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| March 26,1998 |
| March 26,1998 |
Justice Department to block Lockheed-Northrop merger
by Chris Hellman, Senior Research Analyst, Center for Defense Information
chellman@cdi.org
On March 23 the Justice Department announced it was bringing a lawsuit against Lockheed Martin over its plans to acquire Northrop Grumman, stating that it would unfairly limit competition in the defense industry. This is the first attempt by the government to intervene in the recent spate of mergers among major defense contractors and is the largest corporate deal ever challenged. The Defense Department allowed six mergers each worth over $1 billion in 1997 alone.
Lockheed Martin first announced its plans to buy Northrop Grumman on July 3, 1997. Executives at the two companies and most industry analysts expected the deal to go through without difficulty. The merger, anticipated to be completed early in 1998. The move would create a company with revenues of $37 billion, second behind Boeing Co. ($48 billion in total revenues) and ahead of Raytheon ($27 billion). Lockheed Martin is already the nation’s largest defense contractor.
On March 9, the Justice Department released a statement that it was "fundamentally opposed to the proposed combination between the two companies." While there had been rumors in previous weeks about government concerns over the proposed merger, the strength of the Justice Department’s objections came as a surprise to many. It shouldn’t have: DoD and Justice Department officials have stated repeatedly that they expressed their concerns about the proposal throughout their investigations. Industry rivals raised objections to the merger from virtually the moment it was announced. And in November, 1997, a report done by industry analysts Prudential Securities revealed Justice Department concerns about Lockheed’s potential dominance of the critical Airborne Early Warning (AEW) market.
In many ways the Lockheed-Northrop deal is symbolic of the recent rapid consolidation in the defense industry. It would unite five industry giants Lockheed, Martin Marietta, Loral, Northrop and Grumman which were independent just three years ago. Many industry analysts point to this fact to support the contention that DoD’s opposition to the merger centered around concerns that the industry was finally becoming too concentrated. Yet this would reflect a fundamental change in the Pentagon’s position, which has actively encouraged corporate consolidation since 1992 in an effort to make the inevitable downsizing in the defense industry due to the post-Cold War drawdown more orderly and less painful.
Other analysts believe that while the era of defense consolidation will eventually come to an end, further acquisitions will and should occur, particularly at the subcontractor level. They suggest that the Lockheed- Northrop deal is unlike earlier industry mergers. Pentagon sources close to the investigation agree. In addition to Lockheed’s potential dominance of the AEW market, they point to the complex interweaving of the two companies’ interests in current and future DoD programs, as well as their ability to control critical Pentagon subcontractors. For example, a joint Lockheed- Northrop company would not only be the prime contractor on the Air Force’s F-22 fighter, it would supply the bulk of the aircraft’s electronic systems. A similar situation could develop with the Joint Strike Fighter, where Lockheed and Northrop are already teamed in bidding to become that system’s lead contractor. Procurement on these two systems alone could exceed $200 billion.
While the Justice Department has expressed a willingness to continue negotiations on the deal, prospects of a successful conclusion without litigation appear unlikely. Government officials indicate both publicly and privately that the gulf between the two sides is significant. The Justice Department’s rejection of Lockheed’s proposal to divest roughly $1 billion worth of assets, and their proposal that the companies spin off closer to $4 billion of their combined business virtually all of the electronic business that Northrop Grumman acquired from Westinghouse in 1996 will likely make the $8.3 billion deal too unprofitable.
Kyiv’s Balancing Act Between NATO and Russia
by Tomas Valasek, Research Analyst, Center for Defense Information
tvalasek@cdi.org
Ukrainian Minister of Foreign Affairs Hennadii Udovenko caused quite a stir in the West when he announced this week that "Ukraine is not going to apply for NATO membership because [it] pursues non-bloc policy...[and] won’t build its relations with the West at the expense of its relationship with Russia."
The United States spent much diplomatic effort and money in recent years on supporting Ukraine’s independence and incorporating it into Western structures. So does Udovenko’s statement mean that Washington’s policy failed? Hardly, but the Foreign Minister’s words demonstrate that Kyiv’s priorities lie not with NATO but in maintaining good regional relations, especially with its large neighbor to the east - Russia.
Ukraine has used NATO several times in the past to warn Russia against interfering in Kyiv’s affairs. The 1997 joint Ukrainian - NATO exercise Sea Breeze represented one such instance. It was originally scheduled to take place in Crimea, a region which houses a large Russian minority and whos status as a part of Ukraine some elements in Russia dispute. The first scenario for the exercise included a hypothetical revolt against the government, which friendly navies help put down. The intended message was not lost on Russia, which vehemently criticized the plan. Ukraine quickly altered the scenario to an environmental emergency, but Kyiv made its point: it will defend its independence by force, if necessary, and with outside help.
