The three largest defense companies in the world are (2024)

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

THE U.S. DEFENSE INDUSTRY AND ARMS SALES

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

***Anonymous if on webPLEASE***

<![if !supportEmptyParas]><![endif]>

INTRODUCTION

The three largest defense companiesin the world are all United States companies.With a combined total revenue in 2001 of $100billion and employing 400,000 people, Lockheed Martin, Northrop Grumman andBoeing are three powerhouses of American business.<![if !supportFootnotes]>[i]<![endif]> Their combined revenues account for 1% ofthe United States' $10 trillion GDP.<![if !supportFootnotes]>[ii]<![endif]> Each company is on each of the Fortunelists: America’s Most Admired Companies, Global Most Admired Companies, Fortune500 and Global 500.<![if !supportFootnotes]>[iii]<![endif]> Lockheed Martin, Northrop Grumman and Boeingare also the three top arms-producing companies in the world. To scope this paper is to examine to whatextent these three companies depend on their arms sales in general and theirarms sales to foreign governments in particular, and to evaluate how thesecompanies would fare if the wars they are faced with in the future are fought witheconomics instead of aircraft and missiles.In the first section of this paper, company-specific financial analysisis examined and in the second section of this paper, the US arms industry as awhole is considered. After consideringthe global parameters of the arms industry, the future prospects of LockheedMartin, Northrop Grumman and Boeing are qualitatively considered.

<![if !supportEmptyParas]><![endif]>

SECTION I:COMPANY-SPECIFIC ANALYSIS

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

Inorder to properly understand how these three top defense companies operate, itis important to have an accurate understanding multiple lines of business eachruns, beyond merely the high profile aircraft they manufacture. There is a tendency to think these combataircraft is all they produce when, in fact, this is not the primary businesssector for any of the companies.

<![if !supportEmptyParas]><![endif]>

In 2001, totalsales were $24 billion and for the nine months ending 9/30/02, sales had risen13% to $18.8 billion.<![if !supportFootnotes]>[vii]<![endif]> Over the past five years, the average annualgross profit has been $1.9 billion.<![if !supportFootnotes]>[viii]<![endif]>

Lockheed’sprimary customer is the United States government, and specifically, theDepartment of Defense. The salespercentages by customer are:<![if !supportFootnotes]>[ix]<![endif]>

U.S. Department of Defense -57%

NASA & Other GovernmentAgencies - 20%

International - 17%

Domestic Commercial - 6%

<![if !supportEmptyParas]><![endif]>

LockheedMartin Corporation employs 125,000 people in the United States and abroad.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !vml]>

<![endif]><![if !mso]>

Northrop's sixprincipal business sections are Electronic Systems (combat avionics andsurveillance), Information Technology (computer systems), Integrated Systems(air combat, electronic warfare, and battlefield management) , Ship Systems(military and commercial), Newport News (nuclear-powered subs and aircraftcarriers), and Component Technologies (electronic and optical components).<![if !supportFootnotes]>[xi]<![endif]> Familiar Northrop products include the B-2Spirit Stealth Bomber and the F-14 Tomcat.However, like Lockheed, the largest percentage of Northrop’s revenuecomes from Electronic Systems and Information Technology sectors, and notIntegrated Systems sector (which includes the combat aircraft businessunit). Electronic Systems Sectorcomprises 34% of revenues and Information Technology comprises 27% of revenueswhile Integrated Systems comprises 22% of the company’s revenues.<![if !supportFootnotes]>[xii]<![endif]>The biggest programs in 2001 in terms of sales were GovernmentInformation Technology, Air Combat Systems, and Aerospace Electronic Systems.<![if !supportFootnotes]>[xiii]<![endif]>

Northroprecently engaged in a successful hostile takeover of TRW, Inc., a $16 billioncompany whose products span the automotive, aerospace, and informationtechnology markets. The Department ofJustice and Northrop Grumman have agreed to a timeline for the closing ofNorthrop’s acquisition of TRW, Inc.According to the timeline, agreed to in October, the acquisition willclose in the fourth quarter of 2002.<![if !supportFootnotes]>[xiv]<![endif]> The acquisition was officially cleared bythe European Commission in October.<![if !supportFootnotes]>[xv]<![endif]>

