Meet Bill Clinton, Arms Merchant

A collective shudder ran through the defense industry when Bill Clinton won the Presidential election. Many of his national security appointments were old hands from the Carter Administration, a moralistic bunch who frowned on overseas weapons sales. But five months into his new Presidency, it's clear that Clinton wants to help, not hinder, defense exporters.

Driven by a desire to boost U.S. competitiveness and to cushion job losses in the defense sector, top Clintonites from Secretary of State Warren M. Christopher on down have backed continued sales of conventional weapons to U.S. allies. The most visible sign yet: Commerce Secretary Ronald H. Brown hobnobbing at the June 11-20 Paris Air Show. "Clinton realizes these exports create jobs," says Brian H. Rowe, president of General Electric Co.'s aircraft engine unit. Indeed, weapons merchants are becoming increasingly dependent on overseas markets. Without exports, production of GE's F-110 engine and General Dynamics Corp.'s M-1 Abrams tank would probably end, for instance.

Despite the big export push, overseas sales are starting to slow. Saudi Arabia and Kuwait have their hands full--and their wallets depleted--taking delivery of billions of dollars' worth of already ordered U.S. tanks, fighter jets, and Patriot missiles. Taiwan, another big buyer, may take a breather after coughing up $5.8 billion for 150 Lockheed F-16 fighters and $2.6 billion for French Mirage jets.

The overseas backlog was a big reason the biennial Paris aerospace confab was so low-key. Cost-conscious companies reduced their attendance at the industry extravaganza, and buffets replaced waiter service at some corporate receptions. AlliedSignal Aerospace sent 42 employees, down from 170 in 1991. Martin Marietta Corp. didn't show at all. With budgets curbing military development, the only demonstration flights of new aircraft were of Airbus Industrie's A330 passenger planes. "For a guy who likes airplanes, there's no sexual satisfaction in watching a commercial airliner fly over," GE's Rowe says.

Things could be worse. "The Europeans are in much more desperate straits than we are," says Joel Johnson, international vice-president of the U.S. Aerospace Industries Assn. Hobbled by smaller markets, European arms makers can't match U.S. development spending. That allowed U.S. companies to beat out European competitors on their home turf. McDonnell Douglas Corp., for instance, is selling Finland F/A-18s to replace Russian and Swedish fighters, while Switzerland will buy F/A-18s to replace some aging French warplanes. Grumman Corp., with no European competitors for its E-2C carrier-based surveillance aircraft, will sell four of the planes to France. And the Russians, a big presence at the Paris show, face doubts about their ability to service the equipment they are so eager to sell.

DISMAYED DOVES. To bolster their hands, the Americans are taking advantage of orders for upgrades--new missiles, avionics, and radar--that can extend the life of aging airframes. "The cost of airframes has gotten so high that people try to squeeze more life out of them by upgrading," says William Benso, president of Martin Marietta Overseas Corp. Martin is pitching its Lantirn night-navigation system for F-16s in several European air forces. Rival Hughes Aircraft Co. will have plenty of work supplying the radar and the Maverick, Sidewinder, and Sparrow missiles that the Saudi F-15s will carry. Indeed, Hughes's military exports swelled to $1.5 billion in the past two years, up from $1 billion in the decade before that.

The pro-industry tilt of the first Democratic Administration in 12 years is dismaying arms-control advocates, who want the U.S. to forgo some overseas sales to set an example. But with Clinton focused on the domestic economy, the thousands of jobs at stake in places such as vote-rich California are proving more important than pleasing peaceniks.

WHO'S BROWSING THE
      U.S. DEFENSE SUPERMARKET
      SWITZERLAND   Plans to buy 34 McDonnell Douglas F/A-18s for $1.7 billion
      MALAYSIA      Wants 18 F/A-18s, which will cost more than $1 billion
      ISRAEL        Is shopping for $2 billion in F/A-18s or Lockheed F-16 fighters
      KUWAIT        In January, bought 218 General Dynamics M1A2 tanks valued at $4 
                    billion; wants 20 F/A-18s and up to 24 Apache helicopters
      SINGAPORE     Is eyeing 25 General Electric engines, worth $70 million, to 
                    power an expected order of F-16s
      FRANCE        Is buying four Grumman E-2C carrier surveillance planes worth    
                    more than $500 million; Indonesia, Korea, Thailand, and Turkey 
                    also want the planes 
      AUSTRALIA     Is buying $500 million worth of antisubmarine systems from Martin
                    Marietta 
      DATA: BUSINESS WEEK