Ironically, the Sea Breeze incident seems to have advanced Kyiv - Moscow relations by clarifying each countries’ goals and resolve. Recent relations between Ukraine and Russia can be best described as rational, flexible, and dominated by a mutual desire to seek peaceful solutions, made inevitable by the countries’ geographic position and commonalities. Thus, shortly after the Sea Breeze showdown and while foreign navies were still in Ukraine’s territorial waters, the two Republics signed a statement on the status of the Russia - Ukrainian border, on military cooperation, and on joint defense production. In a symbolic gesture, the two countries also organized a joint military exercise.
Ukraine’s strategy is one of non-alignment, seeking the best possible relations with both the West and Russia. This distinguishes it from most Central European countries and the Baltic States, which bet all their strategic chips on NATO membership, regardless - or precisely because of - an adverse reaction from Moscow. In Kyiv’s game, NATO often is used as a foal to keep Russia at bay. Moscow nearly spoiled this carefully constructed tactic by its own rapprochement (of sorts) with the Alliance, which produced the NATO - Russia Founding Act signed in Paris in May 1997. Nervous about an apparent circumvention, the Foreign Minister Udovenko, cautioned NATO against "developing ties with Russia at Ukraine’s expense." These worries were put to rest when a similar document, the NATO - Ukraine Charter, was signed in Madrid in July 1997.
Although Ukraine has balanced its relations with both Moscow and NATO fairly evenly, the country seems to be tilting slightly more towards the West. Former U.S. Ambassador to Kyiv William Miller recently quoted Ukrainian President Leonid Kuchma as saying, "Ukraine is pursuing a strategic relationship with the United States and a close relationship with Russia." This policy reflects Kyiv’s assessment that outside threats are more likely to come from the east than from the west.
Ukraine is scheduled for national elections on March 29. The projections look gloomy for reformist parties as the Communists and other parties of the left hold a lead in the polls. It is conceivable that Ukraine’s foreign policy will change after the elections. But for now, Udovenko’s statements on NATO can be considered another chapter in Kyiv’s act of balancing its western and eastern relations.
Dangerous Missile Defense Strategy
by Andrew Koch, Senior Research Analyst, Center for Defense Information
akoch@cdi.org
Republican members of Congress have recently stepped-up pressure on the Clinton Administration to accelerate the schedules for when U.S. missile defense systems will be deployed. This policy of placing political wishes over sound scientific practices is dangerous, a recently released Pentagon report warns.
The report, dated February 27, 1998, notes that accelerating missile defense testing schedules "is far more likely to cause program slips, increased costs, and even program failure" than to prove successful. Entitled "Reducing the Risk in Ballistic Missile Defense Flight Test Programs," the report found serious problems with abbreviated testing schedules and reduced number of flight tests in what it called "a rush to failure" to develop missile defenses.
Written by an independent panel composed primarily of former military officers and defense contractors and headed by retired General Larry Welch, the study was sponsored by the Ballistic Missile Defense Organization (BMDO) and Pentagon officials responsible for operational testing. The panel notes that political pressure is driving BMDO to pursue "very aggressive schedules, but these schedules are not supported by the state of planning and testing. Specifically the perceived urgency of the need for these systems has led to high levels of risk." The report concludes that "accepting higher risk is not accelerating fielding capability" and has led to delays in deployment dates and cost overruns.
The study focuses on the serious problems associated with developing an effective national missile defense system (NMD), which it said "would benefit from the earliest possible restructuring to a more achievable set of goals." In response, BMDO head Lt. Gen. Lester Lyles said his organization would reevaluate its testing schedules. However, political pressure to deploy theater missile defense (TMD) and NMD systems at the earliest possible date will likely prohibit meaningful changes.
One example of this is the Republican-backed Iranian Missile Protection Act of 1998 legislation which seeks to add an additional $147 million dollars to the Pentagon’s Fiscal Year 1998 TMD budget. The new monies would be spent to accelerate the testing schedules of the Patriot Advanced Capability-3 (PAC-3) and Navy Area-Wide TMD systems, and would pay for one additional test of each system. The legislation would also provide $35 million in funding for the Joint Composite Tracking Network project, which is designed to link data from existing sensor platforms for more timely and accurate detection of a ballistic missile launch. Additionally, the bill would increase funding for completion of PAC-3's remote-launch capability in 1999 instead of 2000, and would provide $10 million to increase the interoperability of U.S. theater missile defenses and Israel’s Arrow system. Funding for a third Arrow battery, which some members sought, was not included in the bill due to Clinton Administration objections.
