JOHNSON: Oh, the FMF program, you have two kinds of financing, grant and loan.  Grant aid goes exclusively, for all practical purposes, to two countries, Egypt and Israel.  Of the program for Israel, half a billion of that is earmarked to go to the Israeli Defense Industry, so it's hardly a subsidy to our industry.  I would argue that none of it's a subsidy, insofar as the government is allowing an ally to buy equipment.  We, whether we provide, it's no different when we provide an F-16 to Egypt with government money than when you provide tractors or bulldozers to a Ghana with foreign assistance money.  Those aren't a subsidy to Caterpillar.

LOTTMAN: Well, the word subsidy does not appear anywhere -

JOHNSON: Okay, it does in all his stuff, though --

LOTTMAN: -- no, no, I'm glad that you're familiar with his -

JOHNSON: Oh, yeah. Well, clearly the military assistance program, insofar as it is, the requirement is to buy U.S. military equipment is a useful thing to our industry.  If you go back to the mid-'70s, you'd find approximately sixty percent of all of our sales were financed by the U.S. government.  Today, it's under twenty percent. So, clearly, that form of assistance has markedly declined in terms of our ability to maintain market share over the last twenty years.  

LOTTMAN: And, that program used to be over five billion -

JOHNSON: Oh, well over five billion.  There were times it was up in the eight or ten billion dollar range, if I remember correctly.  

LOTTMAN: I know it's three point three -

JOHNSON: 3.3 less the half billion that's earmarked for the Israeli Defense Industry.  So, you have to chop that out.  So, you're really down to about two and a half billion dollars.  Compared to a period when it was six, eight, ten, twelve billion dollars.

LOTTMAN: But, that is a program that -

JOHNSON: Sure, clearly, if that program went away, presumably, Egypt and Israel would be able to purchase less defense equipment.  Probably not a hundred percent in that other things would get sacrificed in those countries to maintain a level of modernization.  But, clearly, they would be purchasing less.  So, clearly, that form of assistance is useful to our industry just as agricultural loan programs are useful to the agricultural sector.

LOTTMAN: Okay. And, also the Defense Department of defense acquisition funds, uh, that sort of a stockpile of export ready -

JOHNSON: That program was discontinued three to four years ago.  So, there have been no new acquisitions.  That was really to benefit both our industry and the defense department in that what it allowed you to do, if you knew there were going to be foreign sales coming up, you could buy equipment with advance with that money and then resell it to the foreigners.  It helps stabilize the production lines and hold down costs, not only for the foreign purchaser, but for the US military.  Generally, the money didn't actually get spent.  What would happen is they would contract two to three years out to fill a line slot.  When a foreign purchaser came in, they would in turn buy those positions.  And, so no Treasury money ever went anywhere.  But, it was, I think, a very useful program.  I think it's unfortunate that it was discontinued.

LOTTMAN: Okay.  And, the last one I have in DOD is air shows.

JOHNSON: Air shows, again, to me this is a symbiotic relationship.  Basically, the U.S. military has airplanes and has flying time because of training money.  Approximately six and a half billion dollars a year is spent to keep pilots in the air.  Each of them get so many hours per month.  But, they have no money budgeted to put people at the four or five major air shows a year.  The defense contractors are willing to provide the out of pocket costs for the military crews while in the country, but aren't about to pay a half a million dollars to put an airplane part on a ramp for ten days.  From a marketing perspective, you can put two men in the field, salesmen, for a whole year for that kind of money.  

So, what you basically have is a symbiotic relationship in which the U.S. military gets to show the flag, which they like to do, and provide the military hardware and the US defense contractors lined up paying half a million, a million dollars, for the entire show to have ten, twelve airplanes there which, from a marketing perspective, is considered presumably the companies a worthwhile expense.  What should be understood is that, if you went back to the old system of the companies paying to lease the airplanes, insure the planes, transport them there and back, in each case, it isn't that they would be spending a whole lot more money, it's that you would have no American military hardware at the major shows. And, that was the case. 

