Budget Deficit? What Budget Deficit?

Rich Smith, The Motley Fool
Updated

Boys will be boys, and we do love our toys. Army men, model airplanes, remote-controlled helicopters -- these are just a few of the occupants of any red-blooded American male's toy chest. And the last of these, the remote-controlled helo, is about to start filling up the Pentagon's toy chest as well.

Last week, the U.S. Army confirmed that despite the ongoing debt crisis, and despite continued pressure to curb defense spending, it's proceeding with an ambitious plan to "roboticize" the U.S. helicopter fleet. Over the next several years, the Army plans to spend "a minimum" of $1 billion to acquire "at least" 100 robotic helicopters as part of its Vertical Takeoff and Landing unmanned aerial vehicle program.

Initially, the Army plans to award as much as $250 million to fund a pair of development contracts for new VTOL UAVs. Beginning sometime early next year, the Army will begin reviewing bids from as many as eight separate defense contractors interested in building the new birds. Key candidates likely include:

  • Boeing (NYS: BA) , which makes the A160T "Hummingbird" UAV, and has already contracted with U.S. Special Operations Command to begin leasing the unmanned helicopter for use in supply runs.

  • United Technologies (NYS: UTX) , which last year announced a $1 billion effort of its own to revamp its Black Hawk helicopter into a flying robot.

  • Lockheed Martin (NYS: LMT) , which has partnered with Honeywell (NYS: HON) and Kaman Aircraft to develop the K-Max robo-helo. Lockheed has also paired up with EADS to help build a robotic version of the UH-72A Lakota attack chopper.

  • And, of course,Northrop Grumman (NYS: NOC) , whose Fire Scout UAV is already in service with the Navy. Not content to rest on its laurels, Northrop's also working today to develop an upgrade dubbed the Fire-X, cooperating with Textron's (NYS: TXT) Bell Helicopter on the effort.

What's it mean to you?
$1 billion is a big chunk of change, so who's likely to get it? Northrop seems like the leader in production of robotic helicopters. But unofficial reports suggest the Army has been unimpressed with the Fire Scout's capabilities. On the other end of the scale, we know the Army likes UTC's Black Hawks, while Boeing already has a contract with U.S. Special Ops Command for the Hummingbird. I'd wager one of those two companies should have the advantage in this contest.

In fact ... if reports are correct that the Army will award two contracts, maybe Boeing and UTC will both win.

Want to keep current on the VTOL UAV contest?Add Boeing and UTC to your watchlist.

At the time thisarticle was published Fool contributorRich Smithdoes not own shares of, nor is he short, any company named above. The Fool owns shares of Lockheed Martin, Northrop Grumman, and Textron. And yes, The Motley Fool has adisclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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