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Newest defense merger is a dangerous thing Boeing-McDonnell Douglas deal gives arms lobby more clout


Boeing's $13 billion takeover bid for McDonnell Douglas is the most dramatic step yet in the consolidation of the U.S. military industry.

The company's spin on the merger -- echoed by exuberant Wall Street analysts and endorsed in reassured tones by the Washington Post and The New York Times -- is that it will make the United States more competitive in global markets, save money for the Pentagon and create more jobs for U.S. aerospace workers.

Don't believe the hype. The most likely outcome of the Boeing deal will be to strengthen the defense industry's ability to win funding for unnecessary weapons projects, weaken the Pentagon's ability to control the costs of these programs, and increase the emphasis of U.S. foreign policy on promoting trade at the expense of human rights and social justice.

If the Boeing-McDonnell Douglas deal is approved, the most immediate cost to taxpayers will be the $1 billion or more in "restructuring costs" that the company is likely to seek from the Pentagon to pay for everything from shutting down plants to golden parachutes for executives.

Lockheed Martin CEO Norman Augustine -- who has built his firm into a $30 billion military conglomerate over the past three years by merging Lockheed, Martin Marietta and Loral -- set the groundwork for this lucrative new form of corporate welfare when he prevailed upon his former business associates William Perry, outgoing U.S. secretary of defense, and John Deutch, CIA director, to reverse a long-standing Pentagon policy against government reimbursement of defense-merger costs.

These merger subsidies and a permissive antitrust posture have created a situation in which the military-industrial complex might soon be dominated by just three giant companies: the new bigger Boeing, Lockheed Martin and a third major player made up of some combination of Northrop Grumman, Raytheon, Hughes Defense and Texas Instruments.

And contrary to the claims of industry leaders, these new megafirms will have plenty of government money to split up. The Pentagon budget is still at a near-Cold War level of $265 billion, and spending on new weapons is slated to jump by one-third over the next five years.

Based on recent performance, Boeing and Lockheed Martin alone can be expected to divide up to $25 billion in military contracts per year, roughly $1 out of every $5 the Pentagon gives to private companies.

In an environment in which the only threat to their prosperity would be a substantial shift of funds from the Pentagon budget to domestic needs, these military-industrial behemoths are more likely to cooperate to drive up military and space budgets than they are to compete to lower Pentagon weapons costs.

For example, Boeing is a major subcontractor to Lockheed Martin on the $70 billion F-22 stealth fighter program, which an independent analysis by the General Accounting Office has deemed unnecessary in the post-Cold War world. The two companies can be expected to use all their lobbying power to save the F-22 from being cut back.

Boeing is also a fellow contractor and lobbying partner with Northrop Grumman in the effort to get Congress to revive the B-2 bomber, which will carry even more weight if McDonnell Douglas and its far-flung facilities are brought into the Boeing fold, adding strength to its pork-barrel appeal.

Other of its high-priced projects that the Boeing-McDonnell team will fight tenaciously to protect are the $80 billion plan to buy 1,000 new F/A-18 fighters for the Navy, a $46 billion program to purchase V-22 tilt-rotor aircraft for the Marines and a $42 billion scheme to buy C-17 airlift planes for the Air Force.

According to John Pike of the Federation of American Scientists, "One of the scariest things about Boeing is its huge political footprint -- if you look at a map of their facilities, it looks like the United States of Boeing. They have a presence in virtually every state south of the Mason-Dixon line" -- plus California, Oregon, Pennsylvania and Washington.

Boeing has shown great skill at leveraging its presence in key states into support in Congress and the White House for everything from most-favored-nation trading status for China to sales of AWACs radar planes to Saudi Arabia to laser weapons for the Star Wars program.

In future battles over whether to sell weapons and advanced technologies to repressive regimes such as Turkey and Indonesia, a Boeing-McDonnell combine can be expected to weigh in heavily on the side of ignoring concerns about human rights and weapons proliferation and in favor of expanding exports.

If President Clinton really wants to streamline the weapons industry and cut Pentagon costs, he should go after the problem directly by substantially reducing the military budget.

Creating a handful of multibillion-dollar weapons companies and letting them carve up a growing Pentagon pie is a recipe for wasteful military spending and a fatally distorted set of foreign and domestic priorities.

William D. Hartung is a senior fellow at the World Policy Institute at the New School for Social Research in New York and author of "And Weapons for All," published by Harper Collins, 1994. This commentary is reprinted with permission from The Nation.

Pub Date: 12/29/96

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