2021 was a pivotal year for Raytheon.
Twelve months ago, there was uncertainty around what lay ahead for the Waltham-based defense juggernaut. On the one hand, Raytheon had recently completed its mega-merger with United Technologies and stood poised to dominate the defense industry. It also had a cozy relationship with the Trump administration and unparalleled access to some of Trump’s top advisers, news reports showed.
On the other hand, a new administration was coming in. The Biden team was looking to end longstanding conflicts in the Middle East and talking tough on one of Raytheon’s key customers, Saudi Arabia, promising various crackdowns, including a limit on weapons sales.
Raytheon expressed little concern. A few days after Biden’s inauguration, CEO Greg Hayes told investors that he expected a major arms deal with a “Middle East” customer could be scrapped, writing off over $500 million in potential sales for an offensive weapon system. But when asked if the new administration would change the company’s financial outlook, and specifically business in the Middle East, Hayes wasn’t too worried.
“Peace is not going to break out in the Middle East anytime soon,” he said. “I think it remains an area where we’ll continue to see solid growth.”
Today, the murky outlook for one of Massachusetts’ largest employers seems clearer, defense experts said, and growth seems to be an accurate assessment. Raytheon’s stock price has climbed 25 percent; the company has dodged congressional pressure to block billions in arms sales to Riyadh; and it has made seminal advances into new weapons technology that could become lucrative as Washington enters an arms race with China.
Brian Garvey, the assistant director of Massachusetts Peace Action, which advocates against Raytheon, said the company’s “unexpectedly good year” did not surprise him, specifically noting the power the company carries among lawmakers in Washington.
“Raytheon likes to claim ... it doesn’t make policy,” he said in an interview. “But in fact, because of their lobbying, and the revolving door, they have massive influence on policy.”
Founded in Cambridge in 1922, Raytheon has grown into the country’s second-largest defense manufacturer. Known most for its Patriot missile system, it turned a tough decade — years of declining profits and struggles from federal budget cuts — into one capped with a $135 billion blockbuster merger with United Technologies in 2020. (The company’s current market value hovers around $127 billion.)
More so than other defense contractors, a key part of Raytheon’s growth over the years has stemmed from arms sales to foreign countries, Saudi Arabia chief among them. The company’s history with the kingdom dates to the 1960s, and in 2017, it established a permanent presence in the country in a ceremony witnessed by Trump and the king of Saudi Arabia. In 2018, Saudi Arabia comprised roughly 5 percent of Raytheon’s annual sales, about $340 million.
But as a new administration came to power in Washington, that relationship made it particularly difficult to gauge how Raytheon might fare. Under President Trump, Raytheon faced scrutiny. Saudi Arabia used its bombs to kill women and children in Yemen, but it still pushed forward on $500 million in sales to the country.
When the Biden administration took over, things seemed like they would change. The administration quickly put a temporary freeze on Saudi arms sales, threatening a chunk of Raytheon’s business. Company officials also said they lost $75 million in annual revenue when Biden pulled US forces out of Afghanistan.
At the same time, the company faced significant pressure this year from federal lawmakers like Senator Rand Paul and Senator Bernie Sanders. The duo tried to pass an amendment in the national defense bill that would pause $650 million in arms sales to Saudi Arabia, including 280 Raytheon-made missiles and nearly 600 missile launchers.
But the amendment failed to pass the Senate, meaning the national defense bill Biden signed last week was stripped of language that would impact Raytheon’s bottom line. The Biden administration opposed the anti-Saudi amendment, upsetting arms control activists who felt the administration was backing down on its tough stance against Saudi Arabia.
William Hartung, a senior fellow at the Quincy Institute for Responsible Statecraft, a foreign policy think tank, said that the turn of events to Raytheon’s favor was a “moral stain” on federal lawmakers, and suggested one reason sales to Saudi Arabia have turned out differently than expected.
“Historically, Raytheon has used all the lobbying clout at its disposal to block any decisions that would limit its arms sales to Saudi Arabia and other repressive regimes,” he said in an e-mail. “This case was likely no different.”
Raytheon spent $12.7 million on federal lobbying in 2021, according to OpenSecrets, a government transparency nonprofit, more than any other defense contractor. At the same time, the Government Accountability Office, a watchdog agency, found in September that Raytheon employed more former Defense Department officials — roughly 315 — than any other major defense contractor.
Now, with 2022 looming, it appears Raytheon is positioning itself to take advantage of the Biden administration’s shift toward China.
In recent months, Hayes went on television talking about how China’s advances in hypersonic missile technology pose an existential threat to America. He argues that China is several years ahead of the United States in developing this military technology, which can fly lower and faster than traditional missiles and penetrate missile defense systems.
“The most destabilizing threat to the homeland,” Hayes called it. “The time to react is very, very short.”
The seemingly inflammatory language, abnormal for the tight-lipped defense firm, came shortly after Raytheon had its first successful test of a hypersonic missile that could lead to a lucrative contract with the United States Air Force. For activists, it was no surprise and signals what lies ahead.
“A new arms race to counter the rising power of China is going to make a fortune for the military-industrial complex,” Garvey said. “Especially Raytheon.”
Pranshu Verma can be reached at pranshu.verma@globe.com. Follow him on Twitter @pranshuverma_.
January 03, 2022 at 04:15AM
https://www.bostonglobe.com/2022/01/02/business/they-have-massive-influence-how-raytheon-turned-potentially-hard-year-into-good-one/
‘They have massive influence.’ How Raytheon turned a potentially hard year into a good one. - BetaBoston
https://news.google.com/search?q=hard&hl=en-US&gl=US&ceid=US:en
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