Lockheed Martin urges transparency

Lockheed Martin Corp.'s chairman Robert J. Stevens on Sunday urged European regulators to further promote transparency and competition, warning that the idea that protectionism would strengthen markets is misguided.

Speaking on the eve of the aerospace industry's biggest air show, Stevens also said that the spending gap between the United States and European defense budgets threatens to create an unbridgeable trans-Atlantic capabilities gap.

Stevens said that Lockheed, the world's largest defense supplier, welcomed the European Commission's draft directive on defense procurement, which would open up the EU's 80 billion-euro-a-year ($118 billion) defense market to more cross-border competition.

The bills must be approved by EU governments and the European Parliament. Some governments have been hostile to the idea of the EU weakening national controls, but Commission officials said previous consultations with national capitals left them confident the directives could be adopted quickly.

"As the Commission's directive is reviewed and ultimately implemented by the European Parliament and the Council, it will be important to keep the focus on openness and competitiveness," Stevens told reporters in a briefing ahead of the Farnborough International Airshow. "Protectionism is not now, and has never been, a substitute for competitive strength."

Asked about the message sent to Europe by the disputed $35 billion Pentagon Air Force tanker contract, Stevens said it should be viewed as an "acquisition issue."

The Air Force in February selected Northrop Grumman Corp. and its European partner EADS to replace 179 Eisenhower-era aerial refueling planes. Boeing Co. filed a protest in March, and last week, Defense Secretary Robert Gates said the Pentagon will reopen the bid.

The Air Force's original decision provoked fury among U.S. politicians, who objected to the military deal being awarded to an overseas contractor. Boeing had supplied refueling tankers to the Air Force for nearly 50 years.

"I don't think the tanker issue should be viewed as a trade issue as much as an acquisition issue," Stevens said.

Stevens said the positive implications of changes in Europe risked being undermined by the spending gap on defense between the United States and Europe — U.S. spending on defense approaches 4 percent of GDP while very few European countries meet the nominal requirement of 2 percent.

"Growth in European defense spending does not match the growth in the overall economy, and I believe the spending devoted to investment, rather than to personnel and infrastructure, remains inadequate," he said.

"My worry is that the cumulative effect of this differential, year after year, is creating a trans-Atlantic capabilities gap that threatens to become unbridgeable."

Stevens added that he expected U.S. core annual defense spending of around $550 billion to remain at those levels, but conceded that supplemental spending — covering campaigns in Iraq and Afghanistan — averaging around $170 billion to $180 billion could fall in coming years.

Lockheed's F-22 Raptor fighter jet is expected to be a highlight of the first day of the Farnborough air show, where almost 300,000 people are expected to attend and almost 1,500 exhibitors from 35 countries to show off the latest in aviation technology.

The F-22 is due to make a flypast Monday afternoon, marking the world's only operational fifth-generation fighter aircraft's debut at an international air show.

Stevens said that Lockheed supported the position of the U.S. government that a decision about whether any more F-22's would be built is one for the new U.S. Administration.

He also dismissed resurgent speculation that the company could sell the stealth fighter craft to Japan or Australia, noting that U.S. laws currently prevent it from doing so.

"There is no decision as far as I know or provision to change the law," he said.