Although the time-frame for when Iran can reasonably be expected to field a fully operational medium-range ballistic missile has been exaggerated (WDM Jan 8, 98; Sept 18, 98), Republican lawmakers site an emerging Iranian missile threat as the primary motive for their bill. The bill is a scaled- down version of legislation proposed last year that would have added $330 million to TMD programs.
As the Welch report warns, Republican calls for moving to deploy national missile defense systems immediately and attempts to quicken the pace of missile defense technology development is likely to be a waste of money at best. More likely, political meddling with sound scientific practices will cause significant delays or even program failures.
The Culture of Children With Guns - An Opinion
by Colonel Daniel M. Smith, USA (Ret.), Associate Director, Center for Defense Information,
dsmith@cdi.org
As so often happens in human events, there is this week a tragic and bitter juxtaposition between two seemingly unrelated events in widely separated places: the President’s 11 day visit to Africa and the most recent instance of multiple murders involving children.
The President flew into Kigali, Rwanda to spend three hours at the airport with the leaders of that ethnic war torn nation in which over half a million people, mostly Tutsis, were slaughtered by Hutus. The world in general and the U.S. in particular, said the President, were too slow to recognize the carnage that engulfed Rwanda and too slow to react to stop it from spreading. But the warning signs were there and had been present for some time. Indeed, the head of the UN mission in Rwanda has testified before the International Court that with 5,000 trained soldiers and an appropriate mandate he could have prevented thousands of deaths.
Mr. Clinton also visited Uganda where, along with seven African heads of state, he pledged to help find remedies for many of Africa’s ills. Uganda itself is still in the grip of a civil war in its north where a rebel group called Lord’s Army operates. One of its major tactics is the abduction and impressment of children and adolescents into its ranks as fighters. In many rural areas the government is unable to protect villages from these marauders. The result is a generation, or part of a generation, taught to fight, to kill or be killed (for the children are told they will die if they do not kill).
Rwanda and Uganda are not the only ones facing the problems of a society that finds children deeply enmeshed in the culture of violence and guns. Burundi and Zaire, Congo, Angola, and Sierra Leone are other African nations which are struggling to overcome the same militarism. And one could point to other third world nations on other continents struggling to resensitize themselves to the horrors of war and genocide.
It is at this point that this week’s tragedy in Jonesboro, Arkansas comes into focus. We as a society tolerate and even encourage an aura of militarism that, prima facie, is an encouragement to use guns and other forms of violence to "solve" problems.
As a society we also provide the means to enact violence. Pictures in major American newspapers show one of the two children in custody in connection with the Arkansas killings aiming a weapon as a small child. Such exposure and obvious approval by adults is the type of subtle encouragement toward violence that can later lead to child soldiers in Africa and more Jonesboros.
Such seeds of destruction do not, of course, have to turn into reality. But the love of guns and things military continues as children grow up in our society. Quasi-military organizations for youths, such as the "Young Marines," include a "chain of command," "boot camp," marching, uniforms, and "inspections." These organizations are allowed because they are seen as ways to occupy children, to socialize them, to teach them discipline. There is merit in each of these points, but why suddenly is there involvement of the military and a military aura associated with these goals? For decades there have been non-military programs and organizations dedicated to instilling these societal "virtues."
Many communities compound the problem by allowing JROTC - Junior Reserve Officer Training Corps - in their high schools, a program administered out of the Pentagon and staffed by retired military personnel. Military history as a separate subject from other history, "survival" skills such as cross country navigation, marching, uniforms, inspections, a chain-of-command are all present. Some programs go so far as to include marksmanship training. All this, again, is done in the name of discipline, occupying time, teaching "skills." But one might legitimately enquire: For what purpose in civilian life? Why must military training be part of this process?
In a population of over 270 million, the tragedy in Arkansas may be an "aberration." It is true in every case that curing violence, at any age, is a challenge that must focus on violent and violence-prone individuals. But the culture of violence in which those so inclined act out their predilection is a societal problem and one that only the society at large can address and begin to solve.
To ignore the problem simply will increase the peril to our nation and our children. The 1997 Morbidity and Mortality Report says that among children under 15 in the United States, the death rate from firearms was twelve times higher than among the next 25 industrialized countries combined.
Just like Rwanda, Uganda, and other African nations, we have our own "army" of child soldiers right here - and we are acting too slowly to stop it from growing every year.