Lockheed Decries Threats Linked to Merger
Only hours before its merger with Loral Corp. became official, Lockheed Martin Corp. decried threats by its biggest rival to take its business with Loral elsewhere.
Last week, McDonnell Douglas Corp., Lockheed Martin’s main aerospace competitor, announced it may cancel deals under which it buys billions of dollars’ worth of high-tech components from Loral for McDonnell aircraft--such as threat-warning equipment, training simulators and infrared sensors--now that Loral is part of Lockheed Martin.
On Monday, Norman R. Augustine, Lockheed Martin’s chief executive, said the threats by Harry Stonecipher, McDonnell Douglas’s chief executive, amounted to corporate “blacklisting” that violates decades of aerospace industry cooperation. Augustine said if Stonecipher acts on his threats, it could have “a very major impact” on Lockheed jobs.
“I’d hope McDonnell will reconsider its position,” Augustine said at a news conference to mark its merger today with the defense divisions of Loral Corp. “Lockheed Martin doesn’t believe it serves the best interests of the country to employ a blacklist purchasing policy. We buy the best components from others, and sell the finest components to others. . . . This has been aerospace industry practice since the Wright brothers.”
Augustine indicated that ending such corporate cooperation in the defense industry could damage “the national security.” He also suggested that Lockheed Martin could retaliate against McDonnell Douglas, from which it is buying $750 million in space equipment.
When told about Augustine’s statements, a McDonnell Douglas spokesman had no comment.
In conversations with reporters and Wall Street analysts last week, Stonecipher had said he foresaw trouble if Loral were to supply parts for McDonnell’s entry in the heated competition to build the Joint Strike Fighter, a Navy-Air Force program estimated to be worth $750 billion.
In a program like that, Stonecipher said, he expects subcontractors, such as Loral, to be “partners” in promoting the McDonnell plane at the Pentagon and in Congress--something Loral divisions probably couldn’t do when owned by Lockheed Martin, which is offering its own plane in the competition, he said.
“We expect our partners to help sell our products,” Stonecipher said. “We’ll have to find some other suppliers.” He pointed out there are numerous other subcontractors that could take Lockheed’s place, such as Litton Industries Inc. and Honeywell Inc.
Lockheed Martin and McDonnell compete on many fronts, including the sale of fighter jets, military transport jets and rockets.
Any McDonnell Douglas cancellation of former Loral contracts could lessen the value of the Loral divisions for which Lockheed Martin is paying $9.1 billion. When Stonecipher was first quoted stating his policy last week, Lockheed Martin’s stock dropped $3 a share in a few hours.
After adding Loral, Lockheed Martin will be the world’s largest defense company, with 200,000 employees and $30 billion in annual revenue. The new firm will take in about 40 cents of every Pentagon procurement dollar.
