VIEWPOINTS : RETHINKING DEFENSE :...

Malcolm R. Currie, chairman of Hughes Aircraft Co.

“The thing that has caught everybody by surprise is the rush of these events, the pace of these events. We in this country often overreact to events when they happen. We have that national characteristic. I think President Bush is doing a good job of not overreacting, handling these things in stride in a very prudent way.

“What other instabilities will exist in the world or what instabilities these events will give rise to, nobody knows. The thing we know for sure is that they will have an impact on the defense industry. How large--and at what pace--is the thing I can’t even speculate on.

“The big question is what happens in 1991 and, even more seriously, what happens in 1992. You can’t rule out actions that are contrary. The one thing you learn about Washington is that they often overreact.

“The defense industry in the United States does not have to be at its present peak size to be a very healthy, profitable, vital industry.”

Consolidation and mergers in the aerospace industry are “in process right now. You can see the turbulence industrially in Europe--the consolidations, many of which don’t make any sense at all.

“It is a lot of daily turbulence, companies on the block. There is probably more of this in this country than is realized because much of it isn’t publicized. It is in conversations between myself and my colleagues in other companies. A lot of it is taking place.

“I expect advanced technology to become more important as the sheer numbers of armed personnel in the armies around the world go down. One thing that hasn’t changed is the pace of technology. It is going faster than any time in my career.

“I don’t know whether basic human nature and the basic nature of nations has changed that much. If you look over history, there have been very few periods in which there haven’t been tremendous instabilities and regional conflicts. You know it is going to happen but not where and to whom and what role we will play. Well, we are going to play a role in it, and we are not going to relinquish it--and it will be played largely with technology rather than sheer numbers of people like in World War I and World War II.”

Donald R. Beall, chairman of Rockwell International Corp.

“My own sense is that there is going to be a continuation of the decline (in defense spending) that we have been seeing since 1985 and probably acceleration. But any real massive reductions are probably some time off and will have to have the arms control agreements to back them up.

“I would be very surprised to see any cutback (to 25% to 50%) levels in the near term, unless there is a precedent for very significant reductions in force structure in Europe and related weapons, both strategic and conventional.

“Clearly, there are going to be reductions in procurement, but I hope we keep a very strong research and development effort under way in this country, not only to keep our capability in a leadership position for defense, if it should be needed, but also because it is important to the overall technological competitive posture of this country.

“However the defense budget comes out, I would argue that the nation ought to devote more resources to civilian space. After all, we are spending today in civilian space about a fourth of what we spent at the peak of Apollo (the moon-landing program). I wouldn’t advocate that relative proportion of resources, but I would suggest that instead of the 1% of the federal budget that NASA represents, it ought to be 2%, independent of any likely scenarios for defense.

“I am hopeful that something like this lunar-Mars initiative of the President’s goes forward. I think it can be a factor in generating more interest among young people in science and mathematics.

“Certainly, if we are going to spend significantly less on defense-related research and technology, then I think there is even a stronger case for some government incentives to maintain our leadership position in the aerospace business. After all, aerospace is the largest ‘plus’ contributor to the trade balance in manufacturered goods in North America.

“That isn’t happening by accident. It is happening because we have better widgets, and if we don’t maintain and enhance that position, clearly that is going to weaken our international trade posture and our international competitive posture.”

Ralph E. Hawes, executive vice president, missiles and electronics, General Dynamics Corp.

Asked how he feels about defense spending cutbacks, he quipped, “I could be better, with peace breaking out all over. But by the same token a lot of us who dedicated our lives to working in support of a strong defense see good news/bad news. You are pleased that perhaps the effectiveness of what you have done has paid off, but you hate to see what it does to the business.

“There is definitely going to be a consolidation in the industry. There is going to be less business to pursue, which means it will get more competitive. But I see no change in the fundamental philosophy that as a country we are going to bank on the technological edge--not the quantitative edge--in the systems we have to defend ourselves and protect our way of life.

“The propensity for (defense spending) to accelerate in a downward direction is a hell of a lot stronger than the propensity for it to remain flat. That is partly because of the pressure that will build up because of the changes in Europe and the accommodations we are seeking with the Soviets.

