Mergers, international
co-operation, the proliferation of weapons of mass destruction and regional conflicts were
the main developments in 1997 affecting US, European and allied government procurements
from the defence and aerospace industries. The most important were US mergers that went
further than expected and had major effects on European industry and international
collaboration.
There are now only three major US defence and aerospace companies. The largest is Boeing
whose 1997 total revenues are predicted to be $48 billion, of which information, space and
defence revenues are estimated at $16.6 billion. Boeing is the world's largest
manufacturer of airliners, only the European Airbus consortia is comparable.
Second largest is Lockheed Martin, expanded by its 1997 acquisition of Northrop Grumman
that awaits US Department of Defense and anti-trust regulators' approval. In 1996 its
total revenue was $28 billion, including government and defence revenues estimated at $23
billion. 1997 revenues are predicted to be about the same.
Northrop Grumman's 1996 revenues were $8.1 billion and 1997 revenues are predicted at $8.4
billion, mostly from defence business. An enlarged Lockheed Martin would have predicted
1997 revenues of $36.4 billion and defence revenues of $31 billion.
The third largest defence company is Raytheon, formed by acquisition of E-Systems, Texas
lnstruments and Hughes Aircraft completed in December 1997, that had 1997 sales predicted
at over $20 billion, including defence sales thought to be $14.5 billion.
These companies report defence revenues in ways that make it difficult to compare them
directly. However overall figures show that an enlarged Lockheed Martin would be the
world's largest defence contractor with predicted defence revenues of about $31 billion,
while Boeing and Raytheon would be roughly equal with defence revenues in the region of
$15 billion.
In Europe, mergers proceeded at a slower pace and on a smaller scale. The 1996 merger of
the missile-manufacturing divisions of British Aerospace and French company Matra created
Matra BAe Dynamics, Europe's largest missile manufacturer with annual sales of $1.5
billion. But Europe still has too many prime contractors. Accordingly in December 1997 the
leaders of France, Germany and the UK called on European aerospace and defence industries
to produce a plan for restructuring by 31 March 1998, creating a single Airbus entity and
a Euroco or Eurospace defence company. But as French Prime Minister Lionel Jospin's
attempts to retain national defence companies and their jobs showed, there are major
obstacles to such a plan. On the other hand, the Eurofighter 2000, was moving into its
production phase.
Future developments are likely to include increased collaboration between US and European
companies and more effective collaboration between major European aerospace and defence
companies, going beyond that so far achieved and including the elimination of
non-competitive units.