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You can't have 100 aerospace companies doing big projects; the economy just isn't that large. For very mature industries, I believe studies have found that the

by magduf 7y ago

You can't have 100 aerospace companies doing big projects; the economy just isn't that large. For very mature industries, I believe studies have found that the optimal number of competitors is usually 3 large companies. For immature industries with a lot of change and innovation, that number is generally higher, but as the industry matures, players either die off or merge. A good example of this is the American auto industry.

tonyedgecombe 7y ago
I've seen four mentioned several times and the fourth doesn't even need to be that big, a small scrappy competitor can have a big impact.
- babesh 7y ago
  One specific example of antitrust that wasn't handled properly was the Bombardier C Series and Boeing petitioning it for dumping. It resulted in one fewer competitor in the market because it forced Bombardier to sell the plane to Airbus. I think that there will/can be competitors that spring out from the lower end. The trick is to prevent the oligopolists/monopolists from squashing them through manipulation of the legal system or other underhanded tactics. https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Boeing https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Bo...
  - redis_mlc 7y ago
    > One specific example of antitrust that wasn't handled properly was the Bombardier Bombardier is a foreign company that is heavily subsidized by the Quebec Pension Fund. They probably were dumping. I don't see how anti-trust applies here. The CSeries is a fascinating story with so many twists and turns - almost unbelievable if it was a fiction novel! The CSeries probably did not have a viable marketing and support story against Boeing. If you want to get wound up, then the Boeing/Embraer Civil lashup is truly anti-competitive.
    - babesh 7y ago
      You mean like just like Boeing? https://www.reuters.com/article/us-eu-usa-aircraft-wto/wto-says-us-failed-to-halt-state-tax-subsidy-for-boeing-idUSKCN1R923B https://www.reuters.com/article/us-eu-usa-aircraft-wto/wto-s...
coliveira 7y ago
> A good example of this is the American auto industry. Your example shows exactly why this idea is flawed. Three competitors is what is called an oligopoly. There is nothing healthy about that.
- deelowe 7y ago
  The counter argument to this is that the auto industry runs on razor thin margins and is littered with failed companies. Hell, the entire industry almost went belly up in the late 00s. Just look at how much cash had to be funneled into Tesla, which is a small market luxury brand.
- nickik 7y ago
  I would disagree with that. For a market like that 3 competitors in one country is actually probebly close to maximal efficnecy. There is such a unification in basic car concepts that adding more providers really doesn't add much. Specially if there is also tons of international competition as well. When there was a real need for a new company, because of EV shift, a new one happened. If it was a real oligopoly such could not be done. In fact the Big 3 attempt at using their market power against Tesla have mostly been marketing oppertunites for Tesla.
  - magduf 7y ago
    Don't forget, there's a LOT more than 3 competitors in the auto market. There's 4 in America now (Ford, GM, Fiat/Chrysler, Tesla), but that doesn't count all the foreign automakers, many of whom have manufacturing plants right here in the US: Honda, Toyota, BMW, VW, etc. Just looking at cars on the road, the "American" automakers don't even appear to have a majority of sales.
    - nickik 7y ago
      That's why I wrote: Specially if there is also tons of international competition as well. And Fiat is European now I think.
wonderwonder 7y ago
Generally I would say this is a good measure for companies that serve individuals. Person A shops around and buys a car that most meets their needs/budget. This goes out the window once you enter the world of government contracts, especially large scale ones. You currently have a few large companies; Boeing, Lockheed, Northrop, etc. that land all the major contracts. The landing of these contracts though is for the most part based on government lobbying, the assurance of a nice private sector job post government retirement and a large helping of 'this is the way we have always done it'. This has recently led to debacle after debacle where the end user (the US taxpayer) is left holding the bag for massive global corporations that continue to profit. When there is an incident large enough to cause people to sit up and take notice, the ceo of the company gets a massive golden parachute and the company says 'see we took care of it. wink wink'. Look at the F-35, Littoral Battleship, and the subject of this article. If the government started bidding out smaller real hardware contracts to new companies, we would see a rise in new competitors and an accompanying rise in quality and roi. To do that though lobbying would have to be severely curtailed. Probably not going to happen.
- magduf 7y ago
  >If the government started bidding out smaller real hardware contracts to new companies, we would see a rise in new competitors and an accompanying rise in quality and roi. Do you have any evidence that this would actually work? Small companies generally don't have the resources to do large project. How is a small company going to build a state-of-the-art fighter jet? It's pretty much impossible. Look at other countries to see how they do it with small companies: they don't. The European nations basically have only a few large companies, the Chinese are the same, and so are the Russians. The reasons America had a lot more aerospace companies in decades past are 1) planes were a lot simpler, 2) they were wiling to accept higher risk back then (some test planes crashing and killing the pilot was OK), and 3) the defense budget was enormous because there was a Cold War and the US's economy was gigantic thanks to being the only industrial power left standing after WWII. #3 is probably the biggest factor, and isn't going to happen again. As for the stuff about golden parachutes, that's endemic to US companies in general, not just contractors. I don't see how it really affects competition much since everyone does it, except that it adds costs to American companies that, for instance, Chinese companies do not have, so it's probably bad in the long term for American competitiveness, but that really doesn't affect this argument for competitiveness between US government contractors (since they don't compete with foreign companies anyway). The bit about "a nice private sector job post government retirement" is pretty much the same: it's bad for American competitiveness, but doesn't affect things much internally, except that it probably makes upstart companies more competitive as far as costs go, but since acquiring contracts is very political it actually probably hurts upstarts since they're not connected the way the incumbents are. Also, I should add they government actually does farm out smaller contracts to smaller companies. They even have a policy I think which causes them to do this more than they probably should, in an effort to help small companies. They don't farm out fighter jets to small companies, of course, but there are a bunch of processes that cause them to farm out small things to small companies. The other thing that's important to understand is that most small companies do NOT want government contracts, if they're not already in that business. It's not like there's small companies that would be happy to bid on these things but are being prevented. In reality, government contracting is a giant pain in the ass, so the companies that do it are ones that are interested in it, and are good at it: their processes are set up to handle that kind of business model. Bidding on contracts is a pretty arduous thing and requires a lot of specialized skill and knowledge and special staff, so companies that aren't in that sector just don't bother.

