Air Force graphic

Aerojet Rocketdyne played a major role in developing the X-51 hypersonic test vehicle, seen here ready for launch from the wing of a B-52 bomber.

Lockheed Martin, one of America’s most trusted defense companies, recently declared its intent to purchase and merge with Aerojet Rocketdyne, the nation’s last sole provider of solid rocket motors.  This proposed plan is currently under review by the Department of Defense and the Federal Trade Commission.  Rather than simply accept it as a fait accompli, decision makers must look at the dangerous consequences for our industrial base from such a deal. If approved, competition within the US missile defense industry, hypersonics in particular, would cease to exist.

So while this proposed merger would bring significant benefits to Lockheed Martin, there are significant downsides for the defense industry as a whole.  Given the high stakes involved, it must be carefully and critically reviewed, because these type of defense sector mergers create mega-companies that eliminate competition, drive up costs and overwhelm market share.

Since Aerojet Rocketdyne sells missile propulsion systems to several large U.S. defense companies, a merger with Lockheed Martin would be a crushing blow to the rest of the field. They would be forced to either rely on a major competitor for a vital component; seek out foreign suppliers; undermine a Biden administration executive order to use more U.S. component providers; or drop out of missile defense competition entirely.

screenshot of Aerojet Rocketdyne website

The Aerojet Rocketdyne website, showing just some of their many defense programs.

In 2015, then-Undersecretary of Defense for Acquisition, Technology and Logistics, Frank Kendall said, “the trend toward fewer and larger prime contractors has the potential to affect innovation, limit the supply base, pose entry barriers to small, medium, and large businesses, and ultimately reduce competition-resulting in higher prices to be paid by the American taxpayer.”

And when asked about a Lockheed-Aerojet merger and defense industry consolidation during a recent Defense Writers Group, General Charles Q. Brown, Jr. Air Force Chief of Staff, said of defense contractors, “we want to make sure that they are all survivable and sustainable over time and we don’t … get down to one or two and that’s all we have.”

In 2020, following Northrup Grumman’s Orbital ATK acquisition, FTC and DoJ issued new guidelines for evaluating vertical mergers that eliminate competition and harm national security interests.  This guidance will be critical in determining if the newly proposed merger is approved – or not.

Sixty years ago, President Dwight D. Eisenhower used his farewell address to give the nation a blunt assessment of the relationship between our military, lawmakers, and the defense industry. The retired five-star General of the Army and former Supreme Allied Commander in Europe during World War II understood the importance of a strong defense industrial base, yet also warned of a “military-industrial complex” which is counterproductive to national security.

Over the last century, our nation evolved from an almost non-existent arms industry pre-World War II — mocked by German military leaders like Luftwaffe commander Hermann Göring for only being capable of making “refrigerators and razor blades” — to now a handful of giant defense companies which overwhelmingly lead world production in the most advanced weapons systems.

While that’s great for America overall, market control by just a handful of dominant corporations has downsides too. Less innovation, fewer options, and occasionally anti-competitive practices to name a few.

I have written before on the importance of balancing near-term capability requirements with the needs of far range technology evolution in addressing threats.  China, Russia, North Korea and Iran are all making advances in their missile capabilities.

Air Force General John Hyten, the Vice Chairman of the Joint Chiefs of Staff said as much at a recent online forum with the Center for Strategic and International Studies (CSIS).  He noted that their investment in modernizing cruise, ballistic and hypersonic missiles have left the U.S. “not in a very good position,” as he put it.

courtesy Don Loren

Don Loren

As a former U.S. Navy requirements officer, I have addressed capability gaps by looking at an analysis of alternatives, weighing potential capabilities, and assessing cost, production, timeliness of delivery, and achieving force sufficiency over a meaningful effective service life. Reducing competition, limiting choices, and strict control of pricing were never constraints I welcomed.  Similarly, Department of Defense requirements to check advances in adversary missile capability cannot afford such limitations.

We must find ways to ensure innovation, competition and alternative approaches make the most effective, timely, and affordable technologies available to us to meet and defeat emerging threats. It’s a lot more than dollars and cents. When it comes to national defense, our lives depend on it.

 

Don Loren is a retired United States Navy Rear Admiral, a former Deputy Assistant Secretary of Defense, former Assistant Secretary of Veterans Affairs, and former senior national intelligence service executive.