The International Herald Tribune December 1, 2004
Lockheed moves way beyond warplanes
By Tim Weiner
SOURCE: The New York Times
Lockheed Martin doesn't run the United States. But it does help run a breathtakingly big part of it.
Over the last decade, Lockheed, the country's largest military contractor, has built a formidable information-technology empire that now stretches from the Pentagon to the post office. It sorts mail and calculates taxes. It cuts Social Security checks and counts the U.S. census. It runs space flights and monitors air traffic. To make all that happen, Lockheed writes more computer code than Microsoft.
Of course, Lockheed, based in Bethesda, Maryland, is best known for its weapons, which are the heart of America's arsenal. It builds most of the nation's warplanes. It creates rockets for nuclear missiles, sensors for spy satellites and scores of other military and intelligence systems. The Pentagon and the CIA might have difficulty functioning without the contractor's expertise.
But in the post-9/11 world, Lockheed has become more than just the biggest corporate cog in what Dwight D. Eisenhower called the military-industrial complex. It is increasingly putting its stamp on U.S. military policies, too.
Lockheed stands at "the intersection of policy and technology," and that "is really a very interesting place to me," said its new chief executive, Robert Stevens, a tightly wound former marine. "We are deployed entirely in developing daunting technology," he said, and that requires "thinking through the policy dimensions of national security as well as technological dimensions."
To critics, however, Lockheed's deep ties with the Pentagon raise some questions. "It's impossible to tell where the government ends and Lockheed begins," said Danielle Brian of the Project on Government Oversight, a nonprofit group in Washington that monitors government contracts. "The fox isn't guarding the henhouse. He lives there."
No contractor is in a better position than Lockheed to do business in Washington. Nearly 80 percent of its revenue comes from the U.S. government. Most of the rest comes from foreign military sales, many financed with tax dollars. And former Lockheed executives, lobbyists and lawyers hold crucial posts at the White House and the Pentagon, picking weapons and setting policies.
Obviously, war and crisis have been good for business. The Pentagon's budget for buying new weapons rose by about a third over the last three years, to $81 billion in fiscal 2004, up from $60 billion in 2001. Lockheed's sales also rose by about a third, to nearly $32 billion in the 2003 calendar year, from $24 billion in 2001. It was the No. 1 recipient of Pentagon primary contracts, with $21.9 billion in fiscal 2003. Boeing had $17.3 billion, Northrop Grumman had $11.1 billion and General Dynamics had $8.2 billion
Lockheed also has many tens of billions of dollars in future orders on its books. The company's stock has tripled in the last four years, to just under $60
"It used to be just an airplane company," said John Pike, a longtime military analyst and director of GlobalSecurity.org, a research organization in Alexandria, Virginia. "Now it's a warfare company. It's an integrated solution provider. It's a one-stop shop. Anything you need to kill the enemy, they will sell you."
The melding of military and intelligence programs, information-technology and domestic security spending began in earnest after the Sept. 11, 2001, attacks. Lockheed was perfectly positioned to take advantage of the shift. When the U.S. government decided a decade ago to let corporate America handle federal information technology, Lockheed leaped at the opportunity. Its information-technology sales have quadrupled since 1995, and, for all those years, Lockheed has been the No. 1 supplier to the federal government, which now outsources 83 percent of its IT work.
Lockheed has taken over the job of making data flow throughout the government, from the FBI's long-dysfunctional computer networks to the Department of Health and Human Services system for tracking child support. The company just won a $525 million contract to fix the Social Security Administration's information systems. It has an $87 million contract to make computers communicate and secrets stream throughout the Department of Homeland Security. On top of all that, the company is helping to rebuild the U.S. Coast Guard -- a $17 billion program -- and to supply, under the Patriot Act, biometric identity cards for six million Americans who work in transportation.
Lockheed is also the strongest corporate force driving the Pentagon's plans for "net-centric warfare": the big idea of fusing military, intelligence and weapons programs through a new military Internet, called the Global Information Grid, to give U.S. soldiers throughout the world an instant picture of the battlefield around them.
"We want to know what's going on anytime, anyplace on the planet," said Lorraine Martin, vice president and deputy of the company's Joint Command, Control and Communications Systems division.
Lockheed's global reach is also growing. Its "critical mass" of salesmanship lets it "produce global products for a global marketplace," said Robert Trice Jr., the senior vice president for corporate business development. With its dominant position in fighter jets, missiles, rockets and other weapons, Lockheed's technology will drive the security spending for many American allies in coming decades. Lockheed now sells aircraft and weapons to more than 40 countries. The American taxpayer is financing many of those sales. For example, Israel spends much of the $1.8 billion in annual military aid from the United States to buy F-16 warplanes from Lockheed.
Twenty-four countries are flying the F-16, or will be soon. Lockheed's factory in Fort Worth, Texas, is building 10 for Chile. Oman will receive a dozen next year. Poland will get 48 in 2006; the U.S. Treasury will cover the cost through a $3.8 billion loan
In the future, Lockheed hopes to build and sell hundreds of billions of dollars worth of the next generation of warplanes, the F-35, to the U.S. Army, Navy and Air Force, and to dozens of U.S. allies. Three years ago, Lockheed won the competition to be the prime contractor for this aircraft, known as the Joint Strike Fighter.
Lockheed's own executives say the concentration of power among military contractors is more intense than in any other business sector outside banking.
© Copyright 2004, International Herald Tribune
