U.S. Automotive: The Arsenal of Democracy 2.0: How the Automotive Sector Can Reinforce the Defense Industrial Base, and What it Might Mean for Auto Credit

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U.S. Automotive: The Arsenal of Democracy 2.0: How the Automotive Sector Can Reinforce the Defense Industrial Base, and What it Might Mean for Auto Credit

Avi Steiner, CFA AC North America Credit Research

(1-212) 270-5512 03 August 2026 J P M O R G A N

avi.a.steiner@jpmorgan.com

3. Counter-Cyclical Relationship to Auto Demand: The underlying drivers of defense

production, including geopolitical conflicts, a need to replenish depleted stocks, and/or

a desire to enhance existing, or manufacture new, defense capabilities, are in our view

completely uncorrelated to the drivers of new vehicle production, which largely revolve

around consumer demand. We believe this counter-cyclicality could potentially provide

smoother earnings, particularly in periods where new vehicle demand is waning, even as

the causal factors of core product demand destruction are likely to be perceived

negatively by investors.

4. Revenue Visibility: Defense contracts are typically multi-year in length, with the limit,

pre-extensions, often set at 5 years. While this is slightly shorter than the typical seven-

year production lifecycle of a new vehicle (excluding the planning, design, and validation

phases), it nevertheless would provide important visibility to automakers, affected

Suppliers, and investors alike. We believe this visibility, particularly given the capital

intensity and deployment needs of both industries, is critical.

Investment Grade Opportunities

The most credible Investment Grade opportunities currently sit with General Motors, Ford,

and Daimler Truck because each company has identified a specific route into defense

markets. GM has the clearest near-term opportunity through an established defense

subsidiary and partnership with a major defense prime in Lockheed Martin, Ford could