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Can a website sound in the era of one big merged U.S. defense company?

June 15, 2000

Can a website sound in the era of one big merged U.S. defense company?

Defense industry shares have been under pressure ever since the end of the Cold War brought a reduction in defense spending. In response, the industry has consolidated to the point where the Pentagon is getting worried that there may not be enough competition left. There is even talk that future large contracts – such as the Joint Strike Fighter – may be split among several defense companies to ensure their survival as arms manufacturers.

Under pressure from shareholders to boost stock prices, the defense companies are now searching for ways to cut costs and increase profits. Hence the swift decision to come up with a common website to make dealing with suppliers more efficient.

Defense and aerospace companies will be able to buy and sell spare parts and whole weapon systems via the Internet. For approved customers, the procedure will be as simple as making an online order and entering a credit card number. UPS will deliver the jet engine or landing gear to the assembly plant the next day.

Eventually, the shared website might lead to something bigger. Our suggestion: the defense companies and governments should simply drop the pretense that the defense industry is driven primarily by market considerations. Given the heavy influence of politics and national security considerations — this really isn't the case.

So why doesn't the Pentagon endorse a mega-merger of all U.S. defense contractors? The new corporation would be effectively semi-nationalized because its main customers would be public entities. We already have a fitting name: U.S. Defense, Inc.

Such a merger would go a long way toward cutting costs. Yet, according to a Washington Post report, none of this conjecture was the source of inspiration for the common Internet purchasing platform.

Apparently, the catalyst for the Internet idea was the personal experience of one of the CEOs, who enjoyed the convenience of buying books on Amazon.com. Let's just hope that the defense contractors will do better profit-wise than the Seattle-based bookseller, which hasn't yet made a single dollar in profits.