Boeing as No. 1 Aerospace consolidation: Lockheed Martin remains as its chief U.S. competitor.

December 17, 1996

AMERICA emerges even more dominant in the world aerospace industry with Boeing's blockbuster $13.3 billion acquisition of McDonnell Douglas. This mighty duo, leapfrogging Bethesda-based Lockheed Martin Corporation to No. 1 spot on the U.S. scene, combines Boeing's leadership in the civil aircraft field with McDonnell Douglas' proud traditions in military aviation.

It will make the new Boeing Co., with $48 billion in annual sales, an even more formidable competitor against Lockheed Martin in the fierce battle for the biggest prize in military aviation history -- the Joint Strike Fighter contract worth a minimum of $200 billion, with estimates ranging as high as $750 billion. The Pentagon decision to eliminate McDonnell Douglas from the running probably forced it to throw in its lot with Boeing.

On the international scene, Boeing's enlargement is already shaking up Airbus Industrie, the British-German-French-Spanish consortium that is out to increase its one-third share in sales of commercial jetliners. But as age-old European rivalries impede Airbus' consolidation, both in the civilian and military field, the two-thirds share represented by the expanded Boeing Co. looks more and more dominant.

While the U.S. Department of Justice will be looking into anti-trust concerns, chances are that the Boeing-McDonnell Douglas deal will be approved. Lockheed Martin has welcomed the development, saying it prefers to compete with one strong rival.

Of at least equal importance is the Pentagon's pivotal decision ,, to encourage the consolidation of the shrinking defense industry even at the risk of losing leverage in contract pricing. This is part and parcel of the Clinton administration's drive to expand U.S. exports across the board, not least in the aerospace field that is this country's most profitable sector.

Considering how world trade competition is increasingly both multi-national and nationalistic, what is happening in the U.S. aerospace industry makes considerable sense. Jumbo-jets, stealth fighters, space rockets and the electronics essential to the entire field require companies with enormous resources -- both in skilled workforce and in production capacity. Yet there could be a downside if dwindling numbers of players lead to a loss of competitive edge, with all that could mean to national security and service to consumers.

Economic conditions may mandate the emergence of the Big Two, Boeing and Lockheed Martin. It would be unfortunate indeed if sheer necessity ever gives rise to the Big One.

Pub Date: 12/17/96

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