Tag Archives: Defense Spending

F-35

FTC Sues to Block Lockheed Martin Corporation’s $4.4 Billion Vertical Acquisition of Aerojet Rocketdyne Holdings Inc.

Agency Seeks to Prevent World’s Largest Defense Contractor from Eliminating Last Independent U.S. Missile Propulsion Provider

February 1, 2022 – Mike Spillan, Editor

Today, the Federal Trade Commission sued to block Lockheed Martin Corporation’s $4.4 billion proposed vertical acquisition of Aerojet Rocketdyne Holdings Inc, the last independent U.S. supplier of missile propulsion systems. Aerojet supplies advanced power, propulsion, and armament systems, which are critical components for the missiles made by Lockheed and other defense prime contractors.

The agency’s complaint alleges that if the deal is allowed to proceed, Lockheed will use its control of Aerojet to harm rival defense contractors and further consolidate multiple markets critical to national security and defense. This is the agency’s first litigated defense merger challenge in decades.“The FTC is suing to block Lockheed Martin, the world’s largest defense contractor, from eliminating Aerojet, our nation’s last independent supplier of key missile inputs,” said FTC Bureau of Competition Director Holly Vedova. “Lockheed is one of a few missile middlemen the U.S. military relies on to supply vital weapons that keep our country safe. If consummated, this deal would give Lockheed the ability to cut off other defense contractors from the critical components they need to build competing missiles. Without competitive pressure, Lockheed can jack up the price the U.S. government has to pay, while delivering lower quality and less innovation. We cannot afford to allow further concentration in markets critical to our national security and defense.”

The U.S. Department of Defense (“DoD”) reviewed the acquisition and considered the potential impacts of the transaction on national security, the nation’s industrial and technological base, competition, and innovation.

As part this assessment, the DoD facilitated a series of FTC-led interviews with DoD-impacted stakeholders. DoD’s assessment was provided to the FTC for its deliberations and final decision-making.“I deeply appreciate the collaborative relationship between DoD and FTC staff who worked closely throughout this investigation,” said Director Vedova. “The FTC determined that the proposed transaction harms competition for several weapons systems that DoD relies on to defend the nation and there is no sufficient remedy to alleviate those harms.”

Lockheed is the world’s largest defense contractor and a leading missile supplier in a highly concentrated sector. Lockheed, and its U.S missile competitors—Raytheon Technologies, Inc., Northrop Grumman Corporation, and The Boeing Company—act as missile system prime contractors to DoD. These prime contractors are key intermediaries between the U.S. government and the rest of the missile systems supply chain, including the subcontractors such as Aerojet which provide system components to them.

DoD relies on prime contractors to develop, produce, sustain, and source a variety of weapons, including missile systems, hypersonic cruise missiles, and missile defense kill vehicles. Each of these weapons depend on critical propulsion technologies of the type supplied by Aerojet.Aerojet, as a subcontractor, is the last independent U.S. supplier of critical inputs for missile systems, hypersonic cruise missiles, and missile defense kill vehicles. Aerojet and only one other competitor – Northrop Grumman – compete to provide propulsion inputs for missile systems and hypersonic cruise missiles to defense prime contractors.

Aerojet and Northrop Grumman both provide solid rocket motors for missile systems and supersonic combustion ramjets, or “scramjets,” which are air-breathing engines that propel hypersonic cruise missiles. Further, Aerojet is the only proven U.S. supplier of divert-and-attitude control systems that propel missile defense kill vehicles. Lockheed’s proposed acquisition of Aerojet would give Lockheed control over critical propulsion inputs that its rivals require to compete against Lockheed. Specifically, the complaint alleges that the proposed acquisition would give Lockheed the ability and incentive to deny, limit, or otherwise disadvantage competitors’ access to critical propulsion inputs for various weapons systems. The combined firm could disadvantage rivals by affecting the price or quality of the product, the quality of the engineering support, and the schedule and contract terms for developing and supplying it or otherwise disadvantage its rivals.

As a subcontractor, Aerojet also has had access to prime contractors’ sensitive information about technological advancements, cost, schedule, and business strategies. The FTC complaint alleges that post-acquisition, Lockheed would have an incentive to exploit its access to its rivals’ proprietary information to gain an advantage in competitions against them and that the U.S. government, in turn, would be harmed because the cost of missile systems, missile defense kill vehicles, and hypersonic cruise missiles would likely increase, innovation would be lessened, and quality would be reduced, hindering national security and defense interests.

According to the complaint, the proposed transaction could impact research and development as well as innovation into the future, which is vital to ensure that the U.S. remains a leader in these technologies. As an independent supplier, Aerojet has the incentive to allocate its research and development funds based on the potential return the funds would generate regardless of which prime contractor it is supporting.

The complaint further claims that, post-acquisition, the combined firm would be incentivized to allocate Aerojet investment dollars for the combined firm’s benefit alone, which could stifle innovation.

The Commission vote to issue the administrative complaint (a public version of which will be available and linked to this article as soon as possible) and to authorize staff to seek a preliminary injunction was 4-0.The FTC will file a complaint in the U.S. District Court for the District of Columbia seeking a Preliminary Injunction to stop the deal pending an administrative trial. The administrative trial is scheduled to begin on June 16, 2022.

Lockheed Martin To Develop New Missle Defense Laser System

The Missile Defense Agency, a part of the Department of Defense, awarded Lockheed Martin a nine month, $25.5 million contract extension to continue development of its Low Power Laser Demonstrator (LPLD) missile interceptor concept. This program, awarded Aug. 31, builds on a 2017 contract to develop an initial LPLD concept.

