And for Boeing Co’s customers, saving cash is becoming increasingly important.

It’s long been one of the great mysteries of the defense game about whether companies that make a lot of the stuff used for defense and security, might be able to ratchet down their pricing when, economically at least, it was a rainy day.

Because now, it’s raining buckets.

Jim Albaugh, head of Boeing’s defense business, said on Wednesday at the annual Reuters Aerospace and Defense Summit that his crew was working with their customers (many of whom are strapped for cash) to create a more affordable line of products.

Now, this is not a President’s Day Sale at Macy’s. Albaugh’s planes and weapons cost in the hundreds of millions of dollars and some programs are in the multibillion-dollar range. So cost-cutting here can mean some pretty big numbers.

But Albaugh went through a number of programs that Boeing is involved in and gave some good examples of how the company was trying to save their customers some cash. He also responded to some of the concerns about the costs of some programs already in place. 

Aero and Defense is the final Reuters summit of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

There might not be the enthusiasm of a couple of years ago, but some deals in the defense sector might actually get done, according to Thomas Captain, head of Deloitte’s aerospace and defense group.

Speaking at the annual Reuters Aerospace and Defense Summit in Washington, Captain said there were three possibbilities for deals that he sees in the near future.

While there seems to be little room (and even less money) for a huge, groundbreaking deal, Captain said there will be some opportunities for things to buy.

Captain gave a number of scenarios, including that European companies might want to make niche buys of U.S.-based shops and also, that despite currency concerns, U.S. companies still see some room to expand outside their borders.

Why? Many countries won’t do business with companies that don’t have a presence within their borders, so a company may want to make itself part of one thing, gaining it the flexibility to bid on another bit of possibly more lucrative business.

Aero and Defense is the final Reuters summit of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

No, it’s not time for a pop quiz.

Instead, for the U.S. government and the many companies that provide its weapons and defense systems, the time is coming to start deciding on priorities and coming to grips with how to finance all of the things that need to be done.

Robert Stevens, CEO of Lockheed Martin, said at the Reuters Aerospace and Defense Summit on Tuesday that he expects a vigorous review  of everything the government buys, flies or uses to defend its shores.

Stevens, one of the featured speakers at this year’s gathering in Washington, D.C., said he expects that sometime in 2009 the picking-and-choosing will start — but, fear not, he doesn’t expect a full-scale halt of all military spending.

He does, however, see prioritization and rationalization coming.

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

In a time of shrinking budgets and fears for the future, one of the biggest questions of this year’s Reuters Aerospace and Defense Summit was what will happen with the F-22 fighter jet that is made by Lockheed Grumman.

Lockheed Chief Executive Robert Stevens is really the guy we wanted to ask that question and he didn’t shrink from giving a pretty full defense of the jet.

The fate of the Air Force’s F-22 program awaits a decision by President-elect Barack Obama on whether to extend the production line beyond the 183 aircraft delivered or on order.

The supersonic F-22 Raptor has been the subject of a running battle over affordability for years. In June, Defense Secretary Robert Gates ousted the Air Force’s top military and civilian leaders amid a tug-of-war over the aircraft, which has never seen combat.

Designed to defeat enemy fighters and knock out advanced surface-to-air missile systems on the first day of a major war, it features the latest “stealth” technology to reduce detection by radar.

One of Stevens’ main considerations can be boiled down to — if we stop it, can we get it up and running again. He thinks not, based on the costs and advised a good deal of caution when making this decision. 

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

Executives at this year’s Reuters Aerospace and Defense Summit almost uniformely said that finding critical, and rather immediate, value in mergers and acquisitions was especially important now in a climate of less money available for financing.

But opportunities do exist and can be found after careful hunting, said Alex Dorrian (heard first in this clip), CEO of Thales UK and executive vice president of International Operations for Thales Group worldwide, and Allan Cameron, chairman and CEO of Thales North America.

On defense, Cameron said he expected that spending in the United States going forward would “flatten, at best”.

Cameron and Dorrian led off the second day of the summit, held again in Reuters Washington, D.C. offices.

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

Wars have numerous costs and most of those are unimaginable for most of us not in the middle of one.

But, aside from the tragic cost of death or injury, wars also cost a lot of money to finance and President-elect Barack Obama will be facing some of those costs (as well as a whole mess of other stuff) when he takes office in January.

As the United States grapples with a severely struggling economy, a number of federal bailouts and questions about our overall financial shape, Obama will also have to decide rather quickly how he will prosecute the wars in Iraq and Afghanistan and the staffing of the military.

On Monday, Loren Thompson of the Lexington Institute and Richard Aboulafia of the Teal Group spoke at the Reuters Aerospace and Defense Summit about the kinds of challenges Obama will face and just how much this is all going to cost.

Thompson (who you hear speaking first in the audio clip) and Aboulafia have been at our summits before and are always highly engaging and well-informed guests. But this year, maybe more than we’ve ever seen, the two warned that the problems facing the country and the defense sector were as serious as they have seen.

Staffing the military is an expensive proposition and it’s getting more so, the two concurred. And a government with a lot on its plate might be forced to take a second look at staffing committments. They think Obama will.

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

The world is a more dangerous place because of the global economic meltdown, according to Northrop Grumman Chief Executive Ronald Sugar, whose company provides specialized aircraft, radar and other electronics to meet that threat.

Sugar was the kick-off speaker at the annual Reuters Aerospace and Defense Summit on Monday in Washington, D.C.

Sugar acknowledged that hunger and thirst could not be solved with his company’s products but  argued that diplomats dealing with the world’s woes would be more likely to be successful if diplomats followed President Teddy Roosevelt’s famous dictum.

“You only talk if you have a big stick,” he said.

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

– Additional reporting by Diane Bartz in Washington