“I don’t think it will be catastrophic.

“We are going to find ways to continue to make sure the technology in our systems is as good as we reasonably can make it.

“I do believe that as we have been successful in negotiating through strength, one of the things we have to be careful of, as we negotiate to scale down our strength, is that we do it in a manner that keeps us well balanced and flexible to be able to respond.

“You cannot stamp out a missile like you stamped out a rifle or a bayonet that we went to war with the last time around.

“Where we are today in 1989 and where we were in, say, 1939 is dramatically different (in terms of) the posture of the industry, as well as the sophistication of the implements to defend ourselves. The economies of the business are so greatly different than they were in 1939.

“I hope there is a strong appreciation of that in our leaders, although sometimes you have to wonder about that.”

Daniel M. Tellep , chairman of Lockheed Corp.

“There is going to be contraction, no question about it. We have to figure out ways to be more efficient at reduced rates of production, but my priority would be to keep the research and development going.

“My general view is that we have seen the trajectory that is shaping up, but the velocity is increasing. Looking back even six months ago, a lot of us felt it would be flat or a couple percent of real decline per year.

“You can see countercurrents already developing, and people are saying we have to go at a measured pace. We are in for additional declines in the (defense) budget, but I don’t think they are going to occur in 1991 at a great level. Beyond that, there are declines, but they are beyond anyone’s vision at this stage.

“The strategic systems are going to retain high priority. This is a time, if anything, to keep up with force modernization.

“If we are rethinking where our enemies are, the concept of force projection is important. It might mean that if we have fewer carrier battle groups, we might want more capable carrier battle groups.

“This is an important time to alter the process by which budgets are put together. There ought to be some overarching strategic vision for what we want in the way of a defense posture. It is going to shift from emphasis on conflict between superpowers more decisively to the possibility of conflicts on a smaller scale and localized conflicts anywhere on the globe. We need to have that strategic vision.

“Force structure will come down, but everybody is saying we don’t want hollow forces. The binder here is, how much can you cut production rates?

“We may have to give up some thoughts about second sources. (The Pentagon has sought to establish second sources for production of certain weapons to foster competition and lower prices.) Not all second-sourcing has worked out well, because it was premised on high production rates that never materialized.

“As part of the new order of things, we may have to pay for less economical production rates to maintain the defense industrial base. It is an interesting thought you wouldn’t have heard a year ago.”

Kent Kresa, president of Northrop Corp.

“I don’t see any catastrophic reduction of the total defense effort. The real issue is the trades between modernization and maintaining somewhat of a status quo.

“Secretary (of Defense Dick) Cheney and the President are speaking about staying on a modernization path, but there really is an issue of where Congress will come down on this. We will have a good idea of what portends for the next few years when the (1991) defense budget gets sent to the Hill and Congress reacts to it.

“What is occurring right now--Cheney is looking at a $180-billion reduction over five or six years--is a result of looking at (the Gramm-Rudman deficit-reduction law). This doesn’t really take into account some of the other world events that are occurring. But if you look at what the President is saying--someone wanted to put some words in his mouth about the end of the Cold War. He didn’t want to do that.”

Worst-case reductions of 25% to 50% in the defense budget in coming years would be “enormous changes that there would be no precedent for. Big, big changes would be very, very difficult for the industry. A 25% change in the defense structure would . . . have an enormous impact on not just America but Europe and the Far East.”

Kresa cited recent public opinion polls reporting that a majority of Americans believe that in the context of current world events, defense spending is in “reasonable balance.”

“Certainly, if we go the modernization route, we will look at the trade-offs. What new (weapons) systems can you bring on board that will have lower ownership costs? You are talking about those modern systems’ giving you equal or more capable defense for lower operating costs. If (it) goes that route, we will see the acquisition side stay up at some level.

“We have always had fewer men under arms with more capable equipment. That has been our great strength in the world, and I see no reason to change that, simply because we are able to stay on the leading edge of technology.”

As for increasing the civilian space budget to offset declines in Pentagon spending, Kresa said, “I don’t think we should mix” the issues.