<![if !supportEmptyParas]><![endif]>

In 2001, Northrop’s total sales were$14 billion and for the nine months ending 9/30/02,sales had risen 40% to $12.4 billion. Over the past five years, the average annual gross profit has been2.1 billion.<![if !supportFootnotes]>[xvi]<![endif]> The TRW acquisition will approximatelydouble each of the figures.<![if !supportFootnotes]>[xvii]<![endif]>

Northrop’sprimary customer is the United States government. The sales percentages breakdown is:<![if !supportFootnotes]>[xviii]<![endif]>

US Government - 78%

Other Customers - 22%

<![if !supportEmptyParas]><![endif]>

NorthropGrumman Corporation employs 100,000 people in the United States and abroad.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

The Boeing Company

<![if !supportEmptyParas]><![endif]>

<![if !vml]>

<![endif]><![if !mso]>

<![if !supportEmptyParas]><![endif]>

Boeing’sfive major business units are Commercial Airplanes, Integrated Defense Systems,Boeing Capital Corporation (financial services), Connexion by Boeing (in-flightentertainment) and Air Traffic Management (air traffic control systems). However, 99% of Boeing's revenue comes fromthe first two units: Commercial Airplanes (60%) and Integrated Defense Systems(39%).<![if !supportFootnotes]>[xx]<![endif]> The latter includes Military Aircraft &Missile Systems (21% of total) and Space & Communications (launch services,missile defense, space exploration—18% of total).<![if !supportFootnotes]>[xxi]<![endif]> Familiar Boeing products include the C-17Globemaster and the 747 commercial transport.

In2001, total sales were $58 billion and for the nine months ending 9/30/02,sales had fallen 5% to $40.4 billion.<![if !supportFootnotes]>[xxii]<![endif]> Over the past five years, the average annualgross profit has been $6.9 billion.<![if !supportFootnotes]>[xxiii]<![endif]>

Approximatelyhalf of Boeing sales are foreign and half domestic.<![if !supportFootnotes]>[xxiv]<![endif]> Boeing has very strong commercial relationswith China, which accounts for 10% of Boeing’s business.<![if !supportFootnotes]>[xxv]<![endif]>

The Boeing Company employs 171,000people in the United States and abroad.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

ARMS SALESDEPENDENCY

<![if !supportEmptyParas]><![endif]>

Inaddition to being the largest military contractors in the world, LockheedMartin, Northrop Grumman and Boeing are also the largest arms-producingcompanies in the world. The dependencyof the companies on their arms sales, combined domestic and foreign, are asfollows:

<![if !supportEmptyParas]><![endif]>

Sales figures arein millions of US dollars.<![if !supportFootnotes]>[xxvi]<![endif]>

Key to abbreviations: Ac = aircraft, El = electronics, Mi = missiles, SA/A = small arms/ammunition, Sh = ships, and Oth = other

<![if !supportEmptyParas]><![endif]>

Lockheedis the most dependent on arms sales, which comprised 73% of its total sales in2000. Notice that “arms” is a verybroad term including aircraft and electronics and not merely missiles andammunition. Northrop is the next mostdependent on arms sales at 48%. Thecurrent makeup of Northrop Grumman is much less dependent now than beforeNorthrop acquired Litton Industries, Newport News and TRW, when Northrop’spercentage arms sales of total sales was 87%.Boeing is the least dependent on arms sales, largely because commercialaircraft sales comprise the majority of their revenues.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

The previous armssales dependencies section included domestic arms sales. The dependencies of the top three US defensecontractors on defense foreign military sales are considered in this sectionfor the fiscal year 1999, a fairly representative year in terms of post ColdWar arms sales.<![if !supportFootnotes]>[xxviii]<![endif]> Total purchases in 1999 totaled $6.2 billion. The dependencies on defenseforeign military sales were as follows:

<![if !supportEmptyParas]><![endif]>

Amounts inmillions of US dollars, FY1999

Rankings are based on prime contracts of $25,000 or more formilitary R&D, services and products sold to non-U.S. governments.<![if !supportFootnotes]>[xxx]<![endif]>

