Risks And Rewards Of Vertical Integration

My beliefs on the dangers of vertical integration were taken out of context in "How Lockheed's early-warning system crashed" (News: Analysis & Commentary, Apr. 6), your view of how the proposed merger of Lockheed Martin Corp. and Northrop Grumman Corp. ran afoul of government regulators.

I do indeed believe that vertical integration is dangerous if contractors freeze out competitors by denying them access to components or shut out as sellers those traditional second- and third-tier component suppliers who normally sell to prime contractors.

However, your story failed to include the second part of my argument: that many companies, including the one I have served, Lockheed Martin, have a better solution by acting as merchant buyers and suppliers, i.e., buying and selling to all on an equal basis. The benefit of this approach is clear: Systems ultimately sold to the customer are made up of the best components available. It's what our customers deserve, and it's what our employees and shareholders expect of us.

Simply put, I do agree that the existence of banks can lead to bank robberies. I do not agree, however, that banks should therefore be outlawed.

Norman R. Augustine


Lockheed Martin Corp.

Bethesda, Md.

Before it's here, it's on the Bloomberg Terminal.