If you go back to 1989 at Paris, General Dynamics flew a Dutch F-16, with Dutch livery.  The Canadians flew a CF-18 for McDonald Douglas who paid the hotel bill for the Canadian airman.  And the Air Force had a B1 bomber.  That was the entire US military presence.  If you go to nineteen ninety-seven, you had something like sixteen military aircraft at Paris.  You could showcase both from the point of industry but from the point of the US military, the military prowess of the United States and our equipment.  Both sides benefitted.

LOTTMAN: And, unless you want to address as responding to how times work - 

JOHNSON: Well, by the way, I mean, the number, again, I don't know how we do this on camera, but the numbers that are in his study, in terms of what the US government actually spent in terms of participation in air shows was grossly exaggerated.

Interviewer 2: John, can I suggest something just so we get this on camera and it's clean, why don't you just address directly sort of the philosophical difference you have with ___ numbers.

LOTTMAN: Or, if you have a different number, you know, feel free to -

JOHNSON: Well, the US military reports to Congress on what their out of pocket costs were.  Most of which, by the way, have to do with industry defense booths -- I'm sorry.

LOTTMAN: Start over.

JOHNSON: The US military, by law, reports to the Congress what they spent over and above normal training costs that they would have spent anywhere.  I think the preponderance of those expenses have to do with tri-service booths that services put at these air shows that talk US military stuff.  There's very little interest on the part of industry.  We wouldn't fund that kind of an activity ourselves.  That's there strictly because the Army, Navy, and Air Force wants to get whatever their own messages are across, and they're their booths.  So, they're not covered by US industry.  As opposed to the hardware that's there, which is covered by US industry.  

But, if you take a look at Hartung's numbers, he has, for example, in two versions of his study, an aircraft carrier in Singapore and charges an appropriate amount for the carrier, a daily cost of running an aircraft carrier, talks about the proximity of 5000 crew members with potential buyers. It so happens the carrier never got within a hundred miles of Singapore. It was steaming for an R&R in Thailand. It launched twelve airplanes, wants to do a flyby. The weather was such the planes had to return and never did fly by.  So, if those 5000 crew members had any proximity to potential customers, somebody was doing a lot of swimming. 

Now, he knew that, and re-published it in his subsequent year study.  And, yet that was almost of half the amount he attributed to the US government support for air shows.  An event that never occurred.  He also has an aircraft carrier in Duby.  It was never there.  Anybody who was at that show knows that carrier was never there.  So, when you get that kind of inaccurate information, even after it has been called to his attention live on a radio show that it was never there and it's repeated, it's pretty hard to put credibility into that kind of a study.

LOTTMAN: So, the carrier and the tri-service booths are not appropriate to -

JOHNSON: Well, the carrier never existed, so it was certainly inappropriate.  The tri-service booths basically are supporting initiatives of the military themselves. Some cases has to do with foreign weapons testing in which we have, there's a military program, quite appropriately, that spends money to bring foreign weapons to this country for testing and, if they work out, they buy them.  So, that's, part of those booths support our competition -- appropriate to the US military, but certainly nothing that the US industry would have paid for.

LOTTMAN: And, you would say that his use of economic support funds, as an example, is also inappropriate.

JOHNSON: Well, the economic support funds, by law, cannot be used for military products.  There's an indirect exception in the case of Israel in which EGSF funds are used to pay off debts that were for military purposes based on purchases back in the late seventies.  Obviously, this in no way helps current industry.  In the case of Egypt and other ESF recipients, by law, those funds have to be used for developmental purposes, everything from fertilizer to sewage systems, to roads, etc.  Now, you can argue that, because they have that economic assistance, they can buy more military equipment.  But, I can argue, sure, and, when we give them development assistance, that's, is that indirect support to their military acquisition so you should count -- or, when we give them, back up.

