News:

Big Deal

Boeing Buys McDonnell Douglas

by Russ Lockwood


Boeing grabbed McDonnell Douglas in a $13.9 billion deal, whch comes atop a $3 billion buyout of Rockwell. If approved, looks like that pretty much leaves two mega-aerospace companies: Boeing (plus McDD and Rock) and Lockheed Martin (the merger of Lockheed and Martin Marietta).

Hmmm. But who wins here? When Lockheed bought Martin Marietta, it took $1.8 billion in write offs (under a policy allowing merging companies to charge the Pentagon for merger costs--a cozy little incentive, eh?), and also laid off a number of folks in the process. Of course, Boeing says the new merger will not result in layoffs.

Hmmm. Now we'll have only two corporations vying for defense contracts, which may mean less competition, higher contract pricing, and fewer options. No doubt the selection of Boeing and Lockheed Martin as the two finalists for the Joint Strike Fighter encouraged admittedly struggling McDD to jump at the Boeing offer.

Boeing's JSF at left. Lockheed's JSF at right. Illustrations © by respective companies.

Footnote: The JSFighter would be the first fighter built by Boeing since before WWII. Boeing, through Rockwell, builds the B-1 bomber.

The JSFighter program will be one of the largest ever, with an expected 3000-plane production run through the year 2010. The US Air Force is expected to grab 2000 of them as a replacement for the F-16 and A-10 (and complement the F-22), while the Navy and Marines want about a 1000 with "jump jet" technology. The jump jet variation will also serve as a replacement for the UK Royal Navy's Sea Harrier.

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