THE Defense Department will not sit idly by while the weapons industry goes through a shakeout, says a high-ranking Pentagon official.
This week's Northrop victory in the battle to buy Grumman is but the latest in a two-year series of defense-contractor sales. Further corporate mergers and job cuts in this important sector of the economy are sure to come.
The Bush administration took a passive approach to this turmoil, believing free markets would produce a smaller but adequate force of armsmakers. Under the Clinton administration, defense officials "are very active participants in defense industrial-base changes," said Deputy Secretary of Defense John Deutch in a meeting with Monitor editors and reporters Tuesday.
That does not mean the Pentagon picked a favorite in the battle for Grumman, the Long Island defense contractor that in recent years has fallen on hard times. Mr. Deutch says he did talk to the chief executive officers of the two firms vying for the Grumman prize, Northrop and Martin Marietta, but that the Defense Department hierarchy took a "hands-off" attitude to the outcome of the brief struggle.
It does mean that the Defense Department should take a long look at what kind of defense firms the nation should have. Arms-industry overcapacity ranges from about 25 percent to 40 percent, so further brutal competition lies ahead. "It is in our interest to ensure that what remains meets the long-term defense needs of the nation," Deutch said.