Lockheed Martin is the top-grossing
defense firm in the world and the US
government supports that business to the
tune of over thirty seven point seven
billion dollars it surpasses its closest
competitors Boeing and Raytheon by
nearly twenty billion in arms sales
these funds are granted by Congress to
provide equipment that enables the US
military to protect the country at home
and abroad so why is Lockheed the
defense darling of the US government and
how did it beat out its competitors one
of the top priorities of all
administration's is the protection and
safety of the American people to ensure
that politicians work with defense
contractors to provide equipment to the
military this partnership provides a
unique opportunity for private
corporations to execute the will of the
government and requires a delicate
balance President Eisenhower in his
farewell address coined the term
military-industrial complex and what he
was talking about was the close
connection and collaboration between
arms contractors and uniformed military
and the council's of government we must
guard against the acquisition of
unwarranted influence whether sought or
unsought by the military-industrial
complex the political incentives of the
US Congress and the Department of
Defense tended to work together in a way
that created enormous incentives to
increase military spending for example I
went as a major weapons program like say
the f-35 which is the current Air Force
combat aircraft it's being purchased as
members of Congress who may have
questions about this plane is it
performing well are we getting a good
deal for our money and so forth are
reluctant to vote against it because it
means going up against potential jobs in
their states the Congress people in
whose district those companies are
located and the Defense Department that
then gets to use the equipment that is
purchased in this way and Eisenhower
believed that that complex of the
military the industry and the government
Congress in particular created a
tendency for the United States to
overspend on national security as it
decreases the revenue decreases waging
an actual war is a very expensive
project the 9/11 attacks in 2001 were
shock to the American psyche led to a
substantial ramping up of US military
spending in the years after 2001 partly
because of the immediate issue of
terrorism and partly because of the
closely related with second order
problems of the wars that the
counter-terrorist program led to in
Afghanistan and Iraq the the price tag
gets huge and so American defense
spending has grown you know radically
since 2001 remains very and Lockheed
Martin is the top contracted company by
the US government in 2018 alone the
company sold thirty seven point seven
billion dollars worth of contracts to
the US government making up 70 percent
of their net sales the other 28 percent
came from foreign military sales and 2
percent came from commercial and other
customers Lockheed's total revenue in
2018 was about 53 billion dollars by
contrast Lockheed's next biggest
competitor Boeing was awarded about
twenty three billion dollars from
government contracts the same year so
even though Boeing is a much larger
company with 100 1 billion dollars in
total revenue in 2018 only a small
portion of its business relies on
defense contracts Boeing mostly makes
planes for commercial airlines but it
also has a robust business making
military aircraft and other weapons the
next largest competitor is Raytheon
Raytheon is a prominent defense firm
that offers services and every
from cybersecurity to missile defense
68% of Raytheon's net sales came from
the US government in 2018 which means
about eighteen point four billion
dollars they list their principle US
government customer as the US Department
of Defense as does Lockheed Martin
however before Lockheed Martin got this
very crucial customer it struggled to
define its identity
Glenn L Martin opened his aviation
company on August 16 1912 the company
went on to become one of the earliest
suppliers of the US military making
aircraft for both the Army and the Navy
they went on from success to success
during the twenties and the thirties in
1961 the second Glenn L Martin company
merged with the American Marietta
corporation it was renamed the Martin
Marietta corporation the same year Glenn
Martin launched his aviation business
the Lockheed brothers launched their
aviation business the Alko hydro
aeroplane company which was later named
Lockheed Aircraft Company Lockheed log2
like Lockheed people had a hard time
pronouncing it that led to the brothers
legally changing the spelling of their
surname to Lockheed Malcolm went on to
start a successful car hydraulic brake
company and Allen resigned after the
company was bought by Detroit Aircraft
Corporation but the company didn't last
long and fell into receivership under
the title insurance and Trust Company of
Los Angeles officially killing Lockheed
Aircraft Corporation which was a
subsidiary its assets were sold off to
Robert gross and other investors who
went on to form a new Lockheed Aircraft
Corporation of Delaware Lockheed
Aircraft Corporation changed its name in
1977 to Lockheed corporation to
demonstrate they offer other services
besides aviation those two companies the
Martin Marietta Corporation and Lockheed
