would anticipate to see a monetary impression.
“The unsure period and future potential impacts of the federal government shutdown creates a scarcity of clear visibility into our money forecast for the rest of the yr,” she mentioned. “We’re taking prudent actions to preserve money and liquidity. If a decision might be reached within the close to time period, we’d anticipate to have the ability to obtain the forecast that I simply mentioned. Nevertheless, within the occasion of a protracted shutdown, it’s unclear how and when our money circulation can be impacted, regardless of our cautious efforts to diligently handle money.”
Novakovic laid out one such step: Following the third quarter, the corporate re-entered the industrial paper market — a monetary time period used to explain what is actually an IOU offered by an organization to assist finance brief time period money owed — which she mentioned would assist the corporate’s liquidity throughout the federal government shutdown within the occasion of gradual or nonpayment points.
Basic Dynamics is evaluating the impacts to its contracts on a weekly foundation, and whereas the shutdown has not but impacted money assortment, the furlough of sure division contracting personnel has resulted in a delay in awards, Novakovic mentioned.
“If it goes into subsequent yr, that will increase the probability this may have further impression,” she mentioned, including that “explicit strains of enterprise” might start to expire of funding.
For HII, shipbuilding packages proceed to be supported, with no impression to ongoing shipbuilding operations or the contract negotiations for the subsequent spherical of Columbia-class ballistic missile submarines and Virginia-class assault submarines, mentioned CEO Chris Kastner throughout an earnings name Thursday. Nevertheless, there was an impression to the corporate’s mission applied sciences enterprise, which Kastner characterised as “immaterial” to this point.
“We’re watching these packages carefully as they’re extra more likely to be impacted by funds timing. We proceed to assist completion of the FY26 appropriations course of as quickly as attainable to reduce the impression {that a} lapse in funding might have on our packages,” he mentioned.
Not all protection CEOs spoke at size concerning the shutdown or its impacts. Lockheed Martin CEO James Taiclet, who leads the world’s largest protection contractor, mentioned the corporate is carefully watching congressional deliberations on the shutdown and FY26 funds however “proceed[s] to see broad assist by way of all of this for nationwide protection priorities.” Two CEOs with a big industrial aerospace footprint — RTX’s Chris Calio and Boeing’s Kelly Ortberg — didn’t point out the shutdown in any respect throughout their remarks.
