Northrop Grumman CEO Kathy Warden Talks Golden Dome Project

Northrop Grumman Chair, CEO and President Kathy Warden says the firm expects to have a "decent share" of the Golden Dome, while speaking to Bloomberg Television's 'Balance of Power' Co-Anchor Kailey Leinz during the DC Newsmaker Event covering defense and policy in Washington DC. Warden also says the company committed to providing the US with more than 100 B-21 bombers and that the defense industry needs government support in the rare Earth mineral arena.

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Speaker 1: Bloomberg Audio Studios, podcasts, radio, news.

Speaker 2: Kathy, thank you so much for your time. It's an

Speaker 2: incredibly interesting time, I'm sure, to be running a defense prime.

Speaker 2: And I wonder how you're thinking, not just about Northrop

Speaker 2: Grumman's wartime footing now, but how the current conflict we

Speaker 2: are embroiled in in the Middle East has made you

Speaker 2: consider what wartime footing of the future needs to look like.

Speaker 1: Well, first of all, thank you for having me. It's

Speaker 1: great to be with you. And it is a dynamic

Speaker 1: time in the industry that Northrop Grumman operates in. We

Speaker 1: are certainly on a wartime footing because we've been quite

Speaker 1: active supporting the administration in operations around the globe, as

Speaker 1: you know, and at the same time working to build

Speaker 1: the capability and capacity that we need for the future,

Speaker 1: both as a nation and for our allies. So that

Speaker 1: work for us has meant expanding across much of our

Speaker 1: portfolio in the ability to build faster and building plants

Speaker 1: that allow us to have the capacity so that we

Speaker 1: can accelerate the rate at which we are building product

Speaker 1: and delivering them to the U.S. government.

Speaker 2: Well, and on that exact point, obviously with the depletions

Speaker 2: we have seen in the Middle East, this administration wants

Speaker 2: to be rebuilding munitions. Specifically, they want them ASAP. And

Speaker 2: I wonder how prepared the defense industrial base and the

Speaker 2: supply chain is to meet that moment now, or if

Speaker 2: there are areas in which more serious investment is crucially needed.

Speaker 1: There's certainly the need for more investment, but I will

Speaker 1: say that we have been investing. When you look at

Speaker 1: the work that we've been doing in our company, we

Speaker 1: didn't start this last year or even a couple of

Speaker 1: years ago. Certainly, as we saw increases in national security spending,

Speaker 1: both by the U.S. and our partners around the globe,

Speaker 1: we started to plan for and build capacity for that moment.

Speaker 1: We just in the last two years alone have added

Speaker 1: 2 million more square feet of manufacturing space. We've opened

Speaker 1: those facilities they are producing today. I'll be at a

Speaker 1: facility tomorrow walking the floor and it is a buzz

Speaker 1: with activity in our manufacturing plants today. So that work

Speaker 1: has been underway and is delivering results today. With that said,

Speaker 1: there is more capacity expansion planned because, to your point,

Speaker 1: the administration sees the need for far more, sometimes two times,

Speaker 1: four times, the amount of capacity that we have in

Speaker 1: place at this moment.

Speaker 2: Well, and when you consider what they're trying to ramp up,

Speaker 2: things like that and Patriot systems, because we've been using

Speaker 2: them for air defenses in the Middle East, how much

Speaker 2: of that is about expanding a factory footprint versus being

Speaker 2: reliant on specific components like solid rocket motors being able

Speaker 2: to be ramped up quickly?

Speaker 1: We build solid rocket motors, as you know, and we

Speaker 1: have seen that that area of the supply chain had

Speaker 1: limitations because in most cases, each weapon only had one

Speaker 1: company qualified to produce. And when you have an expectation

Speaker 1: to very dramatically increase capacity, One company trying to do

Speaker 1: that across multiple weapon systems obviously has limitations. So the

Speaker 1: government has sought more sources. And for tactical missiles, Northrop

Speaker 1: was not a primary provider. And we're getting the opportunity

Speaker 1: now to become a second source supplier for solid rocket

Speaker 1: motors in that area. We had focused more on strategic missiles,

Speaker 1: I think bigger solid rocket motors. And now we are

Speaker 1: getting qualified to produce some of the smaller ones for

Speaker 1: products like PAC-3.

