This big defense merger locks up a segment for Lockheed, even though the company is a poster child for cost overruns.
In spending $9 billion to buy Sikorsky from United Technologies, Lockheed will become an even more formidable challenger to Boeing in the defense sector.
Sikorsky is the world’s largest manufacturer of military helicopters, responsible for such workhorses as the Black Hawk. Lockheed firms up its position as the world’s largest defense company by revenue.
Boeing’s defense unit is a big dog, too, but it will have a hard time keeping up on choppers. It makes the Apache attack helicopter among others but Lockheed is a major Apache supplier. The Wall Street Journal reports that with the deal, “Lockheed nears military helicopter dominance.” This might give Lockheed a great advantage in future helicopter programs needed by the Army and Marines.
Whether the deal is good for the national interest is another open question. Lockheed is the prime contractor behind the deeply troubled F-35 Joint Strike Fighter, years behind schedule and scandalously over budget. Meant to replace almost all of America’s fighters, the F-35 was recently bested by an F-16C. The better next-gen fighter, Lockheed’s F-22 Raptor, was shut down with only 195 built because the program cost nearly $67 billion.
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This points to the ongoing procurement crisis in the highly concentrated and incestuous Military Industrial Complex. Programs are costing too much; the bang for the buck it too little (as with the vulnerable littoral combat ships). From bombers to submarines and the surface fleet, existing platforms are aging, yet replacements are impossibly costly and not necessarily better.
Before the Pentagon rubber-stamps Lockheed’s deal, Congress needs to insist on reform.
Today’s Econ Haiku:
Hear the big banks whine
How much capital to hold
Should be held in jail