Can an 'industrial strategy' save the defense biz?

These are bleak times for the defense industry. You know all the reasons, but top leaders from Boeing, Lockheed and the Aerospace Industries Association listed them again Tuesday in a panel discussion at the Air Force Association's trade show outside Washington:

The defense budget is going to grow less than it has been; the industry is smaller than ever; and it's more expensive and technically difficult than ever to finish big new weapons programs. Neil Kacena, Lockheed's vice president of advanced development, showed a slide that graphed the rapid decline in the number of DoD aircraft programs from the 1950s until today. That means there's been a commensurate decline in the number of designers, engineers and other skilled workers -- and if budgets dip too low, he warned, parts of that smaller workforce could disappear altogether.

Fred Downey, a vice president with AIA, rattled off some fun facts that drove the story home:

• In 1960, if all the U.S. producers of combat aircraft were one company, it would've been the 3rd largest in the country. In 2010, if all those big firms were one company, it would be 65th biggest.

• In 1960, there were 700,000 people across the U.S. engaged in building combat aircraft. Today there are about 190,000.

• In 1960,  there were 6 fighter aircraft in development, and 7 in production. Today there are unmanned combat aircraft in development, but no manned fighters; and only limited production of the F-35; F-15; F-16; and F/A-18. (And the U.S. won't be buying many of those jets.)

• In 1960, there were two bombers in development and three in production. Today, "Well, we’re hoping there’s going to be one in development, but there are none in production," Downey said.

• In 1960, there were 938 fighters delivered to the government. In 2010 there were 110.

So if this decline continues, Downey warned, parts of the U.S. aerospace industry, which he argued is a "national strategic asset," will wither and die. If the big balloon went up, how would America crank out fighter jets?

The answer, he said, is a national industrial policy -- a guiding document that would guarantee the U.S. keeps open the factories and keeps employed the workers that can build its combat aircraft. But before you can have that you need a -- yes, let's all say it together -- a strategy!

We've talked a lot about the challenges modern Washington faces in developing the kind of all-encompassing, magical super-strategy that everyone wants to light the path down the road. Assuming for a moment that it'd be possible to get one, could it then form the cornerstone for an "industrial strategy" that would protect the Boeings, Lockheeds and other boldfaced names in the defense game?

You could argue DoD already plans many programs with a view toward protecting key vendors. (See: DDG 1000.) But could it work as a formal policy, and across hundreds of billions of dollars of annual spending? It would require Pentagon officials to give up their abiding faith in the power of competition, and it would require big defense firms to surrender the profit motives that have always pushed them toward big government contracts. An "industrial strategy" might require Washington to became sensible and methodical about how it pours the feed in the trough, spreading less around so that everyone could at least get some.

Could it happen? What do you think?