Speaker 2: Do you see more room to grow in the munitions

Speaker 2: space specifically, since it seems that that is an area

Speaker 2: of acute focus for the Pentagon right now?

Speaker 1: Yes, we believe that's going to be one of the

Speaker 1: fastest growing parts of our market, if not the fastest

Speaker 1: growing market. And we are positioned with capacity. I mentioned

Speaker 1: that 2 million square feet of manufacturing space. Some of

Speaker 1: that is dedicated to solid rocket motor production. And we

Speaker 1: had a head start there. We started that investment more

Speaker 1: than three years ago. So we've already doubled capacity. We

Speaker 1: have another plant that we are building today that will

Speaker 1: take capacity to about 3x what it was when we

Speaker 1: started this expansion. So that positions us as we are

Speaker 1: signing these new contracts and becoming qualified to be a

Speaker 1: supplier to be ready to go now.

Speaker 2: Well, I want to go back to your point about

Speaker 2: how sometimes there is one supplier of one key component.

Speaker 2: Is that the biggest challenge in scaling up so much

Speaker 2: of this is specific bottlenecks in the supply chain? such

Speaker 2: as that, and do you feel like you have enough

Speaker 2: visibility into the sub-tier parts of the supply chain?

Speaker 1: We have been focused on increasing that visibility all the

Speaker 1: way down the supply chain. We've always had very good

Speaker 1: visibility to our first tier and even our second tier supply,

Speaker 1: but we now are down to the material level, the

Speaker 1: very commodities that our first and second tier suppliers are

Speaker 1: relying upon, and we're doing capacity planning with those suppliers

Speaker 1: as well. so that we can assure from the very

Speaker 1: basic parts, which in a solid rocket motor is chemicals,

Speaker 1: for instance, that we have enough supply to build all

Speaker 1: the way up to the manufactured product.

Speaker 2: And you're doing this work as a company, but what

Speaker 2: is the Pentagon asking of you in terms of its

Speaker 2: own visibility into that? Are they seeking information from you

Speaker 2: or giving you information?

Speaker 1: It's a little bit of both. It is a partnership.

Speaker 1: It is mostly asking for the information that we have

Speaker 1: and then offering to supplement that because they can see

Speaker 1: beyond our portfolio into the demands of other companies that

Speaker 1: are supplying them, and they have a fuller picture of

Speaker 1: what that supply ecosystem looks like in the aggregated demand.

Speaker 2: Well, trying to get that fuller picture on the Pentagon side,

Speaker 2: the WD Defense Secretary Feinberg sent out a memo just

Speaker 2: last week asking for more specific cost and pricing data.

Speaker 2: And I wonder what your reaction to that was and

Speaker 2: whether or not it is asking for something overly burdensome

Speaker 2: for you and other companies, or if this is relatively

Speaker 2: on par with what Northrop already would be providing as

Speaker 2: it seeks a contract.

Speaker 1: In most cases, we're already providing that data today. And

Speaker 1: we have systems set up that allow us to collect it.

Speaker 1: And we are all for transparency. And so we're happy

Speaker 1: to provide it. There are companies that don't have systems.

Speaker 1: They're called cost accounting systems. that collect that data and

Speaker 1: have auditability and transparency to the government for that data today.

Speaker 1: And so I am sure that from some in industry,

Speaker 1: you might hear that this is going to require them

Speaker 1: to take extra steps. For the most part, this is

Speaker 1: something that we already are structured to do.

Speaker 2: Well, and let's talk about different contracts you may be

Speaker 2: doing that for. Northrop is competing right now for a

Speaker 2: Navy fighter, the FAAXX. could be awarded sometime soon. And

Speaker 2: I just wonder what you feel is the company's positioning

Speaker 2: right now in terms of being well positioned to potentially

Speaker 2: have to develop that program from the ground up while

Speaker 2: also trying to scale up everything else, B21 included.

