A recent plan to merge two of the nation's biggest defense contractors - Lockheed and Martin Marietta - into a single company has drawn cautious approval from most observers, but the combination is certain to get serious scrutiny from federal anti-trust officials.
That is as it should be since the resulting company will be the dominant figure in America's entire aerospace-defense industry, doing billions of dollars more in annual business than runner-up McDonnell Douglas.Yet it is hard to see any alternative than continuing mergers in this area. With the end of the Cold War, the disintegration of the Soviet Union and the downsizing of the U.S. military establishment, the industry must shrink.
The market for complex new weapon systems clearly is getting smaller. The United States will continue to need new and updated versions of aircraft, missiles, satellites and other technology. But vast new programs can hardly be justified in the current geopolitical climate. Against whom would they be used?
Other mergers already have reduced the number of firms in the defense field. Just two major contractors now build fighter planes; three produce helicopters; only one builds nuclear submarines.
The challenge is to make sure that the smaller numbers can still produce the quality and numbers the Pentagon needs, even in a post-Cold War era.
And with only a handful of companies providing most of the equipment, the Pentagon must not let itself get into a situation where the lack of competition prompts suppliers to dictate prices and terms.
In the meantime, defense contractors should vigorously pursue new roles in the marketplace. Heavy dependence on federal dollars can leave firms vulnerable when conditions change.
Even the giant new Lockheed Martin company, as the merged firm will be called, does 60 percent of its business with the government and is not immune to the shifting winds of world politics. In diversity there is strength.