LTV Unit Sale Unacceptable, Pentagon Says

The Pentagon’s intelligence agency has concluded in a secret report that the acquisition of LTV’s missile business by French-owned Thomson would pose an unacceptable risk to U.S. national security, according to testimony at a congressional hearing Thursday.

The disclosure comes amid an increasingly contentious lobbying campaign by Thomson and by the losing bidders for the LTV unit, Lockheed and Martin Marietta. Chief executives of the parties traded accusations Thursday during a House Armed Services Committee hearing.

Thomson, which is nearly 60%-owned by the French government, and the Carlyle Group, a Washington-based investment firm, agreed to pay $450 million for LTV’s missile and aircraft business last month as part of a bankruptcy court sale.

The DIA found that the Thomson deal poses a higher risk to U.S. national security than any of the 200 other cases it has examined, said Rep. Larry J. Hopkins (R-Ky.).

Hopkins said he had read the intelligence agency assessment as part of his role overseeing secret military programs on an investigations subcommittee.

The DIA report is part of the Bush Administration’s review of the Thomson deal, which is being performed by the multi-agency Committee on Foreign Investment in the United States. Noting the classified nature of the report, Hopkins said he could not elaborate on it.

Declaring that he is “no fan of the French government,” Hopkins lashed out at the French arms industry’s role in providing weapons that were used against U.S. forces in the Middle East and the French government’s failure to cooperate in the investigation of Iraq’s attack on the U.S. guided missile frigate Stark in 1987.

“What assurances do we have that future sailors aboard the Stark would not be victims of another Exocet (missile) sold to a Third World country that has been upgraded by secret technology from LTV?” Hopkins asked.

Frank Carlucci, former Secretary of Defense and a partner in Carlyle, said U.S. interests would be better protected by having Thomson producing missiles in the United States, where it would be subject to U.S. regulations.

But Carlucci was clearly caught off-guard by the DIA disclosure, and he left the hearing fuming that it was “absolutely outrageous, just outrageous” that the secret findings had been disclosed at the hearing.

While the DIA finding by itself could be a damaging blow to Thomson’s deal, Congress is also stepping up efforts to block the deal. Two powerful senators--Robert Byrd (D-W.Va.) and Lloyd Bentsen, (D-Texas)--introduced legislation this week to stop the sale.

Augustine said in an interview that if the LTV deal goes through, it will precipitate others like it as the defense industry consolidates. He advocated a broad national policy prohibiting any foreign government-backed entity from acquiring major U.S. prime defense contractors, even if that represents a form of U.S. industrial policy.

Meanwhile, Tellep testified that the technology at LTV was developed at a cost of billions of dollars to U.S. taxpayers and it would be improper for Thomson to gain access to that.

But Jim Bell, president of Thomson’s U.S. subsidiary, defended the deal, saying that France was America’s first ally and is the only major nation that the U.S. has never been at war with.

Bell noted that Thomson is already a participant in a large number of U.S. defense programs and operates plants in 14 states. Bell asserted that Martin Marietta and Lockheed were trying to acquire LTV at a “fire sale” price and were simply outbid.