US Department of Defense pays out $84 million to bail out some small military contractors suffering from effects of COVID-19

(July 11)The Pentagon is using the Defense Production Act in order to pay $84.4 million to a group of small military contractors who are suffering because of the COVID-19 pandemic. Officials claim the companies are essential for supplying the US military.

The companies include, drone-makers and shipbuilding companies.

The Defense Production Act

The act allows the US to take certain economic actions in emergencies. In this case the bailouts are for what are regarded as essential companies that are losing money from the COVID-19 pandemic and could go bankrupt if not subsidized through a bailout.

Pentagon had earlier suggested a bailout was coming

While other US industries were receiving bailout money earlier, the Pentagon had then suggested that arms manufacturers should also receive some type of federal monetary aid in order to protect them from going out of business.

Most funding was in relatively small amounts

Most of the subsidies were in the $3 million dollar range but there was one large payout of $56 million to ArcetorMittal that was intended to protect jobs for building ships, and another of $15 million to LeoLabs which invests in space surveillance. The undersecretary of defense for acquisition and sustainment, Ellen Lord had earlier identified shipbuilding, aviation, and the small space secctor as three crucial areas that were suffering because of the economic effects of the COVID-19 pandemic.

The subsidy to ArcelorMittal was to be used to expand its plate processing and heat-treating capability, and increase its alloy steel plate production. This would ensure that US government had dedicated long-term industrial capacity to meet national needs.

A Pentagon statement said: "The money, divided among seven different companies, will be used to “sustain and strengthen essential domestic industrial base capabilities.These actions will help to retain critical workforce capabilities throughout the disruption caused by COVID-19 and to restore some jobs lost because of the pandemic.”

A detailed description of the purpose of each subsidy can be found here.

Previously published in the Digital Journal