corporation were two prominent
competitors in the defense marketplace
however that marketplace has never been
completely independent of the
government's actions just as President
Eisenhower had warned when he spoke
Terry industrial complex military
procurement had declined around 52% from
1985 to 1997 in current dollar terms
before 2001 many people believed that
national security had become a lot
easier with the end of the Cold War and
that the United States could take what
was referred to at the time as a peace
dividend the the the much larger
defensive efforts that the United States
had made during the Cold War when we had
to fight the Soviet Union weren't
necessary anymore when the Soviet Union
collapsed in the Cold War ended and
stood defense budgets tended to decline
leadership at the Department of Defense
inferred that the defense industry would
have to shrink around 40% in order to
save the industry from collapsing amid
declining demand from the department
officials encouraged companies to
consolidate in an effort to save each
other at the end of the Cold War there
were concerns about whether the Pentagon
budget which was going to come down
about 10 to 25 percent so it was
projected in real terms you know could
that smaller budget sustain the same
number of contractors and William Perry
the Secretary of Defense's like the
administration felt the answer was no in
fact in 1993 the government asked
specifically for less competition among
defense contractors look to your left
and look to your right gonna be here
neustine engineered the whole series of
mergers and famously or famously norm
Augustine who at the time was the head
of Martin Marietta was at that time with
a bunch of other industry leaders and he
was one of the most aggressive
executives and taking that guy running
with it
lockheed-martin absorbed large companies
like Ford aerospace and Laurel by 2000
the industry had consolidated into the
marketplace we know today with Lockheed
on top Lackey Martin now stretches into
four business segments aeronautics
missiles and fire control rotary and
mission systems and space in 2019
Raytheon and United Technologies
announced intention to merge to have a
better edge on the defense industry to
protect their profits companies like
Lockheed Martin also sell their aircraft
to American allies when cleared by the
State Department that's one way the
government controls the defense
marketplace another way is through
direct negotiations with industry CEOs
in the 2017 fiscal year the then
president barack obama proposed a budget
of 580 2.7 billion dollars for the
Department of Defense the following year
in 2018 President Trump proposed a
budget of 639 point 1 billion dollars
for the fiscal year 2019
proposed a budget of 716 billion dollars
for national security with 686 billion
for the Department of Defense and
looking to the future
Trump proposed a budget of 750 billion
dollars with 718 point 3 billion going
to the Department of Defense for the
fiscal year 2020 the company was well
positioned in the Obama years as well
because you know he he actually spent
money in this decade which includes most
of the Obama to terms we've spent a
trillion more on the Pentagon than in
the prior decade which was at the peak
of the Iraq Wars President Barack Obama
appointed Lockheed CEO Marilyn Hewson to
the President's Export Council in
September of 2013
Marilyn Hewson from Lockheed Martin
obviously one of our greatest innovators
and one of those innovations is the f-35
fighter jet it is the most advanced
fighter in the world its stealth you
cannot see it is that correct
better be correct right a single f-35
can cost over 80 million dollars and the
government hasn't always been happy with
the f-35 s performance and price then
president-elect Donald Trump thought the
f-35 s program delays and high costs
were bad for business this one from the
president-elect based on the tremendous
cost and cost overruns of the Lockheed
Martin f-35 I've asked Boeing to price
out of comparable f-18 Super Hornet
this caused Lockheed Martin shares to
fall around 2% and sent Boeing shares up
0.5 percent in January 2017 Trump
commented on the attention of his
negotiation with Lockheed Martin look at
what's happening with Lockheed number
one we're cutting the price of their
planes by a lot but they were also
expanding and that's going to be a good
thing ultimately they're gonna cut
they're gonna be better off Houston is
actually in this very interesting sweet
spot where the defense budgets never
been bigger under any presidency so that
gives her company a lot of leeway to
snatch up a lot of those contracts
there's another company that's gonna
exceed Lockheed Martin in the next five
years
Lockheed Martin will be delivering 478
f-35 aircraft to the US government under
their biggest deal yet a 34 billion
dollar contract with the Pentagon in
2019
the US government also approved the sale
of 32 f-35 jets to Poland for around 6.5
billion dollars so the company is poised
to be successful among allies as well
when you look at Lockheed diverse
portfolio and you pair that with the
defense budget at a tune of 700 billion
dollars of course Lockheed is prime
suited to pick up more government
contracts and to write even more of a
successful wave
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