Weapons Makers Look Overseas As Pentagon Cuts Back

But the defense industry is closely tethered to one primary buyer — the U.S. government. It has been a lucrative relationship. Defense spending is up more than 40 percent over the past eight years, fueled in part by spending on wars in Iraq and Afghanistan. Much of the money flowed to defense contractors that supply the Pentagon with everything from warships to bullets.

Overseas arms sales represent a relatively small segment of defense contractor sales. But many are turning to the global markets for growth now that the appetite for big and expensive weapons is waning in the United States. The push is helped by countries worried about security threats from nations such as North Korea and Iran. Many European allies need to upgrade their aging equipment, and are turning to U.S. companies as likely suppliers.

However, budgets for big weapons are getting tighter as costs like personnel expenses eat up more Pentagon resources. Defense Secretary Robert Gates proposes spending more money on tools like unmanned drones to fight insurgencies instead of big and pricey equipment like $140 million apiece for F-22 fighters jets meant for more conventional wars.

In the 2008 fiscal year, the military spent $164 billion to buy weapons. For the 2010 fiscal year, the Pentagon proposes spending only $131 billion, though that number will probably grow when Congress adds weapons spending as it reviews the budget.