LOTTMAN: [inaudible]

JOHNSON: Or, you could equally ask the question, does that mean all military assistance is also development assistance because we allow Israel to have free money to buy airplanes with.  They have more money left over for social programs.  I mean, all money's fungible.  So, it makes no more sense to argue that ESF, by subsidizing development, frees up money for military than it does to say that military systems free up money for development, therefore, should be counted in the development account.

LOTTMAN: Okay, what about Commerce Department export administration programs?

JOHNSON: Well, of course, the Commerce Department does two things.  They have export promotion activities, which pertain to all industry. And they have a Bureau of Export Controls, which controls exports.   So, there's a plus and a minus.  There's no difference really, though, in their treatment of defense products than of all other US products.  Sure, that's one of the things the Commerce Department is supposed to do is support US industry per se.  And, if you go to an embassy, you'll see a foreign commercial service. And, whether you're exporting fertilizer or automobiles or defense equipment, they're supposed to be helpful to you.

LOTTMAN: Is it effective?

JOHNSON: Moderately.  In terms of defense equipment, generally where you would look for your, because these tend to be large purchases, highly political, you're really looking for your support at the ambassadorial level.  And, from Washington, DC.  And, we clearly get some of that.  We get advocacy support, it's known as, just as all our competitors get advocacy support from their prime ministers, finance ministers, ministers of defense, etc.  That's the way the game is played.  Remember, the only customer we have for defense equipment are other governments.  Other governments make decisions that are both political as well as price and availability.  So, yes, certainly, our government can be helpful there as is our competitors governments.  

LOTTMAN: But, is -

JOHNSON: Sure, but, obviously, we would like to see more of it.  

LOTTMAN: Okay, and the last one on this laundry list I have is XM bank.

JOHNSON: XM Bank, by law, is prohibited from financing defense equipment with a couple of small exceptions.  One has to do with anti-drug programs, and the other has to do with dual use equipment.  I think they're running about a hundred million dollars a year in that area.  Example, selling a three dimensional radar to Rumania, which is being used both to land commercial aircraft and Bucharest, but is also plugged into their air defense system. 

The, basically, the way the law is written is you can buy a military product with XM bank funds if the primary use of that product is for civilian purposes.  And, again, I guess, we would ask, what's your problem?  Does someone have something against buying American products?  It seems to be that there's no particular difference between a Boeing worker in Seattle building big, shiny commercial aircraft, and a Boeing worker in Wichita producing military aircraft.  If the US government has set a sale is consistent with US foreign policy interests, then, by all means, I think, they ought to get that kind of support.  But, once gain, the support from XM bank is, at best, much more limited than all other industrial segments.  

LOTTMAN: Uh huh.  Well, I mean, naturally, you know, we're interested on what the return is on these programs is in general, but, I'm just interested for the moment, in sort of what the return is for the industry and are they -

JOHNSON: Again, very small.  I mean -

LOTTMAN: We all want a strong aerospace industry -

JOHNSON: Out of about, you know, again, fourteen, fifteen billion dollars in exports, XM Bank may be relevant to maybe a hundred million.

LOTTMAN: Okay.  Uh, now I want to talk about the Executive Branch agencies engaged in promoting and financing and otherwise facilitating military exports. And, I know you're aware of the Hartung figures on what the size of this bureaucracy is and the annual costs.  And, just in case you're not, ____ sixty-five hundred full time equivalent with attending cost of $450 million per year.  And, I know you've worked, you know, in the area of acquisitions reform, that's one of your priorities is streamlining the acquisition process, so I'm just asking if you think there's room for that bureaucracy, for the Executive branch agencies, you know, could they be streamlined?  Is there any -

JOHNSON: Sure. In effect, I mean, what you are finding is that the foreign customer is increasingly moving away from buying through the government.  And, buying directly from the contractor.  Because the governments tend to be expensive.  Hartung doesn't not that, by law, all of those guys have to be paid for, not out of taxpayer revenue, but paid for by the customer.  So, that when the customer buys American equipment through the US government, he pays a surcharge of about three percent.  A number of customers are increasingly deciding they can do better by buying directly from the defense contractor.  So, if this was such a great advantage, you would not be seeing that trend.  It began, in part, at a time when almost all sales were government to government and, again, most of them were financed by the US government.  

