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Defense Automotive Metal Stamping Contracts Lifeblood of the Industry by Patrick Boardman

The precision sheet metal industry depends largely on stamping parts for the automotive industry, and to a lesser extent aerospace and military parts. Of course the military needs a constant supply of vehicles, everything from jeeps to heavily-protected tanks. The contracts go not only to military contractors, but also companies normally associated with the civilian market. Upon closer examination, it turns out that approximately half of the contracts are held by dual-use manufacturers - those that provide services for both private and military customers.

Precision metal stamping is broadly included under the Machining Intensive Durable Goods Sector (MDG); to give an indication of the approximate military portion a Pennsylvania State University study states: "From our 1991 survey of a sample of establishments, we estimate that 48.8 (+ 3.1) percent of all plants in the MDG sector were defense contractors." The business practices of the military manufacturers allow for more collaboration due to the non-competitive environment, giving them an edge in many ways. The private manufacturers have the advantage of strong management and tight cost-effective methods of production. They have a customer with very specific needs; companies in the MDG sector with defense contracts are guaranteed to stay open for business, having an over 95% longevity rate.

According to IBIS World Industry Reports, "The Automotive Metal Stamping industry had a wild ride during the recession. However, the industry is set to improve over the next five years." Although the precision metal stamping business will see significant activity, the profit margin is expected to be more modest due to the smaller size of cars. Rising gasoline prices have caused a lower demand for SUVs and large cars so the reduced size of bodies, hoods, doors, and parts right across the board will cut into the volume of metal forming.

The military automotive contracts are issued for tracked and wheeled combat assault vehicles, motorcycles, trucks, tractors, ground effect vehicles, and all the parts, cabs, bodies, frames, transmissions, mufflers, and so on. The large primary Canadian contractor General Dynamics Land Systems had a $1 billion contract in 2006, designated CF LAV III Upgrade, an order for 550 wheeled combat vehicles with an option of 80 more, with improved protection, firepower, and mobility.

Contracts of this size are a boon to the precision metal stamping industry and all manufacturers who are awarded sub-contracts. The Canadian government policy since 1986, called IRB (Industrial and Regional Benefits), has made it mandatory in defense contracts over $100 million for the Prime Contractor to make sub-contracts and investments in the Canadian economy, in an amount usually equal to the value of the defense contract they won so there is an incentive to solicit contracts within the country. In spite of this, many parts for the Canadian military are made in the U.S. and vice-versa.

The expanded state of perpetual war that was instituted at the beginning of the century has created an insatiable demand for all things military. Metal stamping procedures such as difficult forms and deep drawing are used to make the parts for trucks, helicopters, jets, missiles, cluster bombs, land mines, artillery shells, and hundreds of thousands of other products. Unlike the World Wars, there will be no end date and no disarmament planned; like any efficient business, expansion is the word of the day.

Pat Boardman is an SEO consultant writing in respect to Taurus Stampings in the roll forming and sheet metal stamping industry who have the facilities for deep drawing to manufacture parts made of stainless steel and aluminized steel.

Article Source: http://www.earticlesonline.com/Article/Defense-Automotive-Metal-Stamping-Contracts-Lifeblood-of-the-Industry/1093428

If there is high open interest in a put and the options expiration date rolls around, can you expect that the?

stock price will rise since the options owners may want to sell their shares for the higher value as their option gives them that right?

In a put? Don't you mean a call? I believe you mean a call and so I'll answer your question as I understand it.

If you were meaning to look at the Put open interest it would mean that the stock was looking to move lower in all likelyhood.

If there was significant open interest in calls then there might be a move up coming. However this is likely not the case and you shouldn't be jumping into options trades because you see a high open interest. There could be any number of things going on.

For instance, there are about 80,000 open interest SPY 139 Feb calls right now. Does this mean the price will move from $133 to $139 by this Friday. No way. Rather these are professional options traders, like myself, who are selling these call options and betting the price WON'T go to $139 by this Friday.

Don't let open interest fool you, you might just get crushed by it if you don't understand what is going on.