Pentagon Concerned About Defense Industry Mergers

The US Hercules C-130J by Lockheed Martin
The US Hercules C-130J by Lockheed Martin sits on display on the opening day of the 47th Paris Air Show at Le Bourget on June 18, 2007. File photo by Eco Clement/UPI | License Photo

WASHINGTON, Oct. 1 (UPI) — The Pentagon’s top weapons buyer has voiced concern that major security industry deals like Lockheed Martin’s purchase of Sikorsky could hinder innovation.

U.S. regulators approved Lockheed Martin’s $9 billion acquisition of Sikorsky Aircraft┬áin September, finding the deal did not violate any antitrust laws. The Defense Department did not attempt to block the deal, however Under Secretary for Acquisition Frank Kendall told reporters further moves like this could be a roadblock for both the industry and national security.

“We believe these types of acquisitions still give rise to significant policy concerns,” Kendall told reporters. “The Department of Defense is concerned about the continuing march toward greater consolidation in the defense industry at the prime contractor level.”

Lockheed Martin is the largest defense contractor and arms manufacturer in the world, a status the company enjoyed long before the Sikorsky deal was proposed. Their purchase of the helicopter developer marked the largest aerospace acquisition since 2012, when United Technologies purchased Goodrich Corp. for $16 billion.

“With size comes power,” Kendall added, “and the department’s experience with large defense contractors is that they are not hesitant to use this power for corporate advantage.”

The Wall Street Journal reports Lockheed Martin is also the Pentagon’s largest supplier, and this is not the first time their acquisition moves have raised concerns. The Defense Department blocked an attempt by Lockheed to acquire Northrop Grumman in 1998, also one of the world’s largest defense contractors.

U.S. Defense Secretary Ash Carter echoed Kendall’s sentiments to reporters on Wednesday.

“What I said then, and still believe, is that it was important to avoid excessive consolidation in the defense industry, to the point where we did not have multiple vendors who could compete with one another on many programs,” Carter said.

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