As increasingly the vast bulk of US exports are paid for by the customer, he's beginning to say, but I want my best value for my money, and why am I getting hit with an extra three percent?  Plus, I never know what the final price is, sometimes until ten years after I've taken delivery of the final product with the US government. Where, with a defense contractor, I sign a fixed price contract.  This is how much I pay you and here is what I get and that's the end of it.  So, again, you have seen a shift over the last ten years away from the FMS system to buying commercial.

LOTTMAN: Whereas the size of this work force hasn't really come down ___ corresponding -

JOHNSON: Well, that's one reason that the customers are getting agitated, because they're saying what am I paying for.  You know, I'm not in a position to criticize the FMS system, and it has been helpful, particularly with some countries, is helpful to US defense contractors in that you wind up with the government as intermediary and, for one thing, as a guarantor of payment.  Uh, which is helpful.  But, what isn't appropriate is to argue that the taxpayer's paying for these people.  The taxpayer isn't paying for these people, the foreign customer is paying for these personnel.  

LOTTMAN: Okay. I've written down here an optional question.  I'll go ahead and ask it and, you know, give you the option of answering it and if you say you don't want to answer it, you know, I'm not going to like show that on TV, whatever.  But, military related debts from foreign governments.  It's my impression that they continue to pile up.  And, I was just wondering how do you see that situation being resolved -

JOHNSON: There was a ballooning of debt back in the mid to late seventies when government guaranteed loans were handed out as if they were grant money. And, lo and behold, come, at a time when interest rates were extraordinarily high, _____ cost ____ money to the Treasury.  What happened in the eighties, it became clear that a number of these countries are never going to be able to repay that debt, particularly Egypt, and that debt was forgiven some years ago.  Seems to us that's, the Israeli debt has essentially been paid for by economic support funds.  The principal is rapidly coming down.  

The Israelis have suggested buying that debt down over the next few years and converting some of it to additional military assistance and some of it to just the US Treasury.  So, I would argue pretty much that's behind us. I mean, you have not, in terms of current sales, those debts of the seventies, whether they've been written off or not, have very little impact on contemporary sales of -- the government, at the time, made a decision to make those loans for its own purposes, and it has decided to forgive some of those loans for its own purposes.  I don't think that nineteen seventies loans forgiven in the eighties are particularly beneficial to US industry in the late nineties.  I mean, most customers are cash paying customers. And, they either buy or they don't.  And, in fact, a number of those countries that had loans paid them back and are doing quite well.  

LOTTMAN: Okay, on the issue of technology transfers and co-production, and the fact that those are included to facilitate -

JOHNSON: Sure.

LOTTMAN: Does your, do you or does the industry ever worry about creating its own competition?

JOHNSON: Not too much.  I mean, ironically, most of the technology transfer that was probably, if that was a significant problem, was done as US government policy in the sixties and seventies when it was government policy to rebuild the European defense industry and indeed the Japanese defense industry.  The government was more interested in creating strong industries, that the taxpayers would support a strong military, than they were in worrying about the future of US industry.  Today, you know, there's a good bit more parity in the system.  And, it's certainly true that a number of countries, particularly in southeast Asia, where they're developing defense industries, want technology transfer.  

And, yeah, obviously, it's as much a concern to us as it is to general motors when they decide to put an automobile plant in China or an automobile plant in Brazil.  Or, to a Dupont, when they decide to put a chemical plant somewhere. I mean, what you find is your large customers tend to want a piece of the action, in whatever industry you're looking at. And, by the way, so do we.  When, you know, when Los Angeles, wasn't that many years ago, canceled the subway contract that had too much foreign content until they got a US involved to make sure the technology went to Northrup _____. Or, Northrup in those days. When we buy the most recent trainer from Switzerland, the J-Paths, it will be built in Wichita, not Switzerland.  The baretta pistol, the side arm of the American military, is produced in Maryland, not Italy. We do exactly the same thing with our taxpayers money.  We want to see jobs and technology in the United States.  

