A quick turnaround in aerospace and defense is unlikely, since the industries still face huge challenges, according to business advisor AlixPartners. The company’s 2010 Global Aerospace & Defense Review finds that although original equipment manufacturers (OEMs) and suppliers performed surprisingly well in 2009–posting 2 percent overall growth–companies should not expect such conditions to continue.
“The strong five-year cycle of growth we have seen [ended] in 2009 and [the industry] faces a turbulent ride going forward,” said AlixPartners managing director Eric Bernardini, co-leader of the firm’s global aerospace and defense practice. “The industry made it through 2009 remarkably well, compared to most other industries because the major players reacted quickly to cut production capacity. Also, of course, U.S. defense spending continued to be strong in 2009 and (so far) in 2010, largely due to supplemental spending authorizations for the wars in Iraq and Afghanistan.
“However, because of the financial crisis and our lingering fragile economy, pressures on defense budgets will be intense going forward, which should prompt primes and non-primes alike to move now to optimize their cost structures. The commercial sector faces an economy that’s uncertain, and any recovery will be slow over the next two years,” concluded Bernardini.