by magduf 7y ago

tonyedgecombe 7y ago

I've seen four mentioned several times and the fourth doesn't even need to be that big, a small scrappy competitor can have a big impact.

babesh 7y ago
One specific example of antitrust that wasn't handled properly was the Bombardier C Series and Boeing petitioning it for dumping. It resulted in one fewer competitor in the market because it forced Bombardier to sell the plane to Airbus. I think that there will/can be competitors that spring out from the lower end. The trick is to prevent the oligopolists/monopolists from squashing them through manipulation of the legal system or other underhanded tactics. https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Boeing https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Bo...
- redis_mlc 7y ago
  > One specific example of antitrust that wasn't handled properly was the Bombardier Bombardier is a foreign company that is heavily subsidized by the Quebec Pension Fund. They probably were dumping. I don't see how anti-trust applies here. The CSeries is a fascinating story with so many twists and turns - almost unbelievable if it was a fiction novel! The CSeries probably did not have a viable marketing and support story against Boeing. If you want to get wound up, then the Boeing/Embraer Civil lashup is truly anti-competitive.
  - babesh 7y ago
    You mean like just like Boeing? https://www.reuters.com/article/us-eu-usa-aircraft-wto/wto-says-us-failed-to-halt-state-tax-subsidy-for-boeing-idUSKCN1R923B https://www.reuters.com/article/us-eu-usa-aircraft-wto/wto-s...

coliveira 7y ago

> A good example of this is the American auto industry. Your example shows exactly why this idea is flawed. Three competitors is what is called an oligopoly. There is nothing healthy about that.

