Martin Marietta and GE show how to survive in a shrinking market

Some do it by selling off, others by consolidating. The sale by General Electric of its aerospace business to Martin Marietta Corp. for $4.05 billion illustrates both defense-industry survival techniques, in wide use after six years of declining spending, and the prospect of four more under Bill Clinton. The deal, which will make Martin Marietta the world's largest defense-electronics firm, with revenues of $12 billion, supports chairman Norman Augustine's conviction that "companies that combine will be the survivors." GE chairman John Welch, worried about holding on to a division too small to compete in a shrinking market, decided to get out while the getting was good. "If you are No. 4, and No. 1 sneezes," said Welch, "you get pneumonia."

The acquisition further accelerates a realignment already well along in the industry. Ford Motor Co. sold its missile and satellite operations to Loral Corp., and Hughes Aircraft acquired General Dynamics' missile operations. Faced with continued shrinking of the market, all the major defense firms are reviewing the betting. Predicts Gordon Adams, director of the Washington-based Defense Budget Project: "The bloodletting will continue."