The chief executive officers of several aerospace companies invited to the gathering were informed that, within five years, approximately half of the companies they represented would not be needed by the Defense Department. We will stand by and watch it happen. Augustine said he believes Perry was indicating that the Defense Department would not choose the winners and losers among companies. Augustine went on to outline several survival options open to the aerospace industry. Although diversification or selling off nonproductive assets are options preferable to taking no action at all, increasing efficiency through consolidation and downsizing to build up market share is the path Augustine prefers.
Many companies are reluctant to talk about mergers and acquisitions.
They are hunkered down, as one company representative describes it, hesitant to discuss strategies, personnel concerns or the effects on the marketplace. Because various transactions are still underway or are in the concept stages, any discussion could tip their hands. But some of the major players are willing to offer insight. All agree the trend is in response to the decrease in the Defense Department budget. They also concur that companies that once heavily depended on defense business have to find a balance between defense and commercial products to compete and grow.