deelowe 7y ago
The counter argument to this is that the auto industry runs on razor thin margins and is littered with failed companies. Hell, the entire industry almost went belly up in the late 00s. Just look at how much cash had to be funneled into Tesla, which is a small market luxury brand.
nickik 7y ago
I would disagree with that. For a market like that 3 competitors in one country is actually probebly close to maximal efficnecy. There is such a unification in basic car concepts that adding more providers really doesn't add much. Specially if there is also tons of international competition as well. When there was a real need for a new company, because of EV shift, a new one happened. If it was a real oligopoly such could not be done. In fact the Big 3 attempt at using their market power against Tesla have mostly been marketing oppertunites for Tesla.
- magduf 7y ago
  Don't forget, there's a LOT more than 3 competitors in the auto market. There's 4 in America now (Ford, GM, Fiat/Chrysler, Tesla), but that doesn't count all the foreign automakers, many of whom have manufacturing plants right here in the US: Honda, Toyota, BMW, VW, etc. Just looking at cars on the road, the "American" automakers don't even appear to have a majority of sales.
  - nickik 7y ago
    That's why I wrote: Specially if there is also tons of international competition as well. And Fiat is European now I think.

wonderwonder 7y ago

Generally I would say this is a good measure for companies that serve individuals. Person A shops around and buys a car that most meets their needs/budget. This goes out the window once you enter the world of government contracts, especially large scale ones. You currently have a few large companies; Boeing, Lockheed, Northrop, etc. that land all the major contracts. The landing of these contracts though is for the most part based on government lobbying, the assurance of a nice private sector job post government retirement and a large helping of 'this is the way we have always done it'. This has recently led to debacle after debacle where the end user (the US taxpayer) is left holding the bag for massive global corporations that continue to profit. When there is an incident large enough to cause people to sit up and take notice, the ceo of the company gets a massive golden parachute and the company says 'see we took care of it. wink wink'. Look at the F-35, Littoral Battleship, and the subject of this article. If the government started bidding out smaller real hardware contracts to new companies, we would see a rise in new competitors and an accompanying rise in quality and roi. To do that though lobbying would have to be severely curtailed. Probably not going to happen.

magduf 7y ago
>If the government started bidding out smaller real hardware contracts to new companies, we would see a rise in new competitors and an accompanying rise in quality and roi. Do you have any evidence that this would actually work? Small companies generally don't have the resources to do large project. How is a small company going to build a state-of-the-art fighter jet? It's pretty much impossible. Look at other countries to see how they do it with small companies: they don't. The European nations basically have only a few large companies, the Chinese are the same, and so are the Russians. The reasons America had a lot more aerospace companies in decades past are 1) planes were a lot simpler, 2) they were wiling to accept higher risk back then (some test planes crashing and killing the pilot was OK), and 3) the defense budget was enormous because there was a Cold War and the US's economy was gigantic thanks to being the only industrial power left standing after WWII. #3 is probably the biggest factor, and isn't going to happen again. As for the stuff about golden parachutes, that's endemic to US companies in general, not just contractors. I don't see how it really affects competition much since everyone does it, except that it adds costs to American companies that, for instance, Chinese companies do not have, so it's probably bad in the long term for American competitiveness, but that really doesn't affect this argument for competitiveness between US government contractors (since they don't compete with foreign companies anyway). The bit about "a nice private sector job post government retirement" is pretty much the same: it's bad for American competitiveness, but doesn't affect things much internally, except that it probably makes upstart companies more competitive as far as costs go, but since acquiring contracts is very political it actually probably hurts upstarts since they're not connected the way the incumbents are. Also, I should add they government actually does farm out smaller contracts to smaller companies. They even have a policy I think which causes them to do this more than they probably should, in an effort to help small companies. They don't farm out fighter jets to small companies, of course, but there are a bunch of processes that cause them to farm out small things to small companies. The other thing that's important to understand is that most small companies do NOT want government contracts, if they're not already in that business. It's not like there's small companies that would be happy to bid on these things but are being prevented. In reality, government contracting is a giant pain in the ass, so the companies that do it are ones that are interested in it, and are good at it: their processes are set up to handle that kind of business model. Bidding on contracts is a pretty arduous thing and requires a lot of specialized skill and knowledge and special staff, so companies that aren't in that sector just don't bother.