<![if !supportEmptyParas]><![endif]>

Boeing is the most heavily invested in defenseforeign military sales with $1.4 billion in sales. Although half of Boeing's total sales are to foreign markets, ahigh percentage of those sales are forcommercial aircraft and other non-defense products. The $1.4 billion in foreign military sales only accounts for2.44% of Boeing's total sales.<![if !supportFootnotes]>[xxxi]<![endif]> Lockheed is the a close second with $1.1billion in foreign military sales.Northrop Grumman is actually ranked 5th behind missile giant Raytheonand jet engine and helicopter manufacturer United Technologies. As a percentage of the total sales, thedependencies of the companies on foreign military sales are as follows:

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

Dependencies on ForeignMilitary Sales, Percentage

Amounts in millions of US dollars, FY1999<![if !supportFootnotes]>[xxxii]<![endif]>

<![if !supportEmptyParas]><![endif]>

Asthe above table illustrates, the percentage of Foreign Military Sales out ofthe Total Sales for each of the companies is rather small. Arms sales account for a fraction of each ofthe companies revenues (73%, 48%, and 33% for Lockheed, Northrop and Boeing,respectively), and Foreign Military Sales account for a much smaller percentageof that total (under 5% for all companies).However, although the percentage is small, when the actual dollar amountis calculated, the combined annual Foreign Military Sales of $2.7 billion isstill worth consideration.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

SECTION II: US ARMS INDUSTRY

<![if !supportEmptyParas]><![endif]>

WORLDWIDE ARMS SALES

We have seen thatthe United States is home to the largest military contractors in the world andthat these companies dominate domestic defense sales, worldwide defense salesand US arms sales. So far we have onlyconsidered the sale of US arms to the world.This subsection examines to what extent The United States controls themarket of worldwide arms sales. Inessence, just as the discussion of the three US defense contractors wasjustified by establishing their complete dominance of the worldwide defenseindustry, this section in part justifies the consideration of the US arms salemarket by establishing the US’ dominance of the market. Naturally, we are also interested in therole of the US in the worldwide arms market towards the end of analyzing thefuture of Lockheed, Northrop and Boeing.

TheUnited States is the clear leader in worldwide arms sales, due mostly to thelarger size and capabilities of the US companies. Of the 100 largest arms-producing companies, 43 are US companies,including the 8 of the 10 largest.

The aggregate arms sales (includingdomestic procurement and exports) of the100 largest arms-producing companies inthe OECD (Organization for Economic Cooperation and Development) and developingcountries totaled approximately $157 billion in 2000. US arms sales accountedfor 60% of that total. West European OECDaccounted for 31%, other OECD (Japan, Canada, Australia, Turkey) accounted for6%, and “developing countries” (Israel, India, Singapore and S. Africa)accounted for 4%.<![if !supportFootnotes]>[xxxiii]<![endif]> A summary table follows:

SHARE OF ARMS SALES, FY2000<![if !supportFootnotes]>[xxxiv]<![endif]>

Region Market Share

US 60%

WestEurope OECD 31%

OtherOECD 6%

DevelopingCountries 4%

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

TheUnited States has a larger share of the worldwide arms market than the rest ofthe world combined and double the market share of all of the Western EuropeOECD combined. Trends show that the USmarket share increased rather dramatically through the late 1980s and early1990s and have been slowing increasing up to 60% over the past few years. One can attribute the trend, in part, to theincreasing power of the US military contractors. For the same reasons, onecould expect continued increasing dominance of the US in the worldwide armsmarket.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !vml]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

Inthis subsection, background information on the conditions under which US armsare sold to foreign countries is examined.Additionally, the total value of the Foreign Military Sales incomparison to all US military sales is considered in the Post Cold War era.

In addition to DirectCommercial Sales (DCS), the United States government provides militaryequipment, services and training to foreign countries through a variety ofprograms such as the Foreign Military Sales (FMS) program and the ForeignMilitary Financing Program. TheInternational Military Education and Training (IMET) program also providesequipment, training and services through a grant basis. Money granted under the Foreign MilitaryFinancing Program may be used to purchase military items through the FMSprogram or, in rare cases, directly from the US company (DCS). Of course, there are a host of restrictionson all transfers of U.S. military items imposed and regulated by the U.S.government.<![if !supportFootnotes]>[xxxvi]<![endif]>

