Deputy Secretary of Defense John P. White today advised the Federal TradeCommission that Lockheed Martin's acquisition of Loral Corporation wasacceptable to the Department of Defense.
This conclusion was based on theDepartment's comprehensive review of the proposed acquisition.
In a letter toFTC chairman Robert Pitofsky, White submitted DoD's views for FTC'sconsideration in its review of the proposed acquisition.
(A copy of White'sletter is attached.)
In January 1996, Lockheed Martin announced its intent to acquire a substantialportion of the Loral Corporation.
Lockheed Martin's work for DoD includes theTitan missile system, F-16 Falcon and miscellaneous aircraft accessories andcomponents.
Loral provides electronic components for radar warning receivers,weather satellites and "black boxes" for various aircraft.
The Department reviewed its ongoing and anticipated programs, as well as thebroader market areas of interest to DoD i.e., where the two companies competeor can be expected to compete.
The Department examined whether the transactionwould affect DoD's ability to buy the best products at the best price.
TheDepartment concluded that it would continue to be able to maintain adequatecompetition for its purchases.
The Department also determined that the mergerwill provide substantial savings.
The Department's review also highlighted potential concerns that defenseindustry consolidation might lead companies to favor their internalcapabilities when they decide whether to make components in house or tosubcontract with an outside supplier.
This issue is not unique to this companyor to this merger.
The Department has asked the Defense Science Board to studythe effect of vertical integration and corporate size on such decisions.
TheDepartment also has initiated an internal review of its regulations concerningthe factors that should be considered when a company decides to make acomponent in house or buy it from an outside source.