Newspaper article The Christian Science Monitor

Rescuing America's Ailing Weaponsmakers ; Pentagon Wants to Expand Foreign Sales, Spread Contracts to Aid Strategic Industry

Newspaper article The Christian Science Monitor

Rescuing America's Ailing Weaponsmakers ; Pentagon Wants to Expand Foreign Sales, Spread Contracts to Aid Strategic Industry

Article excerpt

While much of the US economy is booming, the defense industry is falling into a slump so troubling that it is forcing the Pentagon and weaponsmakers to rethink some of their most basic tenets.

Stung by the end of the cold war and a decade of shrinking defense budgets, the industry is only now beginning to feel the full impact of peace. Stock prices of top defense companies are near 52- week lows, and many have lost half their values in the past year. The companies are wracked with debt, while at the same time there are fewer and fewer plum contracts to go around.

"Major companies, be it Lockheed [Martin], or Raytheon, or General Dynamics, or any of them can find themselves not being valued as much as a new computer firm," Defense Secretary William Cohen told reporters last week.

Other companies that make ships, munitions, and tanks "are on their last bones of survival," says one defense-industry analyst. "If the government does not give them enough work, they will simply disappear."

While Pentagon officials do not consider the weakness of the industry a threat to national security, they have begun exploring new ways to breathe life into the military-industrial complex.

The Department of Defense has ordered a task force to review acquisition policies and their effect on the health and competitiveness of the industry. The task force will brief Secretary Cohen and other officials by April 10.

In the meantime, it is evident that the Pentagon is moving in two distinct directions. It is working with the State Department to loosen export controls, which in turn should open new sales markets. And it is gradually taking more care to regulate - even prop up - the industry.

"The [government] is starting to realize that they own the industry, and that the skills needed to make these weapons are vital to this country," says Harvey Sapolsky, a defense-management expert at the Massachusetts Institute of Technology in Cambridge.

Professor Sapolsky, like many analysts, thinks the government needs to move in the direction of buying out the industry - treating it as if it were a public utility.

To do so, however, would reverse a free-market defense industry trend dating back to 1950, when the cold war was heating up and weapons were becoming vastly more complex. But it would not be the first time the government has stepped in. At the so-called "Last Supper" in 1993, then-Secretary of Defense Les Aspin urged the top 15 defense executives to consolidate - or face extinction.

A dramatic example of the difficulties facing the military- industrial complex is the production of the Joint Strike Fighter, a versatile aircraft that will likely be built for the Air Force, Navy, Marines, and the United Kingdom.

With a price tag as high as $200 billion, it will be the largest aircraft contract in history. …

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