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General Dynamics Moves to Protect Jet Fighter Contracts

June 20, 1985

WASHINGTON (AP) _ General Dynamics Corp. moved Thursday to protect its jet fighter contracts with the Air Force, offering a package deal it said could shave at least $1.3 billion off the projected $14.4 billion pricetag for 720 F-16s.

The company said it could make such an offer because the Air Force and Congress had shown a willingness to consider a recent offer by the Northrop Corp. Northrop is trying to break into General Dynamics’ market by offering its new F-20 fighter as a cheaper alternative to the F-16.

The General Dynamics announcement sent Northrup stock slumping $2.25 a share on the New York Stock Exchange. It recovered somewhat at the close, ending at $51 a share, down $1.50. General Dynamics closed up 25 cents a share at $74.

Expressions of interest by Congress and the Pentagon in the Northrop proposal indicate the Air Force might not want a ″multi-role fighter″ capable of performing virtually any mission, said Herbert F. Rogers, the general manager of General Dynamics’ Fort Worth, Texas, division.

If that is the case, then General Dynamics can substitute a stripped-down version of the F-16C - designed primarily for air-to-air combat - for a portion of the Air Force contract and produce significant savings. The new variant of the F-16C would still be superior to the F-20 and cheaper than that plane as well, Rogers asserted.

Northrop Corp. immediately disputed the idea that the new version of the F- 16C would be superior to the F-20, a plane in which the company has sunk $800 million in development costs without chalking up a single sale.

″The F-20 and the (regular) F-16C are comparable,″ said John Thorne, a Northrop spokesman. ″I’d be surprised if the Air Force would want to go back to anything less than the F-16C.″

Pentagon spokesman Michael I. Burch said it was too early to assess the capabilities of the planes proposed by the two firms, adding the Air Force would have to study the matter.

Rogers, at a press conference, acknowledged the Northrop proposal had played a role in forcing the new General Dynamics offer.

″Competition is a wonderful thing,″ Rogers said. ″Obviously, I’m working as a contractor to protect my business.″

He added, however, that General Dynamics was responding primarily to the fact that the huge cost of the F-16 program placed it in ″very severe jeopardy″ in Congress.

The Air Force had planned to buy 180 F-16Cs from General Dynamics during each of the next four years for a total projected cost of $14.4 billion. Northrop has said it will provide 396 F-20s - or more than half of the 720 total - for a guaranteed fixed price of $6.3 billion.

In response to the Northrop proposal, which was unveiled in April, the House has included language in its Pentagon budget bill ordering the Air Force to conduct ″an annual procurement competition″ between the two planes.

When adjusted for inflation, Northrop said the price of each F-20 over the four-year period translated to $15.9 million, including initial spares. Rogers said the Air Force could acquire the stripped down F-16C from General Dynamics for a comparable price of $13 million.

He said the company had proposed the Air Force acquire 504 multi-role F-16s and 216 of the specially configured aircraft. Under that offer, the Air Force would enjoy ″total program savings of $1.364 billion,″ Rogers said.

The savings on the new version of the F-16C are achieved by leaving off equipment like radar and weapons for such things as all-weather ground attacks, Rogers said.

Air Force Secretary Verne Orr said he viewed the proposal as ″a healthy initiative.″

Northrop’s Thorne said: ″The F-20 is clearly the fastest interceptor in the world because it shot down the price of the F-16 in less than 100 days. The taxpayer will enjoy this competitive benefit only as long as the F-20 is around.″

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