President ‘concerned’ over merger of Raytheon, United Tech
The morning after manufacturers Raytheon and United Technologies announced a blockbuster merger that would create a giant in the aerospace and defense sectors, President Donald Trump said he is “a little bit concerned” about the deal’s anti-competitive potential.
Echoing concerns that top Pentagon procurement officials have raised for years, the president said he is worried that the deal would harm the military supply chain by giving government buyers fewer competitive options to turn to for individual weapons systems.
“I’m a little bit concerned about United Technologies and Raytheon,” the president told the television network CNBC. He went on to say that the U.S. “used to have many plane companies” but “they’ve all merged . ... Now we have very few.”
He said too much consolidation at the top of the defense industry could weaken the government’s hand in major weapons negotiations.
“It’s hard to negotiate when you have two companies and sometimes you get one bid,” Trump said. “When I hear they’re merging, does that mean we’re taking away more competition? It becomes one big, fat beautiful company, but I have to negotiate, meaning the United States has to buy things.”
The Defense Department will have to sign off on the deal before it can be finalized. In previous administrations, the White House has generally not been closely involved in those evaluations.
In a call with investors Monday morning, executives from both companies offered vague answers when asked whether they have received feedback from the Defense Department on the issue.
But they did say the added scale the merger would provide will allow the combined firm to innovate on a higher level while keeping prices low. And they repeatedly said that Raytheon and United Technologies do not compete with one another.
“I think once (Trump) understands the benefits of this merger in terms of what it’s going to do to reduce costs to the government, what it’s going to do to improve the technology of the U.S. government and our defense profile, and what it’s going to do for jobs in this country, I think he’s going to be supportive, as he has been for both companies over the course of this administration,” United Technologies Chairman and CEO Greg Hayes told CNBC.
Lt. Col. Mike Andrews, a spokesman for the Defense Department, said in an email that the agency’s undersecretary of defense for acquisition and sustainment, Ellen Lord, “is engaging with Industry Leadership to understand the implications and governance as a result of this acquisition. We look forward to working with Raytheon Technologies Corps. to provide the best capabilities our warfighters deserve, at the greatest value to the taxpayer.”
For years, Defense Department procurement officials have raised concerns that mergers and acquisitions in the defense sector could hurt competition. Obama administration Defense Secretary Ash Carter told reporters in 2015 that he wanted to “avoid excessive consolidation in the defense industry to the point where we did not have multiple vendors who could compete with one another on many programs.”
In 2015, Frank Kendall, then the undersecretary of defense for acquisition, technology and logistics, said he was afraid the Pentagon was moving toward a future in which there are “at most two or three very large suppliers for all the major weapons systems we acquire.”
The Trump White House has been engaged on the issue as well. A White House-commissioned report released last October concluded that “all facets of the manufacturing and defense industrial base are currently under threat,” and there are “entire domestic industries near extinction.” The report identified 300 instances in which important weapons components such as large gun barrels and submarine propeller shafts that are produced by just one company, by a “fragile” supplier that may be unable to meet demand, or by a foreign supplier.