Vice Chairman, Global and U.S. Aerospace and Defense Industry Practice, Deloitte Consulting Tom Captain is one of Deloitte’s most experienced Aerospace, Defense and Airline Industry partners, with 27 years’ experience at the consulting firm, serving clients such as Boeing, Raytheon, Honeywell, BAE Systems, Rockwell Collins, Japan Aircraft Development Corp., Hughes Aircraft, Lockheed Martin, GE Aircraft, GE Nuclear, Hawker Beechcraft and several of their customers, investors and suppliers. He specializes in operational restructuring, industry strategy, investor due diligence, cost reduction, product development, engineering operations, manufacturing productivity improvement, enterprise systems and program management across multiple functions. At the dawn of a new political era, Captain talks with us about what he sees on the Aerospace horizon.
What are some potential effects that you see an Obama administration having on the aerospace/ defense industry?
TC: More focus on weapons development to fight the wars of the future, such as increased emphasis on unmanned aerial vehicles (UAVs), cyber-security, asymmetric warfare, surveillance, intelligence and reconnaissance systems.
What are the issues that keep you up at night?
TC: The once-in-a-generation economic turmoil we’re experiencing will compete with defense spending priorities, and the trade-offs will be challenging. Events continue to demonstrate that we live in a dangerous and unpredictable world, where violence and aggression can erupt overnight. Threats can destabilize world peace efforts with no notice—witness the Russian invasion of Georgia, the recent Gaza actions, the Mumbai attacks, the continued threat of a nuclear Iran and North Korea, and so on.
How about areas you’re hopeful about?
TC: The world has become intertwined economically like never before, which creates incentives for former adversaries to work together for the cause of peace. Dependent trading partners like China need to think twice before pursuing an aggressive initiative with the U.S. over, for example, Taiwan or risk suffering a potentially devastating impact to their economy. This co-dependency has created a beneficial incentive for countries to compromise and work together rather than resort to violent conflict.
What other changes do you see on the horizon for the manufacturing industry, considering both the economy and a Democratic White House and Congress?
TC: The commercial aircraft sector certainly is experiencing a short-term downturn due to the health of airlines worldwide, although longer-term forecasts are for above-average growth in revenue passenger miles, especially in the China/India/Middle East regions. On the defense side, we expect U.S. defense budgets to moderate for two years, then shrink somewhat—some of this occurring due to the expected pullback from Iraq. As a result, defense contractors will be entering and growing in adjacent fields such as defense services, systems integration, software development, cyber-security, homeland security and so on.
Do you have advice for finishing companies seeking to stay afloat during the downturn?
TC: Defense companies are already getting ready for the pending downturn by tuning their cost structure, supply chains, overhead accounts and property plant and equipment, and finishers that supply these companies should be doing the same. As I mentioned, they are looking to grow their top line with entry into adjacent markets where they know the customer segments and technologies.