Speaker 1: We've spent a lot of time looking at how we

Speaker 1: will execute the program, and I feel confident in our

Speaker 1: team's ability to do that with all of the other

Speaker 1: things that we have underway. Each team gets a dedicated

Speaker 1: set of individuals who are focused solely on executing that program.

Speaker 1: And at the same time, our company has resources that

Speaker 1: can surge to support aspects of our business, like an

Speaker 1: FAXX program, which would have a steep ramp at the beginning.

Speaker 1: And that has worked very well for us. We perform

Speaker 1: well in those early days to get a program off

Speaker 1: to a running start. And in this case, we've ensured

Speaker 1: that we have suppliers ready to do the same, investing

Speaker 1: alongside of us and prepared to execute.

Speaker 2: Well, can you broadly outline, and you don't have to

Speaker 2: get too specific, but what the Pentagon defense industrial base

Speaker 2: experts have wanted to see from you in terms of

Speaker 2: sourcing material?

Speaker 1: They have asked for transparency into our supply chain on

Speaker 1: most of our contracts, and we are providing that to them.

Speaker 1: And in many ways, that's something we already are doing ourselves.

Speaker 1: We want to make sure that that capacity exists, that

Speaker 1: we know exactly where it's coming from, and that we

Speaker 1: have price transparency so that we can negotiate on behalf

Speaker 1: of ourselves, but also the federal government in those engagements.

Speaker 1: What I will say is there are certain aspects of

Speaker 1: the supply chain, take microelectronics, for instance, where we have

Speaker 1: some dependency on rare earths. We need government assistance in

Speaker 1: those areas because we aren't just working to build a

Speaker 1: supply chain. We need a supply chain that has national

Speaker 1: security resiliency built in. And if the economics do not

Speaker 1: support those minerals being mined, packaged, and available from trusted sources,

Speaker 1: we can't change that broader ecosystem alone as a company.

Speaker 1: The federal government can bring together tools in their toolbox.

Speaker 1: that allow them to do that, whether it's just basic

Speaker 1: foreign policy, whether it's through laws and regulations, or whether

Speaker 1: it's through subsidies and financing to support those industries. So

Speaker 1: you see that happening, and that's really important to bolster

Speaker 1: the resiliency of our supply chain at the lowest level.

Speaker 2: Well, because you raised rare earths and critical minerals, I

Speaker 2: wonder if you get concerned at all as you see,

Speaker 2: for example, the U.S. potentially threatening to secondary sanction Chinese

Speaker 2: banks over providing financial lifeline to Iran. If China could

Speaker 2: choose to retaliate by once again slapping export controls on

Speaker 2: those things, do you have stockpiles that you can draw upon?

Speaker 2: I just wonder at what point it would become mission

Speaker 2: critical to that be an issue that be resolved for

Speaker 2: the sake of the defense industry.

Speaker 1: We do have stockpiles that we can rely on, and

Speaker 1: we have a plan, more importantly, to remove those dependencies

Speaker 1: over time. And that is happening, as I said, in

Speaker 1: conjunction with steps the U.S. federal government is taking to

Speaker 1: enable an ecosystem of supply to exist outside of China.

Speaker 2: I want to talk about the B-21 and the investment

Speaker 2: that you were making into that program. You've committed $ 2. 5

Speaker 2: billion through 2029. What gives you the confidence to make

Speaker 2: that investment? Is there a way in which this contract

Speaker 2: is structured to ensure that those orders are going to

Speaker 2: be there to provide protection of those dollars that you

Speaker 2: were putting in?

Speaker 1: We have a clear demand signal from our customer that

Speaker 1: they will buy at that higher rate if we are

Speaker 1: able to produce. And we have an evaluation ongoing by

Speaker 1: the U.S. Air Force to determine a program of record size.

Speaker 1: Right now, it is at least 100 aircraft. And we

Speaker 1: anticipate that that may increase as a result of comments

Speaker 1: that have been made from COCOM commanders who have said

Speaker 1: we need more B-21s. And so we wanted to go

Speaker 1: ahead and take the first step and demonstrate that we

Speaker 1: will commit the investment to increase the rate at which

Speaker 1: we produce to enable them to consider a larger program

Speaker 1: of record.

