When Norm Augustine's name is mentioned, most think about his role in the merger of Lockheed Corp. and Martin Marietta to create the biggest defense company on the globe. And certainly that was a huge factor in Augustine landing on our list of the 10 top defense influencers for the last 30 years. But his imprint on industry beyond Lockheed Martin was very profound, as was his influence during his two stints in the Pentagon. And then, of course, there are his laws — those gems of wisdom with a heavy dose of cynicism that spur both a chuckle and knowing snicker among anyone in defense, corporate America or both.
Augustine spoke to Defense News Executive Editor Jill Aitoro, looking back at those consequential times in the mid-1990s and offering words of caution to the Pentagon on balancing priorities.
Q. At the time of the merger of Martin Marietta and Lockheed Corp., did you recognize the synergies? Did you anticipate success that would come of this partnership?
Part of the merger was out of necessity. You weren’t going to survive unless you were willing to combine. So there was not much of a choice. At the same time there was a degree of luck involved. But I think we realized that this was the ideal combination. The two companies, though we’d been bitter competitors, liked each other and got along well.
The great advantage we got was never shown on the balance sheet. On the Martin Marietta side, we had combined 17 companies. We never appreciated the experience of 17 companies sitting around the table.
Q. Were there concerns at the time of the merger on whether or not this would be a success?
There were a lot of concerns. About 80 percent of mergers fail — at least at that time that was true. Your chances of success were not good. And usually the failure was cultural, where the people left couldn't get along with each other. Happily we just didn't have that problem.
Q. I know Martin Marietta had looked at Northrop
actually bid for the company in fact. Do you feel that would have had the same success?
We took two shots at Northrop.
I think it would have been a terrific combination and we could have saved the government a couple of billion dollars every year. That was well audited. My biggest disappointment in my entire business career was when the Justice Department stopped the Northrop Grumman transaction [with Lockheed Martin in 1998]. It wasn’t so much that they stopped it, I mean that's their right. The government could do what it wants. It was the way it was handled that was a huge disappointment to me.
Q. So the Pentagon said first that you all need to start to combine, because we don't have enough business to sustain all of these companies. And then there was a point where they said no more.
Yes, and we had no idea. They called one day and said it was over. So it was a sudden reversal that we didn't quite catch on to.
Q. Do you feel we're at a point now where there needs to be more consolidation in the market?
That’s an interesting question. At the time of the Last Supper, the secretary of defense put a chart on the board of the number of companies they could afford in the various fields, like aircraft, submarines and so on. There were quite a number of them. And they said we can only afford one competitor, which sort of stunned me. But that was the [Department of Defense] position. I don't know if DoD has changed its mind since then or not, but my personal view is that it's better to have two or three healthy companies than fifteen weak companies under any scenario — whether you're one of the companies or whether you're the government. It's going to get harder and harder to do large-scale mergers. My only hope would be that the government would make up its mind and tell industry what it wants and stick with it.
Q. A former colleague of yours actually credited you for being at the Pentagon during a time when DoD encouraged the two-way street with industry. Would you say there was more of a collaboration happening at the time
I would say the collaboration has ebbed and flowed. Ironically during the [former Defense Secretary] Cap Weinberger years — those were years of a lot of defense spending; business was very good, but the relationship was really very poor with industry. Then things got better; but over the years since I first worked in the Pentagon, I would say there's been a gradual deterioration. I am sorry to say that, having worked on both sides of this. But I think there is less trust today, less understanding. I had two tours with government with six different jobs. Today it's very hard for people in industry to do that because of the conflict of interest rules and all that go with it. Similarly people from government don't have any industry experience, so you sort of wind up with sheep herders and the cattlemen, so to speak. Not that people don't have good [intentions], they do. But there isn’t good understanding of what the other side’s problems are.
Q. I often hear people blame procurement regulations for preventing communication between government and industry, but then I’m told there’s actually less communication happening than is even permitted by law. Do you find that to be the case? Is the problem the regulation or people’s understanding of the regulation?
