Martin And

December 26, 1992|By Ted Shelsby | Ted Shelsby,Staff Writer

Martin Marietta Corp.'s recent move to buy the aerospace division of General Electric Corp. is being hailed as a fit, like two pieces of a jigsaw puzzle coming together.

And if the proposed $3.05 billion deal goes through, as expected, the impact on Martin will be every bit as dramatic as the company's shift in the 1950s from making airplanes to rockets.

Through the efficient use of the facilities, resources and the broader range of advanced technologies that will be available to it, Martin will be a more competitive and more innovative global supplier, said Norman R. Augustine, chairman and chief executive of the Bethesda-based aerospace and defense contractor.

The Martin and GE operations complement each other, and there is little overlap, Mr. Augustine said of the deal, which is subject to approval from federal regulators and from Martin shareholders, who are scheduled to meet in February.

This seems particularly true of Maryland operations. "It fits beautifully with our Aero & Naval Systems Division," said Charles P. Manor, a spokesman for Martin.

Some examples:

* GE is the prime contractor for the Navy's Aegis surface ship air-defense system. The system is designed to detect a threat and automatically select the proper response, including the firing of surface-to-air or surface-to-surface missiles. The missiles are fired from shipboard launchers made by Martin workers at Middle River.

* Both GE and Martin's Glen Burnie plant are involved in anti-submarine warfare, but their efforts are complementary. At Glen Burnie, Martin produces towed arrays -- tube-like units filled with listening devices that are lowered beneath the surface to detect and track submarines. GE builds the on-board equipment that analyzes and interprets information obtained from the arrays.

* GE is one of the world's leading suppliers of jet engines. Martin's Middle River complex in Baltimore County is a major producer of thrust reversers, which operate like brakes on commercial jetliners by reversing the engine thrust after a plane touches down.

Terms of the merger give Martin's workers access to GE's main research and development center, in Syracuse, N.Y. But Mr. Manor said there is no plan to dismantle Martin's R&D complex off Interstate 95 in Relay, which specializes in trouble-shooting for Martin's operating units.

There are other parts to the puzzle that bode well for Martin.

By picking up GE's satellite production operations near Philadelphia, for example, Martin is rethinking its plan to get out of the commercial launch business. GE is a major supplier of satellites to NASA and to military and commercial customers such as AT&T. Martin builds several versions of its Titan rockets for launching commercial and military satellites.

Byron K. Callan, an analyst who follows the defense electronics industry for Prudential Securities, noted that this arrangement for the first time gives Martin the ability to package the construction and launch of a satellite for customers.

The GE acquisition will nearly double Martin sales, making it an $11-billion-a-year giant. That will likely boost Martin from the Pentagon's list of the top 10 defense contractors to the top five -- maybe even to one of the Big Three.

GE Aerospace, based in Valley Forge, Pa., supplies satellites, radar, and sonar systems, simulation systems, communication systems, government technical services and other aerospace and defense systems.

The GE unit is the Philadelphia area's largest private employer, and its 13 operations are scattered along the East Coast, from Burlington, Vt., to Daytona Beach, Fla.

Work force could shrink

Initially, the acquisition will boost Martin's total employment from 57,000 to 94,000, including about 4,300 in Maryland. But as the two units meld, the work force is expected to shrink. It is too early to say how many jobs will vanish, Mr. Manor said, but he said even more workers would be laid off if the two companies were not combined.

Martin hopes that employment eventually will increase, as the combined operations put the company in a better position to compete for a bigger slice of the Pentagon's $100 billion-a-year procurement budget.

Government contracts, including those from the Pentagon and other agencies, like NASA, accounted for $4.6 billion of Martin's $6.1 billion in sales last year. The GE unit is even more dependent on such contracts. According to Bruce Bunch, a spokesman for GE, government business accounted for 90 percent of its $5.3 billion revenues last year.

A question of motive

Although Mr. Callan, the analyst, generally praised Martin's move, he said he wondered whether it was designed to protect Martin from being a victim of the consolidation sweeping the defense industry.

His conclusion: Martin's move reflected its desire to remain independent -- not to be eaten up by someone else -- rather than a feeling that the value of defense electronic companies had bottomed out.

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