Speaker 2: Is it the companies that should be bearing that burden,

Speaker 2: that financial risk of building out capacity such as that?

Speaker 2: Or should it be more reliant on the Pentagon itself

Speaker 2: providing that funding?

Speaker 1: I believe it should be a partnership. And in the

Speaker 1: case of B21, it is. We need a clear demand

Speaker 1: signal and one that the government will stand behind on

Speaker 1: a multi-year basis. What then they should expect of us

Speaker 1: is that we will commit the resources and make those investments,

Speaker 1: and then back to the government, we should expect a

Speaker 1: fair return for those investments. This discussion has been very

Speaker 1: prominent over the last 18 months in our negotiations, and

Speaker 1: I think we're very much aligned with the department on

Speaker 1: what we each need from each other and how these

Speaker 1: business deals should be constructed.

Speaker 2: Well, when we think about these new framework agreements that,

Speaker 2: of course, are longer in duration, has that changed the

Speaker 2: game for you? Or because some of them are notional

Speaker 2: in nature, you have to wait until they translate into

Speaker 2: an actual firm contract with money behind it before you

Speaker 2: can really action it?

Speaker 1: There has to be some trust. I mean, to your point,

Speaker 1: the intention is good. The contract is the contract. But

Speaker 1: at the end of the day, we have needed to

Speaker 1: have that trust. The US federal government operates under annual appropriations.

Speaker 1: Sometimes those appropriations aren't let on time. And so we

Speaker 1: have had to lean in as an industry and sometimes

Speaker 1: finance the federal government to keep programs going. We've had

Speaker 1: to trust that annual appropriations will continue to support programs.

Speaker 1: And year after year, those decisions can and sometimes are revisited.

Speaker 1: So there is an element of trust. But there is

Speaker 1: that in any business. You have to project demand into

Speaker 1: the future. There are very few industries where you can

Speaker 1: get that contractually committed. If I were selling to consumers,

Speaker 1: no consumer is going to promise me that they're going

Speaker 1: to buy my goods five years, 10 years into the

Speaker 1: future either. So I don't see this industry as any different.

Speaker 1: We have to have confidence in that demand signal. And

Speaker 1: often that confidence comes not just through a contract, but

Speaker 1: understanding our product, what its use is, and whether that

Speaker 1: use is going to be enduring in the threat environment

Speaker 1: that our customers are going to face. And we make

Speaker 1: those commitments.

Speaker 2: On appropriations, obviously, this administration would like to see a

Speaker 2: lot more money appropriated to the Pentagon. One and a

Speaker 2: half trillion dollars is what they've asked for. They've also

Speaker 2: asked for billions of dollars in supplemental funding. And it's

Speaker 2: not clear whether or not either of those things has

Speaker 2: an immediate future on Capitol Hill. It's a very big

Speaker 2: question as to what Congress is going to approve. And

Speaker 2: of course, we're coming up on a midterm election. The

Speaker 2: balance of power could very well change. And many of

Speaker 2: these agreements that we're talking about extend beyond just the

Speaker 2: length of a presidential term. So how do you, are

Speaker 2: you confident, frankly, that the government will be holding up

Speaker 2: its end of the bargain, even if power shifts?

Speaker 1: I am. And it's because we've now seen over multiple administrations,

Speaker 1: Democrat and Republican alike, that there has been a reconciliation

Speaker 1: of national security interest to budget priorities. And it has

Speaker 1: looked pretty constant for the last decade or so in

Speaker 1: terms of where priorities are, how that translates into programmatic

Speaker 1: funding and appropriations. And defense approach has been some of

Speaker 1: the most bipartisan bills when you look at voting. So

Speaker 1: I do have confidence that that demand signal is going

Speaker 1: to continue. and be fairly steady. There's always going to

Speaker 1: be some shifts, and we've seen that for sure in

Speaker 1: each administration within the broader bounds of national security interest

Speaker 1: as to where their specialized priorities lie. And we need

Speaker 1: to be, as an industry, able to adapt to the

Speaker 1: threat environment as well as an administration's policies and priorities.

