Here in Alabama, we are uniquely attuned to any news coming out of the defense sector. With more than 210,000 Alabama jobs associated with the military in the state, any shifts can have a massive impact on our local economy. As many of us know, there has been a growing trend of consolidation among defense companies over the last decade. During her confirmation hearing on February 2, Defense Deputy Secretary Nominee Kathleen Hicks said she was “concerned” about consolidation in the defense industrial base.
We are yet again facing another proposed merger that will uniquely impact Alabama, as defense contractor Lockheed Martin is currently seeking approval of its plan to purchase and merge with Aerojet Rocketdyne in a $4.4 billion deal. Competition is key to innovation in any industry, but especially in defense. A merger of Lockheed and Aerojet will give the mega-company too much market share, ultimately stifling any competition in the space, forcing us to fall behind our foreign adversaries and dealing a blow to America’s national defense. Additionally, as is often the case with any merger, there will be inevitable layoffs to follow.
We saw the negative impacts of removing competition in the defense industry in 2006 when the U.S. government permitted the formation of Lockheed Martin and Boeing’s United Launch Alliance to support all medium-to-heavy USG launches. Before this, these two companies competed for space launch missions. Following that merger, costs increased 100 percent, even though launches only increased by 59 percent.
These massive mergers end up costing the American taxpayer as the newly formed companies take advantage of the monopoly they have created. In 2015, then-Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall, and now Air Force Secretary nominee warned, “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.”
We should be learning from our mistakes instead of repeating them. In 2018, Northrop Grumman acquired Orbital ATK, an integration that left Aerojet Rocketdyne as the last independent Solid Rocket Motor provider in the country. As a direct result of this merger, Northrop won the $80 billion Ground-Based Strategic Deterrent (GBSD) program. Boeing, the program’s incumbent, was not able to compete. That means that an $80 billion taxpayer project was not challenged. By eliminating competition, Northrop was able to leverage its position into this $80 billion contract, leaving the American taxpayer to pick up the tab on any future project adjustments without any other options – a situation sure to repeat itself with this Lockheed Aerojet deal.
Reduced competition, higher costs, and more instability with our nation’s defense are what awaits us if the FTC and DoD approve this merger. At the very least, our representatives, like Congressman Mike Rogers, need to take a hard look at the potential impacts of this acquisition, rather than accept now, learn later, which we have already done too many times.
