Slow manufacturing and price gouging threaten the new U.S. military arms race
Updated April 14, 2023 at 1:01 PM ET
NATO countries can't make munitions fast enough to fight 21st century wars. Fixing that is going to be messy.
Those explosions that knock out Russian tanks, the artillery rounds that flatten columns of conscripts invading Ukraine — in one sense, much of that mayhem comes from rural Iowa.
Workers at the Iowa Army Ammunition Plant in the southeast corner of the state fill the 155-millimeter shells fired by western howitzers donated to Ukraine. But they aren't making them fast enough to meet demand.
"The Ukrainians have been burning through in one month what the United States produces in an entire year," says Mark Cancian, a senior advisor at the Center for Strategic and International Studies.
That's in addition to all the Soviet-standard munitions Ukraine forces burn through. Cancian says the United States has sent more than 1 million of those artillery rounds to Ukraine. Before the war, the U.S. was producing fewer than 13,000 of them a month and that's increased to about 20,000 now, he says.
So, Russia's invasion of Ukraine highlights a threat to the United States. Cancian says NATO forces could run out some kinds of ammunition if there's a war with China or some other major power. And we don't make the stuff fast enough. The Pentagon has launched an urgent effort to speed up munitions production, but that presents another danger: price gouging.
In the meantime, however, the U.S. military is digging into its global stockpile and foraging for 155-milimeater shells from among its allies, according to Cancian. South Korea has reportedly agreed to "lend" the U.S. 500,000 shells in an agreement that appears tailored to ease the shortage without directly contributing to the Ukrainian war effort. The U.S. bought 100,000 shells from South Korea last year.
The U.S. has entered a new era of "potential wars with Russia and China" and "is not ready"
U.S. industrial might supplied Allied forces during World War II with crushing superiority in aircraft, artillery and tank production.
The Cold War that followed kept U.S. weapons factories humming but when the Soviet Union collapsed in 1991, that arms race all but ended.
It was time for a "peace dividend" that would allow America to shift more of its vast economic firepower from guns to butter. The deputy secretary of Defense at the time, William Perry, called a meeting to break the news to the defense industry. It became known as "The Last Supper."
"He (Perry) told them that there was not going to be enough business to keep them all going, that they would need to consolidate," Cancian recounts. "So, industry listened and consolidated, and as a result was able to weather the transition to a post-Cold War environment. But it squeezed out a lot of capacity."
Dozens of defense contractors collapsed post the Cold War, shedding about a third of U.S. military arms production capacity.
It made perfect sense at the time but times have changed. Cancian says the country has entered a new era of potential wars with Russia and China. And, he says, the U.S. is not ready.
NATO countries have skimped on buying rockets and ammunition for tanks and artillery. Cancian says munitions tend to be the first thing cut to balance defense budgets in peacetime because ammo just isn't as glamorous to buy.
"If you buy an aircraft, a tank, you can see it out there for 20 or 30 years. It provides obvious deterrence. It provides obvious military capability," he says. "You buy ammunition, you just put it into a bunker, and it sits there for decades."
But a ship or plane that runs out of missiles isn't an asset, it's just a target.
The Pentagon recognized the problem years ago. In 2019, it launched an effort to modernize its aging ammunition plants, like the one in Iowa, and the Lake City Army Ammunition Plant in the Kansas City area. The war in Ukraine sped things up.
In two years, the Pentagon wants to boost production of 155 millimeter artillery shells at levels six times higher than current numbers. It's also looking for dramatic jumps in missile production.
The big ramp-up of munitions manufacturing has major obstacles
The big ramp-up of munitions manufacturing is heading straight for some major obstacles. Hiring, for one. With the unemployment rate hovering near 50-year lows, companies are going to great lengths to find workers.
"One factory I talked to in the Midwest said that they had previously recruited in about a 50-mile diameter around their factory," says Cynthia Cook, director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies. "They had to increase it to a 400-mile diameter just to find people."
And even when manufacturers can find people, those new employees can't do any work until they have tools, parts and, you know, a factory.
"The machine tools you need might have a several-year back order," Cook says. "You have to develop your rail lines, and this is all just in the final assembly stages. You also have to surge your manufacturing industrial base, your entire supply chain."
New emergency munitions provisions allow the military to buy ammo on multi-year contracts
It's an enormous undertaking but it's one with bi-partisan political support.
"Last year, we saw Congress add $45 billion more than the president and even the Pentagon asked for," says Julia Gledhill, a defense analyst at the Project On Government Oversight, a wonky, non-partisan watchdog organization that tries to find government waste and corruption. "This year, the budget is likely to exceed $1 trillion, when you account for national security spending outside of the (Department of Defense) based budget.
Congress is flinging the purse wide open. It's changed the way the Pentagon buys munitions. Companies don't want to invest the money to scale up production only to have orders fall back when they do.
So new emergency munitions provisions in the defense budget allow the military to buy ammo on multi-year contracts. Gledhill says lawmakers have also scrapped accounting requirements that force manufacturers to justify prices, ending "certified cost pricing."
"All you need to understand is that it's the Pentagon's best to way ensure that it's making good deals and paying fair prices," Gledhill says.
Gledhill says stripping back that oversight will give defense contractors cover to jack up prices. Crazy prices for military hardware aren't making headlines the way they used to but toward the end of the Cold War, scandals erupted when the Project On Government Oversight accused the Pentagon of spending $435 for hammers, $600 for toilet seats and $7,000 on aircraft coffee makers.
Now the United States is engaged in a new arms race, some characterize the current "era of potential great power conflict" as a second Cold War. And Gledhill says it sets the table for a new era of military spending excesses.
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