Speaker 1: But at the end of the day, we've seen more

Speaker 1: commonality than we have difference. And so I expect that's

Speaker 1: going to continue to be the case. And it's the

Speaker 1: foundation upon which we make assumptions and make business decisions.

Speaker 2: Well, and of course, it's not just the U.S. defense

Speaker 2: budget that the president is interested in. He is encouraging

Speaker 2: other governments to invest more into their own defense industrial bases,

Speaker 2: NATO and European allies specifically. Does that open up opportunity

Speaker 2: internationally for Northrop Grumman? How are you thinking about that?

Speaker 1: It does. We are seeing the most robust demand environment,

Speaker 1: not just in the United States, but globally, that we've

Speaker 1: seen in a very long time. And it is driven

Speaker 1: by this broader threat landscape. Europe has gone through quite

Speaker 1: a transformation in terms of focus on national security as

Speaker 1: a government spending priority. And we have seen that now

Speaker 1: endure since the Russian invasion of Ukraine and expect that

Speaker 1: will continue to be the case. The Middle East has

Speaker 1: been a strong source of demand and is at an

Speaker 1: elevated level now, even considering recent events. And Asia has

Speaker 1: been a growing marketplace for us for years and expect

Speaker 1: that to continue. So when you look across the globe,

Speaker 1: it's not just one area of strength that we're seeing

Speaker 1: in national security spending. It's very broad based and it's

Speaker 1: for common products. So that's another interesting dynamic. We can

Speaker 1: take a product line and it is applicable, whether it's

Speaker 1: missile defense space. These are growing areas of interest all

Speaker 1: over the globe.

Speaker 2: Well, so is it going to end up that it's

Speaker 2: a lot of joint ventures as all these different parts

Speaker 2: of the world are investing in their own defense industry?

Speaker 2: Is it going to be localized in some way and

Speaker 2: you have to work your way in? How do you

Speaker 2: envision it?

Speaker 1: It is localized to some degree. We try to ensure

Speaker 1: that there's local content for business partners and suppliers in

Speaker 1: any country where we're selling. It's varying degrees. Sometimes we're

Speaker 1: building a product, designing, developing, and building it in the

Speaker 1: United States, and it's the integration that's happening with a

Speaker 1: local partner. Other times it's pure co-development with an international

Speaker 1: partner where from the beginning we are working together to

Speaker 1: build the product. And then sometimes it's co-production, where we

Speaker 1: have designed a product and we will sell that IP

Speaker 1: to a partner to build in-country. So all different types

Speaker 1: of models can work. But what we see is our

Speaker 1: customers in other countries want some sovereign content. They want

Speaker 1: to see jobs in their country. They want to see

Speaker 1: the ability to share in the economic gain of what

Speaker 1: they're spending on national security.

Speaker 2: Well, as the administration is pushing for other countries to

Speaker 2: be thinking more critically about these things and spending more money,

Speaker 2: there's other initiatives that have come with Trump 2.0, including

Speaker 2: the Golden Dome. Where is that in the arc of

Speaker 2: idea from the president, PowerPoint presentation to actual contracts and

Speaker 2: things getting real?

Speaker 1: Where are we in the arc? It's very tangible. We

Speaker 1: have an architecture, we have programs, and we are executing

Speaker 1: on those programs. And You know, when you think of

Speaker 1: Golden Dome, it's not a program like B21 is a program.

Speaker 1: It is a collection of programs, some of which are

Speaker 1: new capabilities that don't exist today. And so they're being

Speaker 1: developed like a space-based interceptor. Others are buying more of

Speaker 1: things that we already are producing. And so we look

Speaker 1: in this area called Golden Dome. And I know there's

Speaker 1: a lot of mystery that's shrouding it because it is complex.

Speaker 1: It's not one thing that can be pointed to and described.

