The Defense Post. May 13, 2021 – Competition, innovation, and cost-containment in the missile defense sector are vital to countering rapidly evolving missile threats from China, Russia, and other sources. History has taught us that excessive consolidation in any industry, especially defense, has increased taxpayers’ costs and high-level clumsiness in strategic thinking. That’s why Washington should prohibit Lockheed Martin’s proposed acquisition of Aerojet Rocketdyne and take other decisive actions to promote enhanced competition in the already highly-concentrated missile defense, propulsion, and hypersonic development market.
Missile Defense Propulsion Technology
Approval of this transaction by federal antitrust regulators would cause problems in the tactical and strategic offensive missile markets. It would also further damage competition in the missile defense arena by bringing Aerojet’s solid rocket motor (SRM) manufacturing capability under the control of Lockheed. SRMs, the state-of-the-art technology for propelling missiles toward their targets, are used in virtually all missile systems procured by the US government.
Since Northrop Grumman acquired Orbital ATK and vertically integrated Orbital’s market-leading SRM enterprise into its own business in a 2018 transaction, Aerojet is the last remaining independent manufacturer of this critical propulsion technology. Lockheed’s control of Aerojet’s SRM technology would be problematic because Boeing, Raytheon, and Northrop — the only other three companies capable of competing against Lockheed as prime contractors for US government missile systems contracts — all rely on Aerojet as a supplier of propulsion components for their solutions. Moreover, Aerojet is the only producer of the Divert and Attitude Control System. This critical missile defense propulsion technology makes rapid and precise course adjustments to maneuver interceptors to destroy incoming ballistic missiles.
Harmful to Innovation, Pricing
Substantial historical experience, economic research, and antitrust analyses by regulators at the Federal Trade Commission (FTC), DOJ Antitrust Division, and European Union confirm that corporate consolidations reducing the number of suppliers in highly concentrated industries are likely to foster significant anticompetitive mischief harmful to innovation and pricing. Foremost in relevance are the lessons of Northrop’s acquisition of Orbital, which strongly suggest Lockheed’s takeover of Aerojet will undermine competition, innovation, and affordability of America’s missile defense programs. Northrop’s apparent anticompetitive use of its control of SRMs to discriminate against and force Boeing to drop out of the competition for the Ground Based Strategic Deterrent (GBSD) program contract provides the greatest cause for concern.