The answer to that is yes — it’s both. Clearly the regulations are very controlling, but at the same time, because of the vagueness of the regulations, everybody wants to be very, very careful on both sides. So you sort of build walls that weren't intended. It’s unfortunate, and I think [it] handicaps our system. At the same, time you don't want to have conflicts of interest. Having seen the Defense Department from both sides, and [while] I have my own complaints about the acquisition process, it’s 99.9 percent honest. I can't say that about everything I've seen in federal, state and local levels but the Defense Department by and large is honest. We don't want to lose that. So maybe part of the price to pay is to have this barrier that we live with.
Q. There's been a lot of talk of reform lately, which perhaps is a sign that people recognize a need for some change or at least adaptation to ensure regulations function little bit better. What do you think needs to happen for procurement to function in a way that works?
I think first of all the federal procurement system, particularly in defense, has very unique characteristics. It’s a monopsony, which we don't deal with in the private sector by and large. Within that monopsony there are monopolies. If you want to buy [a] B-2 or [an] F-16, there's probably only one place you can go where you can buy it. So you start out with a constrained or unusual version of the free enterprise system. And the free enterprise system works so well — I’ve traveled to 124 countries and I have yet to see a system that approaches it. So you'd like to have it work, but you also have to run it a little differently. That introduces the fact you do see constraints that you might not have otherwise.
Q. You were in industry at a time when technology began to explode and influence the military in huge ways. We saw a lot of companies including Lockheed begin to acquire companies to build capabilities. We're now seeing companies, Lockheed included, that are shedding aspects of that IT business. What is the proper role of the manufacturers in terms of information technology?
You know it's probably changed so much; it’s been years since I was involved with this. I want to be very careful so I don't give advice to people that I should not be giving advice to. But I think the defense budget is likely to have to increase. You just look around the world at what's going on, no matter who wins the election. And give that, for at least the foreseeable future, there's probably going to be a lot to worry about just with the defense world. The IT world though has been a burgeoning field, and that was why we first got into it. Long ago I ran Martin Marietta’s information systems business. And Dan Tellep, my friend at Lockheed, was very much involved in purchasing [IT] companies that seemed to fit Lockheed well before we merged the two. There's always been this dilemma in the defense industry — feast or famine. When the defense budget is up, you have one situation; when the defense budget is down, everybody says: :"Well, we’ll diversify." I once unfortunately made the comment that the record of our industry in diversification is unblemished by success. And sadly that's perhaps not exactly true but it's true in more cases than not. The defense business is just so unique.
Q. The threat has changed recently. Where do you see the Pentagon's priorities being in terms of procurement and partnership with industry for proper response?
Well, I think one of the dilemmas we face is the kind of wars we're fighting today are the kind we're likely to be called upon to fight in the future. But the problem is that the truly existential war is not the ones we're fighting today; it’s the all-out nuclear exchange; I lived through the Cold War, and that's still out there. It's very easy to say: "Well, we'll just focus on terrorism and we'll worry about the other when the time comes." That’s not a good strategy. When I was [with] the Pentagon we worried about the Cold War principle; then something called Vietnam came along. And technology of course has changed so much over the years, [which transforms the strategy]. When I was [with] the Pentagon I used to say that there are only two things we couldn’t do: I said we couldn't find targets, and we couldn’t hit them once we found them. We've now learned how to hit them. We can do that. And we're beginning to learn how to find them. But we’ve got a ways to go. So it's a new world we're entering today.
Q. You mention a couple of them in this conversation, but you're known for the Augustine Laws. A book came out, in fact, with some of your most noteworthy sayings over the course of years. I’ve got to ask you: Which is your favorite?
You know, somebody pointed out to me this is the 50th anniversary since the first law. It’s so hard to say. There are so many laws — and a lot that I've written since the book came out 30 years ago. I guess one of my favorites is if you superimpose enough layers of management, one on top of the other, it could be sure that disaster will not be left to chance.
Q. I like that. You also said the entire defense budget would be needed to pay for a single plane by when?
It was 2054. I’ve refined it actually to July 23, 2054. The economist just came out with [an] update to my law and I'm sorry to say we’re right on track. I’ve always been remembered for that law and it’s caused no end to grief from our customers.
This article is part of a larger Defense News 30-year anniversary project, showcasing the people, programs and innovations from the last three decades that most shaped the global security arena. Go to defensenews.com/30th to see all of our coverage.