So, it's not terribly surprising, and we all have to make the calculated risk, both in our case.  The government looks over our shoulder when we make that decision.  In other industries, it doesn't.  As to how much do you put off shore, how, what's the minimum you can do to make the customer happy so that you get the sale?  If it goes beyond a point the government's comfortable with, we don't get an export license.  I mean, not only is an export license, after all, for any military hardware we send over, but we need an export license for any technology we transfer as part of that deal.  But, the customer wants a piece of an action, this is true, and it's more so true when people are using their tax payer's funds to buy a product than when it's a private sector transaction.  And, in our case, all of our transactions are with governments.

LOTTMAN: But, it's a calculated risk in a sense that, I mean, there's confidence that, you know, you're not going to knocked out of the top spot by -

JOHNSON: Well, we certainly haven't seen any signs of it, either on the commercial or, particularly, on the military side of our industry.  I mean, who are our chief competitors?  France, Germany, the UK.  Israel, it's true that we paid for a good bit of that technology development, but that was a government call.  A lot of it didn't come from US industry, it came from US revenue to help pay, US taxpayers' dollars to help that industry develop that technology.  But, after all, I mean, these are countries, it shouldn't be entirely forgotten that we got the jet engine and we got radar from the UK.  They had it first.  And, in that case, they did create their own competitor.  But, so far, I don't think you'll see much that we have transferred that's come back to bite us.

LOTTMAN: Well, I mean, say, you know, the co-production of the F-16 as an example, does that represent like a large leap forward to those countries that have, you know -

JOHNSON: I think what you find in general is that they're producing a more expensive airplane which is not competitive on the world market.  But, they do it because of domestic political constraints and because they feel that, overall, it may help their industrial base, but I don't think you're going to come up and compete against F-16's or a generic derivative from Turkey or from Greece or from even Korea in the foreseeable future.  It hasn't happened in twenty, thirty years.

LOTTMAN: Okay. I'm just gonna sort of transition to -

JOHNSON: Sure.

LOTTMAN: -- current events here, getting to kind of a fun part of discussion, two things which I see as positive signs for the industry, on the sort of immediate horizon.  One is that some of the major aircraft deals or aerospace deals struck under the Bush and Clinton administration, at least it's my impression that they still have some, you know, sort of service life to them.  They still have some years on them. I mean, they're not, haven't reached the end of the life of those deals.

JOHNSON: Yeah, I well, I mean, example, the F-15 sale to both Israel and Saudi were only just beginning to be delivered.  There's going to be two -- people tend to forget that when they see an announcement about arms sale usually it's going to be three or four years before the first piece of hardware moves.  Similarly, with the Taiwan F-16 sale, which again, was a 1993 sale, are just beginning, they're just being delivered to Taiwan now.  And, again, it will be one of the few things keeping the F-16 plant open in Fort Worth. 

LOTTMAN: And, once they start deliver, you know, it's -

JOHNSON: You've got several years.

LOTTMAN: Okay, good.  So, that's, you know, one positive -

JOHNSON: We have a pipeline of a number, certain amount of equipment that goes back to the post-Desert Storm area that will be delivered over the next two to three years. So, you should see reasonably strong exports over that period of time.

LOTTMAN: Okay, and the second was the major aircraft modernization, this planned in DOD, and while some of the ____ may not be scaled back, in any case, they're going to have to reduce or replace those ____ planes. And, so, you know, given these two sort of positive outlooks, sort of realities that, you know, we're dealing with, is the aerospace lobby going to de-emphasize to any extent, you know, its emphasis on exports in the near future?  I mean, it's -

JOHNSON: Well, I don't how much the lobby does on exports.  The interest of the industry in defense exports that the US government says are consistent with foreign policy is not going to go away.  You know, H billion dollars worth of sales is X thousands of jobs.  And, I've never known an industry to say, gee, that's enough, we don't need any more of that.  I mean, you know, if Caterpillar has a good year, they don't fire their salesmen.  If General Motors has a good year, you don't close your automobile shops. I mean, the fact is if you're producing a product for which there's demand, you're likely to produce up to that demand level as long as you're making a reasonable profit at doing so.  