Altogether,the value of US military sales, production and contracts, both foreign and domestic,in the post-cold war era (1992-present) has averaged $94.1 billion a year. The standard deviation is rather low, assales are holding relatively steady. Ofthat $94.1 billion total, 82.8% has been domestic and 17.2% as an export. Foreign Military Sales (FMS) deliveriesaccount for 84.9% of the export value (14.6% of the total value) whilecommercial exports licensed under the Arms Export Control Act account for 15.1%of the export value (2.6% of the total value) of all military items.<![if !supportFootnotes]>[xxxvii]<![endif]> Thus the vast majority of the value of USmilitary sales, production and contracts comes from domestic procurement ratherthan export.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

Thissubsection provides a breakdown of the US arms sales recipient by region. In examining these figures, the effect ofunified US arms sales buying freeze by region — for instance, by members of theMiddle East (or more realistically, the Arab League— can be considered.

US ARMS DELIVERIES TO ALL COUNTRIES IN THE FOLLOWINGREGIONS FOR 1992-2001<![if !supportFootnotes]>[xxxviii]<![endif]>

<![if !supportEmptyParas]><![endif]>

The Middle East and South Asia are the largestrecipients of US arms, with 42% of US arms deliveries since 1992 going to thatregion. Within the Middle East, thelargest recipients of U.S. military items in the Middle East in the post-ColdWar period are Saudi Arabia, Israel, Egypt, and Kuwait.<![if !supportFootnotes]>[xlv]<![endif]>Together these four countries account for 94.4% of the arms deliveries to theregion.

The breakdown ofUS arms deliveries to these top four recipient countries in the Middle East areas follows:

US ARMSDELIVERIES TO THE MIDDLE EAST FOR 1992-2001<![if !supportFootnotes]>[xlvi]<![endif]>

All amounts are in millions of US dollars

<![if !supportEmptyParas]><![endif]>

The largest recipient of US arms inthe 1992-2001 period was Saudi Arabia.Saudi Arabia received 29% of all US foreign arms deliveries, compared tothe next biggest recipient, all countries in East Asia and the Pacific at 26%.

The grand total of all US foreignarms deliveries in the period 1992-2001 was 131,941 million ($132 billion),. Although $132 billion is certainly alot of money, the value of US arms deliveries is small in comparison to thecombined export and domestic value.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

In millions of US dollars at current prices<![if !supportFootnotes]>[l]<![endif]>

<![if !supportEmptyParas]><![endif]>

Asevidenced by the above table, domestic business accounts for the vast majorityof the value of the US arms production industry. The $132 billion total (previous section) of all US foreign armsdeliveries in the period 1992-2001 is less than the value of any two years ofdomestic US arms sales, production and contracts. The total value of US arms production, foreign and domestic, inthe period 1992-2001 is approximately $930 billion. Exports account 16% of that total.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

Itis very clear from the previous section that the US spends far more on its ownarms production industry than the rest of the world combined. However,it was also established that the US arms industry dominates theworldwide arms market, which begs the question, how much does the United Statesspend on its military in comparison to the rest of the world?

<![if !supportEmptyParas]><![endif]>

MILITARY BUDGET<![if !supportFootnotes]>[lii]<![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

Althoughmilitary budget is not equivalent to military strength, it is more than clearthat no military power, singular or combined, in the world rivals the power ofthe United States’ military. Not onlydoes the United States have more money, more equipment, more resources, andmore top defense contractors, the United States has the infrastructure to tieits resources together. All the F-16’sin the world cannot help if you do not have the intelligence, reconnaissance,surveillance, communication and leadership to back them up. The Center for Strategic and InternationalStudies has enumerated some of the qualitative weaknesses in regions such asthe Middle East in the report, “The Conventional Military Balance in the Gulfin 2000."<![if !supportFootnotes]>[liii]<![endif]> Besides the weaknesses identified above,over-centralization of the effective command structure, lack of strategicassessment capability, slow tempo of operations, and inability to fight modernnight and all-weather warfare, are among the long list of additional weaknessesidentified in the report.

