Lockheed-Martin merger approved


The federal government gave its final approval yesterday to the merger of Martin Marietta Corp. and Lockheed Corp. -- a $10 billion marriage that will make Maryland home to the nation's largest defense contractor.

By a 4-0 vote, the Federal Trade Commission approved the largest merger ever within the U.S. defense industry after the companies agreed to take steps to resolve antitrust concerns. The Department of Defense had approved the plan in late December.

Although the FTC did not require either company to sell any operations, its agreement with Martin and Lockheed places certain restrictions on the companies' operations in military aircraft, satellites and rockets.

"This is a very important day for Maryland," Tim Ayers, a spokesman for Gov.-elect Parris N. Glendening, said of the merger, which will establish a company with 170,000 workers (4,300 in Maryland), $23.5 billion in sales and a business backlog of $43.6 billion. Lockheed Martin Corp. will have its headquarters in Bethesda.

The merger still is subject to the approval of shareholders of both companies. Although the special stockholders' meetings have not been scheduled, spokesmen for both companies expressed confidence the closing will take place before the end of the first quarter.

Restrictions placed on the new company to resolve the government's antitrust concerns include:

* A curb on its ability to team up with other companies to bid for satellite contracts.

* Lockheed and Martin Marietta have to end the exclusive teaming arrangements they have with Hughes Aircraft Co. and Northrop Grumman Corp., respectively, to develop and manufacture military satellites.

* The creation of a "fire wall" that prevents Lockheed Martin's rocket launch operations from getting information, through its satellite divisions, about a competitor's rocket when launching its satellites on their vehicles.

* A similar arrangement to prevent Lockheed Martin's avionics operations from sharing information with its aircraft manufacturing operations when supplying competitors with a system used on the F-15 and F-16 fighter planes that enables pilots to "see" their targets in the dark.

* Barring Lockheed Martin from altering its night navigation system to discriminate against competing military aircraft producers.

The strategy behind what officials of both companies insist is a combination of equals is to make the new company -- Lockheed Martin Corp. -- more competitive in vying for a bigger piece of the shrinking Pentagon budget.

It could also be a boon to the Pentagon. Defense industry sources have estimated that the merger will save the Defense Department between $2 billion and $3 billion over the next five years as it places orders for such military equipment as the F-22 stealth fighter plane, spy satellites, aircraft electronics and rockets.

While the merger of Martin Marietta and Lockheed has top executives excited, it has many factory workers and lower-echelon managers nervous about their futures with the company.

Charles P. Manor, a Martin spokesman, said there will be a reduction in the work force because of duplication and overlapping.

State officials are poised to protect the 4,300 Martin Marietta jobs in Maryland. Mr. Ayers said Mr. Glendening will be seeking a meeting with Lockheed and Martin officials shortly after taking office to protect as many jobs in Maryland as possible.

Martin Marietta's Middle River complex came dangerously close to closing early last year as a result of Martin Marietta's acquisition of General Electric Co.'s aerospace division.

To protect the plant, the state came up with a $900,000 package that will be used to help retrain workers. It also agreed to lease a five-story building that Martin Marietta had constructed at its Middle River complex six years ago to house engineering operations and executive offices.

There was no such luck for workers at a plant in Glen Burnie that produced anti-submarine warfare equipment. It was closed, and the work was shifted to Syracuse, N.Y.

The Clinton administration has been encouraging consolidation within the defense industry as a way for companies to adjust declining military sales.

Lockheed Chairman and Chief Executive Officer Daniel Tellep will be chairman and CEO of the new company. Martin Marietta Chairman and CEO Norman R. Augustine will be president. When Mr. Tellep retires next year, Mr. Augustine will become chairman and CEO.

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