Lockheed Martin’s LPLD concept consists of a fiber laser system on a high-performing, high-altitude airborne platform. LPLD is designed to engage missiles during their boost phase – the short window after launch – which is the ideal time to destroy the threat, before it can deploy multiple warheads and decoys.

Over the course of this contract, Lockheed Martin will mature its LPLD concept to a tailored critical design review phase, which will bring the design to a level that can support full-scale fabrication.

“We have made great progress on our LPLD design, and in this stage we are particularly focused on maturing our technology for beam control – the ability to keep the laser beam stable and focused at operationally relevant ranges,” said Sarah Reeves, vice president for Missile Defense Programs at Lockheed Martin Space.

“LPLD is one of many breakthrough capabilities the Missile Defense Agency is pursuing to stay ahead of rapidly-evolving threats, and we’re committed to bringing together Lockheed Martin’s full expertise in directed energy for this important program.”

Lockheed Martin expands on advanced technology through its laser device, beam control capabilities, and platform integration – ranging from internal research and development investments in systems like ATHENA to programs such as LANCE for the Air Force Research Laboratory.

Continued LPLD development will take place at Lockheed Martin’s Sunnyvale, California campus through July 2019.

As a proven world leader in systems integration and development of air and missile defense systems and technologies, Lockheed Martin has already delivered the U.S.  several high-quality missile defense solutions that protect citizens, critical assets and deployed forces from current and future threats.

The company’s experience spans directed energy systems development, missile design and production, hit-to-kill capabilities, infrared seekers, command and control/battle management, and communications, precision pointing and tracking optics, radar and signal processing, as well as threat-representative targets for missile defense tests.

Senate Sends Defense Bill To President Trump For Signing

The US Senate easily passed a $716.3 billion defense authorization bill Wednesday that ramps up military spending and bolsters America’s posture against Russia, while avoiding policy changes that would have antagonized President Donald Trump.

The National Defense Authorization Act (NDAA) passed 87 to 10 in the Senate a week after clearing the House of Representatives, and now heads to the White House for Trump’s signature.

The bill provides $69 billion in special war funding known as overseas contingency operations, authorizes a 2.6 percent pay raise for members of the armed forces, and invests tens of billions in modernizing the Pentagon’s air and sea fleets and missile defenses.

It notably prohibits delivery of F-35 Joint Strike Fighter aircraft to Turkey, a NATO ally with increasingly fraught relations with Washington, until Ankara can confirm it will not buy Russia’s S-400 anti-aircraft missile system.

And while China and Russia are classified as “strategic competitors” to the United States, the legislation negotiated between the House and Senate left out a proposal by senators that would have blocked a deal Trump reached with Chinese telecommunications giant ZTE that eases tough financial penalties on the firm for helping Iran and North Korea evade American sanctions.

The capitulation smoothed things over with the White House, but it angered Republican Senator Marco Rubio, who voted against the bill.

“It’s time we opened our eyes,” Rubio told colleagues.

“We are engaged in a geopolitical competition, not with some poor agrarian country trying to catch up, but with a global super power who is quickly nipping at our heels and doing so unfairly, with the intent of replacing us in the world as the most powerful country militarily, economically, geopolitically and technologically.”

The NDAA also includes a provision allowing the administration to waive some Russia-related sanctions that would have barred Washington from selling defense-related equipment to countries using Russian technology.

Supporters of the provision stress that the change will help certain countries wean themselves off of Russian influence.

The bill including provisions which allow for better assessment of risks to US national security from transactions involving foreign firms aiming to gain access to sensitive American technology.

It also extends a restriction on US-Russian military cooperation, and authorizes $65 million to revamp the US nuclear arsenal by developing new “low-yield” nuclear weapons.

This year’s NDAA was named after Senator John McCain, the Senate Armed Services Committee chairman and national security hawk who is home in Arizona battling brain cancer.

“This year’s NDAA represents an important opportunity to implement an effective approach to confront a growing array of threats around the world,” McCain said.

Congress has passed the NDAA for 57 consecutive years, and Senate Democrat Richard Blumenthal noted its success marks “a victory for the notion that national security is above politics and party.”

F-22 Raptor

The Great F-22 Fighter Shortage

With the U.S. Air Force considering the retirement of the Boeing F-15C Eagle, Lockheed Martin’s stealthy fifth-generation F-22 Raptor will be the only air superiority fighter in the service’s inventory.

While there is no doubt that the Raptor is far and away the best air superiority fighter ever built, the U.S. Air Force only has about 186 surviving Raptors in its inventory. Of those 186 remaining Raptors, only 123 are “combat-coded” aircraft with another twenty that are classified as backup aircraft inventory machines. The rest are test and training assets. Even then, some of those aircraft are undergoing long-term repairs after suffering from accidents—such as one Alaska-based aircraft that made a belly-landing in Florida in April —and are not flying.

In total, there are only six front line F-22 squadrons—rather than the required 10—all of which have fewer aircraft than a normal fighter unit. Five of those squadrons have 21 primary authorized aircraft and two backup inventory jets while one operational Hawaii Air National Guard unit has 18 primary authorized aircraft and two backup jets. Test and training units are also shortchanged—with the Weapons School and the elite 422nd Test and Evaluation Squadron being forced to share roughly a dozen jets at Nellis Air Force Base, Nevada.

This leaves the Air Force and our nation desperately short of fighter capacity and is a matter that the Air Force, the Trump administration and Congress will very soon need to address.