Sinceit is clear that no military could stand up to the US military, it can be askedwhy any country would continue to buy US (or any other country’s) arms? If a unified UN peacekeeping force couldboth suppress any offensive action by a rogue nation and likewise protect anynation against invasion or foreign oppression, the need for foreign countriesto continue to buy US weapons comes into question. Of course, one can expect that the US would play a major role inarming the unified peacekeeping force, but what effect on the US defensecontractors would it have if groups such as the Arab League decided to stopbuying US arms?

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

Let us reconsider the chartfrom the section on US foreign military sales by region:

US ARMS DELIVERIES TO ALL COUNTRIES IN THE FOLLOWINGREGIONS FOR 1992-2001<![if !supportFootnotes]>[liv]<![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

The effect of the Middle Eastand South Asia freezing all purchases of US arms would deliver an annual lossof approximately $5.5 billion, counting both direct commercial sales andforeign military sales. If everycountry in the world stopped buying US arms, including all of the US’ allies,the annual loss would be roughly $13 billion.

Again, $13 billion is a great dealof money, but when we compare it to the value derived from domestic business ofapproximately $93 billion, the foreign dependency is not very high. Furthermore, if we reconsidered theindividual companies' dependency on foreign military sales we see that theimpact is even less:

<![if !supportEmptyParas]><![endif]>

Amountsin millions of US dollars, FY1999

<![if !supportEmptyParas]><![endif]>

Theloss felt by a global buying freeze by any individual company is unilaterallyless than 5%. Allies of the UnitedStates account for a significant portion of the foreign arms sales so it issomewhat reactionary to envision a global buying freeze. Furthermore, there is no clear historicaltrend to suggest that such a buying freeze is on the horizon for theforeseeable future. Recall the chart onthe US market share of the arms market showing an increasing US dominance. Also consider a graph of the value of thearms exports since the end of the Cold War (presented in tabular form in thesecond section of the paper) with a linear trendline:

<![if !vml]><![endif]>

<![if !supportEmptyParas]><![endif]>

Even if most of the world adopted theviability of a global UN peacekeeping force, surely the United States, with itsfirm command over the world arms market and with superior technology andmanufacturing capabilities, would have a large role in arming the peacekeepingforce. However, even if one considersthe most dramatic of possibilities—an absolute end to foreign arms sales, theindividual companies would be only slightly affected. The sale of one more B-2 Stealth Bomber would offset the loss forNorthrop Grumman, for instance, five times over.

<![if !supportEmptyParas]><![endif]>

SECTION III: FUTURE OF US DEFENSE CONTRACTORS

Thislast section of the paper considers qualitatively, the prospects of LockheedMartin, Northrop Grumman and Boeing.First, the possibility of mergers is examined and then the financialfuture of the companies is summarized.

<![if !supportEmptyParas]><![endif]>

MERGERS

The defenseindustry has undergone a great deal of consolidation in the past fewdecades. While in 1980, there were 51separate US defense companies, by 1997, there were five. By 2001, there were four.<![if !supportFootnotes]>[lxi]<![endif]>Althoughconsolidation in the defense industry will likely continue, it seems unlikelythat there will be further consolidation among the very largest companies,namely Lockheed, Boeing, and Northrop Grumman . In 2001, the Department of Defense rejected a proposedacquisition of Newport News by General Dynamics in the interest of competitionin the US shipbuilding and nuclear technology.<![if !supportFootnotes]>[lxii]<![endif]> The DoD did allow Northrop Grumman tocomplete its hostile takeover of Newport News so General Dynamics and NorthropGrumman will probably never be allowed to merge. In 1998, Lockheed Martin abandoned it attempted acquisition ofNorthrop Grumman after it became clear theDepartment of Justice and the Pentagon would not allow it.<![if !supportFootnotes]>[lxiii]<![endif]>IfLockheed Martin and Northrop Grumman had merged, the combined company wouldhave been the largest in the world.<![if !supportFootnotes]>[lxiv]<![endif]>Theattempted acquisition by Lockheed occurred before Northrop Grumman acquiredLitton Industries and Newport News so a merger between the two and this pointwould surely not be allowed. Likewise,mergers between Lockheed and Boeing or Boeing and Northrop Grumman aresimilarly out of the question.

Aswe have seen in the second section of the report, the effect of a possible USarms buying freeze by other nations will have a relatively small effect,percentage-wise, on the three companies.The majority of their revenues come from commercial sales in the case ofBoeing, and/or the U.S. Government in the case of Lockheed and Northrop.

