THE recently proposed merger of Lockheed and Martin Marietta
Corporations threatens to stall the remarkable and little-heralded
process of post-cold-war defense conversion. If approved, it could
force many companies engaged in the search for civilian uses for
their highly skilled personnel, facilities, and know-how to turn
instead to the risky game of courting rivals and building empires.
In turn, the Pentagon will face fewer suppliers with even greater
Merger mania has belatedly bloomed in the defense industry,
unleashing the same frenzy that hollowed out many American
corporations in the 1980s. The rationale is that in an era of
defense cutbacks, consolidation would permit contractors to save on
overhead; with lower costs they could pass savings on to taxpayers
and beat out competitors. This may be true in the short run, though
tens of thousands of jobs will be lost and taxpayers will absorb
But there is a darker side to the proposed merger. Fewer
competitors and bigger size will mean greater leverage in dealing
with the Pentagon and Congress. Political analysts worry about the
considerable heft of a Lockheed Martin in the American "gunbelt,"
the coastal and Southern states favored by defense spending. The
mammoth survivor would have enormous power to convince Pentagon
officials and military users of the indispensability of its
products and its plans for new generations of military equipment.
It would also have greater bargaining power in setting weaponry
prices, especially in missile and satellite programs.
Although some leading military contractors consistently naysay
conversion, prominent among them Martin Marietta's CEO Norman
Augustine, our research shows that conversion efforts are
surprisingly widespread and increasingly successful, even among the
largest firms. Conversion has a long history.
Dupont worked assiduously after World War I to retain its
employees and facilities, mostly committed to munitions, and
successfully moved into the paints, plastic, and synthetics
businesses. After World War II, aluminum makers like ALCOA found
marvelous markets in housewares and appliances, while Boeing
transformed itself into a first-rate, dual-use aircraft company,
weathering the post-Vietnam cuts remarkably well.
Today, contractors from the smallest to the largest have mounted
conversion initiatives. Some are already profitable. Although small
and medium-sized companies - more nimble and perhaps more desperate
- are more successful at conversion, large companies like Hughes/GM
and TRW Inc. are making dramatic strides in applying aerospace
expertise to automobiles, transit systems, and intelligent