Lockheed-Martin Merger Fosters Defense Shifts

ANY change affecting the national interest deserves scrutiny. Questions being raised about the Lockheed Martin merger merit answers.

One concern is that the sheer size of Lockheed Martin could have disproportionate influence in dealing with the Pentagon and Congress; another, that it will be less apt to pursue conversion efforts; and finally, that the merger will contribute to higher weapons costs in the long run.

First, experience shows that size does not necessarily translate into leverage. Lockheed and Martin Marietta have been very successful, but both can cite examples of half-hearted support from their legislative delegations and programs awarded to competitors, large and small. All companies have political constituencies, and a few programs have taken on lives of their own thanks to congressional support. They are relatively few and seem unrelated to company size. What really counts over the long haul are the merits of our programs and our competitive zeal.

Objective studies show that during the past five years, all aerospace companies, large and small, have been affected comparably by cuts in defense spending. Some analysts believe that size could actually work against a company, since some might assume that its programs are more expendable because it can better absorb the loss. At least two other existing aerospace companies are about the same size as Lockheed Martin will be after the merger.

SECOND, merging two strong defense companies enhances opportunities to develop non-defense businesses and create new jobs. The technical and financial strength of the merged company will improve the ability to pursue and invest in non-defense initiatives. Together, the merged companies will gain critical mass in commercial sectors where, separately, they are marginally competitive.

Lockheed and Martin Marietta have been on parallel strategic paths to leverage technical skills and move into new non-defense markets. Both companies have made major investments to enter markets such as commercial space, energy and environmental remediation, materials, information services, intelligent vehicle highway systems, and airport development. Almost half of Lockheed Martin's business will be outside the Department of Defense (DOD). It would be unwise to curtail this effort when we've achieved success and defense spending remains under assault.

Finally, the idea that the combined company will contribute to higher weapons costs to the DOD is incorrect. We are confident that the Federal Trade Commission will determine that effective competition exists in the relevant markets. The two companies' previous experiences show that consolidation does save the government (i.e., the taxpayer) money.

The Lockheed Martin merger will help preserve critical capabilities in the nation's industrial base. It will improve the companies' global competitiveness and opportunities to develop non-defense businesses. That is the outcome defense consolidation is meant to achieve. And that is why the Lockheed-Martin merger has been almost universally well received.

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