We have also seen that the USmilitary budget is the largest in the world many times over. Furthermore, there is no indication that USmilitary spending is on the steep downturn, even though the Cold War has beenover for a decade:

<![if !vml]><![endif]>

Figuretaken from the CDI Almanac 2001-2002<![if !supportFootnotes]>[lxv]<![endif]>

<![if !supportEmptyParas]><![endif]>

Thedefense contractors could safely rely on the US government to support theirbusiness if all other customers disappeared, and the US government obviouslyhas the ability to sustain such support.Also, as was shown in the first section of the report, these companieshave multiple lines of business beyond merely arms production and arewell-diversified enough so that the faltering of one line of business would notcompletely cripple the company.

Itis thus concluded that Lockheed, Northrop and Boeing, as we know them today asseparate companies, will be able to weather the uncertain future of the defenseindustry. Their survival can beattributed in part to diverse lines of business, in part to their marketdominance and superior capabilities, and in large part to their most loyal andsteady customer, the US government. Itis furthermore concluded that the US government would not let the $100 billioncompanies employing 400,000 to fail and, given that the majority of the $100billion comes from the government, has the power to do so.

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

<![if !supportEmptyParas]><![endif]>

ENDNOTES

<![if !supportEndnotes]>

<![endif]>

<![if !supportFootnotes]>[viii]<![endif]> compiledfrom data from Yahoo! Finance and Lockheed Martin Annual Income Statement, http://yahoo.marketguide.com/MGI/mg.asp?target=%2Fstocks%2Fcompanyinformation%2Fincomestmt%2Faincomestd&Ticker=LMT

<![if !supportFootnotes]>[xvii]<![endif]> TRW: Total sales, 2001: $16 billion; Nine months ending9/30/02: sales rose 5% to $12.07 billion.Five-year average annual gross profit: $2.4 billion. Source: Yahoo! Finance,http://biz.yahoo.com/p/T/TRW.html

<![if !supportFootnotes]>[xxiii]<![endif]> compiledfrom data from Yahoo! Finance, and Boeing Annual Income Statement, http://yahoo.marketguide.com/MGI/mg.asp?target=%2Fstocks%2Fcompanyinformation%2Fincomestmt%2Faincomestd&Ticker=BA

<![if !supportFootnotes]>[xxvii]<![endif]> Datafrom Litton Industries, Newport News, and TRW was added to Northrop Grumman’stotal to reflect the current makeup of Northrop Grumman, which is the concernof this paper. In 2000, the year fromwhich the data is taken, neither of these three companies had been acquired byNorthrop yet.

<![if !supportFootnotes]>[xxviii]<![endif]> This is the only year for which specific company breakdownswere available and appropriate. Also, the purpose of this section is to showthe relative scale of the dependencies, and not to provide a toolbox forprecise financial analysis.

<![if !supportFootnotes]>[xlvi]<![endif]>calculated from data in the Arms Sales Monitoring Project’s database, availableat http://www.fas.org/asmp/profiles/sales_db.htm

<![if !supportFootnotes]>[l]<![endif]> datacompiled from SIPRI Military Expenditure and Arms Production Project, availableat http://projects.sipri/se/milex/aprod/nationaldefense/usa.pdf

<![if !supportFootnotes]>[lii]<![endif]> all datais from the Center for Defense Information’s World Military Database 2002,available at http://www.cdi.org/issues/usmi/

<![if !supportFootnotes]>[liv]<![endif]> calculatedfrom data in the Arms Sales Monitoring Project’s database, available athttp://www.fas.org/asmp/profiles/sales_db.htm

<![if !supportFootnotes]>[lxi]<![endif]> AnnualIndustrial Capabilities Report to Congress, http://www.acq.osd.mil/ip/docs/ind-cap-annual-report-to-congress_2002.pdf

<![if !supportFootnotes]>[lxii]<![endif]> Journalof Aerospace and Defense Industry News,http://www.aerotechnews.com/starc/2001/051101/NG_Newport.html and AnnualIndustrial Capabilities Report to Congress,http://www.acq.osd.mil/ip/docs/ind-cap-annual-report-to-congress_2002.pdf)