After the Russia-Ukraine conflict triggered a global surge in military spending, Western defense companies have made a fortune. This year, the "cash dividends" for shareholders of the eight largest European defense companies will reach nearly $5 billion, which is the highest level in 10 years. However, the outside world generally questions whether these defense companies have reinvested the money back into national defense and production after making a large amount of euros and dollars. Instead, they have used this "war dividend" to repurchase shares and boost their company's stock price, thus making even more money. This move has caused great dissatisfaction among Western governments. Trump often calls on domestic arms manufacturers to increase production and reduce share buybacks. This week, he will discuss related issues with defense contractors at his Mar-a-Lago estate.
The Russia-Ukraine conflict has sparked a new wave of military sales in the West
According to the Financial Times, after the outbreak of the Russia-Ukraine conflict, global military spending surged sharply. Russia's military production mainly supplies the Russian army for combat, leaving it unable to cope. In addition, the good performance of US and European weapons on the Ukrainian battlefield has led to most global weapon orders flowing into the West. At the same time, the West has also been placing massive orders with its own arms manufacturers to support Ukraine's war. As a result, these arms manufacturers have made a fortune.
The Financial Times commissioned the research firm "Vertical Research Partners" to analyze data from the past 10 years of the eight largest defense companies in Europe. It is worth noting that Airbus was not included due to its enormous scale. The study shows that the eight largest defense companies in Europe plan to distribute nearly $5 billion in dividends to shareholders this year, which is the highest amount in 10 years. According to the information, the way these eight companies distribute dividends mainly involves increasing cash dividends (i.e., directly paying money to shareholders).
It is worth noting that the six major U.S. defense companies - Lockheed Martin, General Dynamics, Northrop Grumman, Raytheon Technologies, Harris Technologies, and Huntington Ingalls Industries - set a record high for shareholder dividends in 2023, which is the highest in the past 10 years. Although the current shareholder dividend amount has decreased, the relevant data is still much higher than before the Russia-Ukraine conflict broke out.
Arms dealers are making money, but these funds are not being invested in production
It is worth noting that from the perspective of enterprise expansion and production, defense industrial groups and their shareholders should further invest capital to expand production lines, improve production efficiency, and prepare to take on more orders. However, the reality is different. These arms manufacturers mainly produce weapons, but ultimately, they are companies that aim for profit. These shareholders are essentially capitalists, and how to make money quickly is their core goal. Expanding production lines does not significantly contribute to their profits. The reason is simple: as long as an order is placed, the money is paid, and the delivery time is entirely up to them. More importantly, there are only a few major arms manufacturers in the West, so they do not face much external pressure from buyers.
After receiving the money, these shareholders will focus on their company's stock. Specifically, they will repurchase these stocks and raise the stock price, thereby increasing their own wealth. This operation is much faster than expanding production lines.
The study shows that the six major U.S. arms manufacturers have made a lot of money, but their investment in their own arms industry has slightly decreased, which is highly inconsistent with their profit levels. There is widespread criticism of these arms manufacturers' practices within the United States. Trump often urges defense contractors to consider the country more, to use more money to manufacture weapons and increase production lines to enhance military production capacity, rather than just buying back their own shares and boosting stock prices.
This week, Trump is expected to meet with several defense contractors at his Mar-a-Lago estate to discuss related topics. In October this year, U.S. Treasury Secretary Becerra also pointed out that U.S. defense companies are seriously behind in weapon delivery schedules. He hinted that the government may exert pressure as the biggest customer, urging companies to use more of their profits on R&D and production instead of large-scale share buybacks for quick gains.
Trump will discuss the issue of expanding production with arms dealers
Western analyst Cunningham said: If military spending continues to rise and is much higher than now, the importance of the defense industry to the government will become very significant. At that time, the government will start to care about the production efficiency of the arms industry. It is expected that both the U.S. and Europe will pressure their domestic defense companies to expand production lines, increase capacity, and increase investment in military manufacturing in the coming period.
Original article: toutiao.com/article/7589477506437235254/
Statement: This article represents the views of the author.