Speaker 1: And it's going to continue to evolve over time as

Speaker 1: the government looks at different products and how they might

Speaker 1: fit into the architecture. They'll make decisions on what they're

Speaker 1: going to buy, how much of any given product they're

Speaker 1: going to buy. So it's also not set in time

Speaker 1: what is Golden Dome. But a lot of progress has

Speaker 1: been made in the last 12 months.

Speaker 2: What share? do you realistically expect Northrop Grumman would get

Speaker 2: in that initiative?

Speaker 1: There will be a lot of players because it is

Speaker 1: an architecture. No company is going to have the preponderance

Speaker 1: of the Golden Dome architecture, nor would we want that.

Speaker 1: It's a lot of work to be done in a

Speaker 1: fairly short period of time to get the Golden Dome

Speaker 1: architecture deployed. And so it is a many company effort.

Speaker 1: But we are a company that can participate in almost

Speaker 1: every aspect of the architecture. So we do expect to

Speaker 1: have a decent share at the end of the day.

Speaker 2: And including in space-based interceptors, as you mentioned, critics would

Speaker 2: say this may be more technologically possible now, but it

Speaker 2: still may not be cost effective. Is the juice worth

Speaker 2: the squeeze? Is this something that the U.S. can afford

Speaker 2: at scale?

Speaker 1: We believe it can be cost effective. And you made

Speaker 1: an important point in the way you framed the question.

Speaker 1: Technology today has advanced to a degree that what may

Speaker 1: not have been possible, or I would argue was possible,

Speaker 1: but very expensive 10, 15 years ago, is much more

Speaker 1: affordable today. And that's the new information that needs to

Speaker 1: be incorporated into those who are analyzing face-to-face interceptors and

Speaker 1: the solutions that are being offered. And the approach that

Speaker 1: is being taken on Golden Dome is to allow for

Speaker 1: that prototyping and the demonstration before the government commits to

Speaker 1: a particular solution. And that makes a lot of sense.

Speaker 2: As we're thinking about what the government is committing to

Speaker 2: or what it would like to be able to commit to,

Speaker 2: Golden Dome, things we've already discussed, building out more munitions capacity,

Speaker 2: investing in the nuclear triad. You want the submarine Sentinel B-21,

Speaker 2: as we talked about. Can it do all of these

Speaker 2: things realistically at the same time, or do there have

Speaker 2: to be trade-offs somewhere? And if so, where do you

Speaker 2: expect those hard trade-offs might be?

Speaker 1: We believe that industry can provide the capacity and the

Speaker 1: people to do those things simultaneously. there has to be

Speaker 1: budget to support it, which is why this administration has

Speaker 1: asked for a $ 1. 5 trillion defense budget. And to the

Speaker 1: extent that that is funded, then yes, all of these

Speaker 1: programs fit within that budget request. If that is not funded,

Speaker 1: then there are going to be priorities that need to

Speaker 1: be selected. And what we see is that the programs

Speaker 1: that we have are largely sitting in the base budget,

Speaker 1: which is a reflection that they are the priorities continuing

Speaker 1: our nation's strategic deterrent, increasing munitions spending, supporting programs that

Speaker 1: are well underway in development and production. And so we

Speaker 1: feel well positioned even if the base budget is what

Speaker 1: is funded this year, but we certainly recognize the need

Speaker 1: for more and are hopeful that Congress will find a

Speaker 1: path to at least support above the base budget when

Speaker 1: you think about what's needed for ongoing operations, when you

Speaker 1: think about the impacts of inflation over the last five years,

Speaker 1: in real dollars, we're actually spending less on national security

Speaker 1: today than we were before the pandemic. And that's what

Speaker 1: the administration has recognized and wants to make up for

Speaker 1: with these significant increases in budget requests.

Speaker 2: I'd like to talk about technology in our remaining moments

Speaker 2: before we turn things over to the audience. Where are

Speaker 2: the next technology areas that Northrop is excited about? We

Speaker 2: talked about space-based interceptors, but where else?

Speaker 1: Asking me to pick a technology area that our team

Speaker 1: is most focused is like asking me to tell you

Speaker 1: which of my children I like better. I can't do that.