So, there's, what has been true in the last four to five years, as the US defense budget plummeted and defense exports were held at a relatively constant level, the relative importance of those exports went up. If you see an upswing in US defense procurement, which we haven't seen yet, but should that happen, then to some degree, yeah, a little of the focus of your senior management is going to turn back on to the defense budget and he'll, they will as in the eighties, perhaps, spent a little less time worrying about the export side of the business.  But, for the moment, I mean, the foreseeable future, at least till the turn of the century, exports are going to be very critical to keeping production lines open until some of these new systems that you were talking about actually come into being.  The F-22, the V-22, the Comanche, etc., are all systems that aren't out there yet.  

LOTTMAN: yeah, I was thinking in terms of, you know, dark days in the recent past as far as the domestic market goes.  Are you looking at the future, you don't know what's going to happen with the global market, but you are looking at brighter days -

JOHNSON: Well, we don't know what will happen with the domestic sales either, yet. I mean -- [tape cut off, then back on].  Yeah, I think empirically you would find the government provides less support to defense exports than most other sectors.  Agriculture, services, and most other manufacturing. I think most of the numbers in the Hartung study are fallacious.  The government support to us consists primarily -- the same embassy support everybody else gets.  Less support in the finance area than anybody else gets, we're discriminated against in export tax treatment, compared to all other manufacturing sectors.  

So, in answer to your first question, I think we get less support than most other manufacturing and agricultural sectors.  So, there's not much to take away.  We've done quite well without that support.  Will defense exports decline?  I think, somehow people assume that defense exports have nothing to do with buyers.  They have only to do with sellers.  Near as I can tell, the size of the defense market will depend not on the US defense industry and not on US government support, but on the policies of foreign governments and on worldwide conditions as to a, their economic ability to purchase and their feeling of the necessity to purchase. The only real question is what market share will the US have of what these countries buy.  We're not going to make that market.  We will compete in that market. 

And, in that sense, all we ask for, generally, is government, advocacy, and support comparable to that of our competitors.  Not greater than, but comparable to that of our competitors.  Clearly, our competitors think they're getting something out of exporting defense equipment, both economically but, perhaps equally important, from a security perspective, and so do we.  What I don't understand is, why people would argue that, if X amount is going to be bought out there, why is it in the US foreign policy interest to see that market share shift to other countries, excluding the rogue states, obviously -- the Iraqs, the Irans, Libya.  Nobody's asking to allow us to sell to those folk even though some other people are willing to do so.  

But, for the rest of that market, I can't, for the life of me, see how the US benefits when you shift the source of supply to the Russians, to the French, to the British, to the Israeli's, to other competitors out there.  What's in it for the United States, economically?  What's in it for the United States from a foreign policy perspective?  And, I'm primarily interested in what's in it for the United States.  I haven't seen an answer to that question in these kind of studies.

LOTTMAN: So, you answer to the what it would take question would be an end to these more discriminatory practices that you're talking about vis a vis -

JOHNSON: Well, I, what I, you know, I don't see us walking away from defense markets that exist as long as our government permits us to pursue those markets.  In that case, the size of our export market will depend primarily on foreign demand and secondarily how well we do at competing for that demand.  Part of that competition, what determines that competition, will be whether the US government provides the same kind of, primarily, advocacy support that our competitors do. 

