Approve Lockheed’s Purchase of Aerojet Rocketdyne

It’s no surprise that certain self-serving corners of the aerospace and defense sector are looking to undermine Lockheed Martin’s proposed acquisition of rocket engine manufacturer Aerojet Rocketdyne. But a deal that saves taxpayers money and ensures America keeps pace with China in space and hypersonic technology is hard to argue with.

Aerojet Rocketdyne is a linchpin in our nation’s aerospace and defense industrial base. Its rocket engines put NASA’s SLS rockets into space, provide a critical stage in the new intercontinental ballistic missile, provide a wide range of in-space propulsion for satellites and crewed systems and, perhaps most important, power hypersonic missiles.

All those critical initiatives are a lot to bite off for a relatively small company, but married with the resources of Lockheed Martin, Aerojet Rocketdyne will be more than capable of meeting those commitments while retaining its merchant supplier status.

Lockheed Martin’s program management processes and engineering expertise will provide a sustainable foundation to bolster Aerojet Rocketdyne and ensure they remain a healthy merchant supplier for the entire U.S. aerospace and defense sector. Alone, they might fall further behind their primary competitor, Northrop Grumman, undermining the industrial base.

But if the deal does not go through, America will have missed a historic opportunity to strengthen the defense industrial base, both immediately, as it recovers from the pandemic, and into the future, as the hypersonic age dawns.

Nevertheless, several corners of the industry – many who themselves have engaged in numerous mergers and acquisitions in recent years – are attempting to derail the deal, either on or off the record.

As the prime contractor on NASA’s SLS rocket, Boeing would love to have Aerojet Rocketdyne under its wing if it had the means. But the company is reeling from twin headwinds, one external and one self-inflicted. The coronavirus pandemic has undercut demand, at least for the time being, for commercial aircraft, Boeing’s bread and butter. This came on top of Boeing’s quality-control problems in several programs, such as the KC-46 Pegasus aerial refueling tanker, where Boeing has now paid out more in cost overruns—$5 billion – more than the price of its initial contract.

But Boeing is not the only company with a motive to kill the deal.

Northrop Grumman has been building on its acquisition of Orbital ATK, the other, larger manufacturer of solid rocket boosters and a direct competitor with Aerojet Rocketdyne. Northrop’s acquisition of Orbital ATK helped solidify its contract win for the new ICBM, known as the Ground Based Strategic Deterrent, or GBSD. Lockheed’s acquisition of Aerojet Rocketdyne would bring another major player into the mix on the GBSD.

Compared to Orbital ATK, Aerojet Rocketdyne has always been a smaller company with fewer resources. After being acquired, Orbital ATK got the added expertise and resources of Northrop Grumman. Surely, Northrop does not welcome the prospect of a reinvigorated competitor.

Then there’s Raytheon, which is deep in the race to build and deploy hypersonic missiles. Raytheon has recently come out against the deal, not because it hurts them, but because it helps Lockheed Martin. Raytheon will have ironclad legal assurances that Aerojet Rocketdyne’s engines would continue to be available to Lockheed’s missile competitors. Raytheon’s principal argument against the proposed acquisition is that it would jeopardize their access to a range of rocket motors. This is absurd since Lockheed Martin would have zero motivation to undermine such a large percentage of Aerojet Rocketdyne’s business base. Raytheon’s position as a missile prime contractor is very secure and Lockheed Martin would be shooting itself in the foot by undermining one of Aerojet Rocketdyne’s principal customers. No business would make that choice.

For the Pentagon, some mergers actually do provide tangible benefits, particularly in reducing the time it takes to move innovation from the whiteboard to deployment in the field. This is precisely what Deputy Defense Secretary Kathleen Hicks talked about in her confirmation hearing: increasing speed and scale of innovation in the armed forces.

The acquisition of Aerojet Rocketdyne does exactly that. It promotes competitiveness by giving the company the kind of deep resources that its main competitor, Orbital ATK, already enjoys with the backing of Northrop.

With major initiatives underway in space, ballistic missiles, and hypersonics, now is not the time to inject uncertainty into such a significant sector of our defense industrial base. The manufacture of critical rocket engines is just too important to fool around with.

Here’s hoping the Pentagon and other regulators ignore the naysayers and proceed with the transaction—for the good of our nation’s security and our men and women in uniform.

Howard P. “Buck” McKeon is the CEO of the McKeon Group, which has contracts with Lockheed Martin and other defense companies. A California Republican, McKeon served in Congress in 1993-2015, including as chairman of the House Armed Services Committee in 2011-15.