Saturday, November 26, 2005
FTC Poised to Postpone Ruling On Boeing, Lockheed Venture
By ANDY PASZTOR and JONATHAN KARP
Staff Reporters of THE WALL STREET JOURNAL
October 24, 2005; Page A6
For the second time in two months, Pentagon concerns have prompted antitrust officials to withhold swift approval for a proposed combination of Boeing Co. and Lockheed Martin Corp. government rocket programs, according to people familiar with the situation.
Taking its cue from the Pentagon, these people say, the Federal Trade Commission today is expected to allow a 30-day deadline to lapse once again without giving the green light for creation of the venture. Boeing and Lockheed said last May that they planned to combine their rocket businesses in an effort to stem their losses and save taxpayers the expense of supporting two separate systems for launching military, spy, weather and research satellites.
The companies say they remain committed to the concept, which they estimate could eventually save the government as much as $150 million annually. [We're going to believe people with legendary cost overruns when they say they're going to save us money?] Many industry and military officials believe that the deal is likely to win government approval eventually, despite the current uncertainty and apparent policy gridlock inside the Pentagon.
Boeing and Lockheed said they are working with the government to answer questions, but declined to elaborate. A spokeswoman for the Pentagon, which has put off some big purchasing decisions partly as a result of acquisitions scandals involving Boeing, said it was "premature" to comment on the rocket proposal. The FTC doesn't comment on its reviews.
The latest development indicates that the contractors are struggling to convince federal officials about the long-term benefits of the proposal and face a tougher-than-expected fight inside the Pentagon. Other companies within the industry increasingly have voiced concern or opposition.
Since the Air Force is slated to be the venture's primary customer, the FTC has taken a back seat to the Pentagon in analyzing the likely implications. Continued regulatory limbo suggests that some high-ranking Pentagon officials remain on the fence, and haven't told antitrust enforcers they support creation of a monopoly to launch government satellites.
The final decision could set an important legal and policy precedent, because the Pentagon has generally opposed going to a single supplier in market segments with two long-established suppliers.[Odd. I don't remember this complaint when all the industry consolidation was going on in the 80's and 90's.]
The outcome will affect a federal lawsuit in which Lockheed alleges Boeing engaged in corporate espionage years ago by improperly acquiring and using thousands of proprietary Lockheed rocket documents. Lockheed has agreed to drop that suit, but only if the venture goes into effect.
Meanwhile, fledgling rocket-maker Space Exploration Technologies Corp., which seeks to launch government satellites, filed a federal lawsuit in Los Angeles last week accusing the companies of conspiring to violate antitrust laws and asking the court to block the proposed venture. [They don't mention here that Space-X claims to cut overall costs by at least 50% .] Northrop Grumman Corp., a major supplier of satellite components and subsystems, is among larger companies that have expressed concerns to the government about combining the rocket programs.
The anticipated decision by the commission underscores that national-security concerns, projected cost savings and industrial-base issues -- rather than traditional antitrust considerations -- will likely determine the outcome. [This demonstrates the power of incumbency. How can Space-Ex compete without the security infrastructure of the establishment and the comfort level that gives the government? Notice that this doesn't even get to discussions of technology or cost reductions. ] Executives and lawyers for each company spent the weekend considering whether to file a revised submission, the officials said, or push ahead with answering more-detailed questions the commission is expected to pose about the existing document. The companies last month pulled and then filed revised documents with the commission as a way to gain more time and pre-empt regulators from publicly signaling their concerns. It wasn't clear yesterday if the companies intend to use that option again.
When the proposed venture was announced in May, industry officials anticipated a relatively easy review and approval before the end of the year. Since then, support for the idea appears to have cooled in some Pentagon offices, and the Air Force has installed a new acquisition chief for space projects. Air Force Undersecretary Ronald Sega has been noncommittal in his public comments. More than a week ago, he said he hadn't gone through details of the company's revised submission.
Staff Reporters of THE WALL STREET JOURNAL
October 24, 2005; Page A6
For the second time in two months, Pentagon concerns have prompted antitrust officials to withhold swift approval for a proposed combination of Boeing Co. and Lockheed Martin Corp. government rocket programs, according to people familiar with the situation.
Taking its cue from the Pentagon, these people say, the Federal Trade Commission today is expected to allow a 30-day deadline to lapse once again without giving the green light for creation of the venture. Boeing and Lockheed said last May that they planned to combine their rocket businesses in an effort to stem their losses and save taxpayers the expense of supporting two separate systems for launching military, spy, weather and research satellites.
The companies say they remain committed to the concept, which they estimate could eventually save the government as much as $150 million annually. [We're going to believe people with legendary cost overruns when they say they're going to save us money?] Many industry and military officials believe that the deal is likely to win government approval eventually, despite the current uncertainty and apparent policy gridlock inside the Pentagon.
Boeing and Lockheed said they are working with the government to answer questions, but declined to elaborate. A spokeswoman for the Pentagon, which has put off some big purchasing decisions partly as a result of acquisitions scandals involving Boeing, said it was "premature" to comment on the rocket proposal. The FTC doesn't comment on its reviews.
The latest development indicates that the contractors are struggling to convince federal officials about the long-term benefits of the proposal and face a tougher-than-expected fight inside the Pentagon. Other companies within the industry increasingly have voiced concern or opposition.
Since the Air Force is slated to be the venture's primary customer, the FTC has taken a back seat to the Pentagon in analyzing the likely implications. Continued regulatory limbo suggests that some high-ranking Pentagon officials remain on the fence, and haven't told antitrust enforcers they support creation of a monopoly to launch government satellites.
The final decision could set an important legal and policy precedent, because the Pentagon has generally opposed going to a single supplier in market segments with two long-established suppliers.[Odd. I don't remember this complaint when all the industry consolidation was going on in the 80's and 90's.]
The outcome will affect a federal lawsuit in which Lockheed alleges Boeing engaged in corporate espionage years ago by improperly acquiring and using thousands of proprietary Lockheed rocket documents. Lockheed has agreed to drop that suit, but only if the venture goes into effect.
Meanwhile, fledgling rocket-maker Space Exploration Technologies Corp., which seeks to launch government satellites, filed a federal lawsuit in Los Angeles last week accusing the companies of conspiring to violate antitrust laws and asking the court to block the proposed venture. [They don't mention here that Space-X claims to cut overall costs by at least 50% .] Northrop Grumman Corp., a major supplier of satellite components and subsystems, is among larger companies that have expressed concerns to the government about combining the rocket programs.
The anticipated decision by the commission underscores that national-security concerns, projected cost savings and industrial-base issues -- rather than traditional antitrust considerations -- will likely determine the outcome. [This demonstrates the power of incumbency. How can Space-Ex compete without the security infrastructure of the establishment and the comfort level that gives the government? Notice that this doesn't even get to discussions of technology or cost reductions. ] Executives and lawyers for each company spent the weekend considering whether to file a revised submission, the officials said, or push ahead with answering more-detailed questions the commission is expected to pose about the existing document. The companies last month pulled and then filed revised documents with the commission as a way to gain more time and pre-empt regulators from publicly signaling their concerns. It wasn't clear yesterday if the companies intend to use that option again.
When the proposed venture was announced in May, industry officials anticipated a relatively easy review and approval before the end of the year. Since then, support for the idea appears to have cooled in some Pentagon offices, and the Air Force has installed a new acquisition chief for space projects. Air Force Undersecretary Ronald Sega has been noncommittal in his public comments. More than a week ago, he said he hadn't gone through details of the company's revised submission.
# posted by reckoner @ 6:08 AM 