Speaker 1: And that's the beauty of our company and our industry.

Speaker 1: We serve a common purpose, which is national security. But

Speaker 1: we operate across a very wide spectrum of technologies, everything

Speaker 1: from microelectronics and the future of compute, including quantum computing,

Speaker 1: to areas in space that involve space exploration, space resiliency,

Speaker 1: which are new arts and missions being conducted in space.

Speaker 1: And then, of course, aerotime hammocks and the future of

Speaker 1: aviation are also changing. We call B-21 a sixth-generation aircraft,

Speaker 1: or FAA expects a sixth-generation aircraft. That is the future

Speaker 1: of what our air platforms need to operate in. And that, too,

Speaker 1: is an evolving area of science and material science. So

Speaker 1: we are excited about all of those areas. There is

Speaker 1: no favorite child. But the important thing is, tech is

Speaker 1: advancing in all of these domains at a faster rate.

Speaker 1: And so our engineering... organization is really delighted to be

Speaker 1: able to work on such a variety of things and

Speaker 1: be resourced not just by us, but by the government

Speaker 1: to explore these future technologies.

Speaker 2: Well, and there's new technology disruptors entering the defense space

Speaker 2: as well. Are they fundamentally competitors to you at the

Speaker 2: end of the day, or are they bringing additive capabilities

Speaker 2: that can work alongside you?

Speaker 1: Both. And that has been the way this industry has operated.

Speaker 1: It's a bit unique. Most industries, you compete with companies

Speaker 1: and you rarely partner with companies in your own industry

Speaker 1: who do similar things to what you do. Ours is different.

Speaker 1: We often find ourselves collaborating with big and small companies alike,

Speaker 1: companies that are older than us and companies that are

Speaker 1: much younger. And that's how it works. You have to

Speaker 1: be open to taking good ideas and technology from a

Speaker 1: wide variety of partners and embracing them into a solution

Speaker 1: for the good. of our warfighter and the taxpayer. And

Speaker 1: we are very open to that. Everything doesn't have to

Speaker 1: be invented in Northrop Grumman for us to bring it

Speaker 1: forward in one of our solutions.

Speaker 2: So is it mostly partnerships with these players then? Or

Speaker 2: could you see Northrop Grumman at one point absorbing them,

Speaker 2: acquiring them?

Speaker 1: We could see ourselves doing that. I'm not sure that

Speaker 1: in the near term serves the interest, right? There's a

Speaker 1: big market to be served and more competition to serve it.

Speaker 1: is a good thing. And we will compete vigorously with

Speaker 1: these companies while they're offering something different than us. But

Speaker 1: when we partner together, we will operate as complete teammates.

Speaker 1: And we know how to do that. It's how the

Speaker 1: industry works. And we embrace anyone who comes into the

Speaker 1: industry to do the same because that's what's best for

Speaker 1: our customers.

Speaker 2: And finally, how are you thinking as a CEO about AI,

Speaker 2: especially a CEO that has the cyber experience you do?

Speaker 2: Is this something that will just bring greater cost savings

Speaker 2: in a way in which you can take advantage of it,

Speaker 2: or is there a real threat to the speed with

Speaker 2: which this technology is advancing?

Speaker 1: We are seeing it both as a benefit, because we

Speaker 1: can use AI frontier models now to identify vulnerabilities, and

Speaker 1: then it becomes a responsibility for us to respond quickly

Speaker 1: to those, so we're having to scale our cyber operations.

Speaker 1: The good news is, in a company like ours, we

Speaker 1: have had a robust cybersecurity operation for a long period

Speaker 1: of time. We don't just have to defend ourselves against

Speaker 1: actors who might want to seek financial gain. We have

Speaker 1: to defend our information against adversaries like nation states who

Speaker 1: want to seek to get access to our designs and secrets.

Speaker 1: So we have had a very robust cybersecurity program. We're

Speaker 1: needing to scale it and make sure it can be

Speaker 1: responsive at a much higher rate of speed to what

Speaker 1: the frontier models are helping us to identify.