Now, Lockheed Is No. 2

Consolidation of the defense industry picked up steam on Dec. 9, when Lockheed said it would buy General Dynamics' fighter aircraft division for $1.5 billion in cash. The sale, rumored for weeks, will boost Lockheed's annual revenues by $3 billion, to $10 billion, and make the company the No. 2 Pentagon contractor after McDonnell Douglas. Lockheed, which makes the F-117 fighter-bomber and U-2 spy plane, will gain the majority share in the Air Force's F-22 stealth fighter and the long-running F-16 fighter.

For its part, GD is sitting on a dwindling pile of assets. Already this year, GD has sold its Cessna Aircraft division and its missile business. Next up could be the sale of the Electric Boat submarine unit to Tenneco.

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