This statement corresponds with recent moves made by the world's largest defense contractor Lockheed Martin, after they acquired helicopter manufacturer Sikorsky. Also, over the last 6 months Lockheed Martin has announced 700 layoffs in their IT department as they move to combine IT services with Leidos in a $5 Billion deal.
Federal regulators stated, "If a transaction threatens to harm innovation, reduce the number of competitive options needed by [the Department of Defense], or otherwise lessen competition...[regulators] will not hesitate to take appropriate enforcement action."
Government spending has actually declined severely since the recession, which has had the biggest hit on military contractors. Therefore the defense industry has had to make tough choices like merging with each other. Some companies have gone looking for military business globally or even in the commercial sector.
After many job cuts and realignments defense giants have seen profits improve in the past year. But industry officials still have concerns about increased consolidation within the industry, arguing that the slowdown in spending from the Pentagon has made mergers and acquisitions necessary.
This is a very interesting and relevant topic that I have not seen discussed very much. With global conflict on the rise due to growing tensions around the world we may see the effects of this consolidation in the coming years. This could potentially cause issues for our nation on multiple fronts. If these companies continue to consolidate this most certainly would lead to less competition. Less competition would surely cause higher prices for products that would be a burden for the government and the taxpayers. I also agree with the fact that consolidation could lead to less innovation. I feel that if less competition is present innovation will be lower. I'm curious to see whether federal regulators will step in and prevent some of these mergers from occurring. I wonder what would be the point that would trigger the feds to intervene with these companies that they work so closely with.
ReplyDeleteAs for competition, there are so many legal process and asset requirements for a company to enter the defense industry. There is not much the government can do to increase competition.
ReplyDeleteIncrease national saving by cut defense expenditure is not going to be effective if something happened in the future.