And, the degree to which, you know, I think what Mr. Hartung perhaps ignores in his study is the most important government support to our industry is the fact that we have the world's best military.  The fact that we're the last of the super powers.  The fact that, when you buy US defense equipment, you have equipment that's compatible with the US military, that you can train with our guys better, you can do joint ventures, you can do coalition warfare or coalition peacekeeping together.  That's the strongest marketing support we get from our government.  And, the only way that will go away is if we allow our military to deteriorate.  And, I sincerely, hope that won't happen.

LOTTMAN: Okay -

MR. :  Ask him quickly -- I'd like to quickly, on behalf of the viewers, compare our subsidy, you know, framework with our competitors, like France and Russia.  People are going to want to know, how does our government stack up against other governments that we're going up against?  _____ to John.

JOHNSON: Okay, if you wanted to take a more or less comparable country, it would probably be the United Kingdom.  In their case, their official export finance facility doesn't differentiate between defense products and non-defense products.  So, they have a better deal than we've got. In the case of advocacy, probably similar now.  Historically, they would have done a much better job.  Today, both their political senior figures and our political senior figures on import and sales will probably get involved to some degree.  At least indicate to the potential customer that our customer is interested or the Brits are interested in supporting their industry and why they think a buy in one or the other makes sense.  I'd say, in that case, we'd probably see comparable government support.  

Uh, we have a larger military assistance program limited to two countries, certainly than the United Kingdom does.  They, on the other hand, their defense industry quite openly markets. I mean, we have a defense security assistance agency, they have a defense exports services organization.  They know that their job is to -- as uniform military, their job is to get out there and sell British products.  Our guys are operating under much more constraints in terms of both law and policy.  So, once again, I guess I'd give the bell to the British.  The most important thing we've got going for us is we're a superpower and they aren't.

LOTTMAN: What are some of the main points you try to make with your members when you're talking about the current situation in Asia?  Which completely changes over the --  

JOHNSON: If you look at Asia, about twenty-five percent now of our defense production is exported, compared to about seven percent maybe ten years ago.  About twenty-five percent of our exports go to Asia.  So, that's twenty-five percent of twenty-five percent.  And, if you look at the countries in Asia in terms of the economic strength, probably Japan is the strongest, which is our biggest customer.  Taiwan is in pretty good shape. Korea is the one that probably you worry most about, but I think has the potential for a come back most quickly.  You know, I think, realistically, you're looking at a swing of maybe one or two percentage points in our production depending on how Asia goes because there won't be a market change in Japan, a modest one in Taiwan.  I think Korea may be a year or two hiccup.  So, while for particular companies and particular products, you may have a serious glitch for a year or two, overall, as an industry, there's nothing fatal lurking out there.

LOTTMAN: Uh, how about the Middle East?

JOHNSON: Middle East, I would say is, you know, people haven't focused on that, is probably as much a concern as Asia in that, if oil prices go down into the sixteen, seventeen dollar range for a protracted period of time, the Middle East is around thirty percent of our market.  Of course, you've got to knock off a piece of that for Egypt and Israel, which is US financed.  But, it's still almost as large a piece of the market as Asia is.  And, I would see if oil prices stay where they are, probably deferrals in their modernization programs or countries that would otherwise be buying from us and or from Europe.  So, again, you could see, at least, at the margin, two or three percent change in what we otherwise might be.  

And, you know, you can look at that as a good thing or bad thing.  Two or three percent of fifty billion dollars, you know, is still six, seven hundred million dollars, a billion dollars, a billion dollars here or there and you're talking some real employment.  You're talking some real hurt and pain to certain communities if lines close down. 

So, on the one hand, I'm not cavalierly dismissing the loss of a billion or two billion dollars a year.  On the other hand, I think you need to put a perspective that the defense industry will, by and large, maintain itself if, a, the US procurement budget doesn't go down any further and, indeed, begins a gradual recovery, which all projections do, but getting to your earlier questions, projections are pieces of paper.  You don't pay employees and subcontractors on projections, you pay them with contracts.  And, so, until we see what happens over the next two to three years on the domestic budget, we're certainly going to continue our focus on exports.