Lockheed Martin: No. 1 from Day 1

September 06, 1994

The pending mega-merger of Bethesda-based Martin Marietta and Lockheed to form the nation's largest defense contractor finds the Clinton administration beset with conflicting impulses.

Anti-trust traditions at the Justice Department and Federal Trade Commission clash with Pentagon pressures to downsize the defense industry to conform with a much-reduced force structure. Advocates of a government-encouraged industrial policy to promote U.S. weapons exports are up against those who fear a loss of competition will be costly to taxpayers and enervating to the behemoth companies that survive the current shake-out.

This is a debate in which national security is so obviously at stake that close scrutiny and tough decisions will be required at the highest levels. So far, the Clinton administration has fuzzed or ducked the issue. But Martin Marietta chairman Norman R. Augustine believes the merger will flush out an answer. "We'll make policy with this case," he told The Sun last week. Earlier, he contended that "three full factories are better than six half-full factories."

While Deputy Defense Secretary John Deutch has observed that there are "very serious anti-trust questions" involved in the proposed formation of the new "Lockheed Martin" conglomerate, former Defense Secretary Les Aspin says the bottom line is maintaining a viable defense industry even though competition is reduced. There is no indication the current Pentagon leadership disagrees.

Despite the record-breaking size of the Lockheed Martin merger, industry experts see comparatively little danger of supply monopolies that would put the Pentagon at disadvantage. Lockheed's specialty is military aircraft production; Martin Marietta emphasizes electronics for countless weapons systems. If any divestment is required, it will probably be in space systems or ballistic missile manufacture where there is some overlap.

Establishment of the new corporation's headquarters at the current Martin Marietta complex in Bethesda is good news even though this does not insure the security of jobs at production and research facilities in Maryland. Although Mr. Augustine will be serving as No. 2 to Lockheed's chairman, Daniel M. Tellep, he is slated for the top job in less than three years. His willingness to face the realities of downsizing and his agility in keeping his company a major player argue strongly for the success of the new enterprise.

The defense industry, however, is unlike any other. It is a quasi-public entity in the sense that the bulk of its revenues and its very existence depend on government orders financed by taxpayers. For this reason, the public has every reason to demand proof that Lockheed Martin will not only strengthen national security but will do so in a cost-effective way without succumbing to the clumsiness of a giant grown too big.

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