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Show mm asm ! 111 UI-IIUHI - M' ML-jP EXPANDING DEFENCE-ELECTRONICS DEFENCE-ELECTRONICS INDUSTRY Congress is unlikely to place serious obstacles against President Reagan's request for $226.3 billion for defense-related defense-related programs in fiscal year 1982 which begins next October 1. Nor are the lawmakers planning to insist on sweeping changes in Administration proposals detailing how the money shall be spent. . On Capitol Hill, it is pretty well accepted ac-cepted that the U.S. military must be extensively beefed up to offset Soviet defense expansion and to afford our NATO allies the kind of help they so obviously need. Hence, under the Reagan program, the U.S. military posture will be altered significantly. More stress will be placed on tactical missiles which require extensive electronics components com-ponents in their guidance systems. This shift away from strategic missiles assures the need for a continuous flow of replaement hardware. As early as the second half of this year, defense hardware producers should begin to benefit from the rising outlays. HOW MUCH STRAIN ON FACILITIES? Pentagon programs for updating our nuclear defense forces include the MX missile weapon system on which Defense Secretary Caspar Weinberger has promised a decision in June, the Cruise missile, the Pershing II medium-range surface-to-surface missile, as well as the Patriot and improved Hawk air defense missiles. Also planned is full-scale development develop-ment of the new advanced Wasp missile using either an infrared heat-seeking guidance system or one that will employ em-ploy microwaves to point its warhead on target. It is calculated that the Wasp will improve our estimated five-year lead on the USSR in electronically guided missiles. Still another sophisticated missile, known as AMRAAM (advanced medium-range air-to-air missile) is likewise in development. With all these missiles in various stages of development or updating, facilities of defense industry companies are bound to be taxed especially since so much of the industry's plant and equipment is aging and in need of replacement. However, the Administration is likely to give immediate priority to defense work over commercial demand if that should be deemed necessary. And the peaking that appears to be near in the commercial aerospace market should release numbers of engineers and skilled technicians for defense work. ELECTRONIC COUNTERMEASURES Most experts concede that the U.S. still has a technological lead over the USSR in military avionics, a rapidly expanding sector of the defense market comprising electronic warfare devices such as electronic countermeasures (ECM), plus guidance, takeoff and landing instruments and surveillance and monitoring equipment. These systems are so advanced that they are capable of detecting, analyzing, deceiving and decoying oncoming radar-guided missiles, artillery ar-tillery shells, and torpedoes. Sales of such electronic countermeasures coun-termeasures last year were up 20 percent from 1979 and further sharp expansion lies ahead, counting in the $1.5- $2.0 billion Airborn Self-Protection Jammer expected to be in production by 1985 and the higher-energy laser weapons systems being developed by the Army and the Navy. BUY RECOMMENDATIONS Even though the Research Department Depart-ment of Babson's Reports expects the defense buildup to be interrupted by snags and delays becuase of the conditions con-ditions cited above and because of transportation dislocations and shortages, commitments in the larger, well-established companies should prove rewarding. The Research Department favors purchase of the common stocks of Haze I tine Corporation and Sanders Associates. Each is well positioned to benefit from the new Reagan stress on increased electronics military preparedness. |