'It's Not the End of the World,' Northrop Chief Says After Losing ATF Pact With PM-Future
E. SCOTT RECKARD
Apr. 24, 1991
'It's Not the End of the World,' Northrop Chief Says After Losing ATF Pact With PM-Future Fighter, Bjt
LOS ANGELES (AP) _ Northrop Corp. Chairman Kent Kresa's voice came over the loudspeaker moments after the huge defense contractor learned it had lost its pitch to make the next generation of fighter jets.
''This is not the end of the world.''
At Northrop's Century City headquarters and at its production and design center in Hawthorne where the Gray Ghost, Northrop's version of the advanced tactical fighter was dreamed up, employees huddled Tuesday afternoon. They talked so quietly they barely broke the silence.
Kresa's voice came over the loudspeaker: ''Now we have to concentrate on the responsibilities we have.''
Northrop and McDonnell Douglas Corp.'s McDonnell Aircraft Co. unit lost out to a team led by Northrop's rival Los Angeles-area aerospace giant, Lockheed Corp.
''I don't believe you can keep a good outfit down,'' said John Capellupo, president of McDonnell Aircraft. ''This is not the last aircraft program that will be offered for bidding.''
Along with General Dynamics Corp. and Boeing Co., Lockheed will make the ATF. The radar-evading, supercomputer-guided dogfighter flies faster than sound without afterburners and is supposed to keep America supreme in the skies into the 21st Century.
The three will share a development contract worth $12.1 billion; Lockheed ATF program chief Ed Pruden estimated revenue to his company alone will total $15 billion to $20 billion by the time production ends.
Also dealt a severe blow was General Electric Co., whose F-120 engine was the loser in the battle to power the ATF to Pratt & Whitney's F-119 engine.
Northrop, battered by political battles over its B-2 Stealth bomber and contracting scandals, had, with its partners, invested more than $1 billion developing its ATF. The Lockheed-led team invested a like amount.
Without the B-2, Northrop would be a profitable but far smaller company, a major subcontractor rather than a first-rank defense firm.
But the B-2 is the most-challenged of defense programs, a fat target for critics.
They say that at nearly $1 billion a copy, it's too costly for a world where East-West tensions have cooled and the F-117A Stealth fighter-bomber, existing conventional fighters and cruise missiles demonstrated near-total dominance in the Gulf War. The B-2, undergoing tests in the skies over Edwards Air Force Base, didn't see service in Operation Desert Storm.
Defense Secretary Dick Cheney has asked for 75 of the bat-winged B-2s, down from an originally planned 132. Congress has authorized 15.
Northrop is hoping for the best. For the time, its $6.5 billion backlog of work will carry it, Kresa said.
Kresa and John McDonnell, the chairman of St. Louis based McDonnell Douglas, said they hoped technologies pioneered on the ATF program can be applied to other programs, including future fighter competitions.
Kresa said 200 to 400 of the 600 workers on the ATF program face layoffs. ''It's our hope that we can redeploy as many as possible,'' he said.
Pruden, the Lockheed's ATF manager, offered some hope. He noted that while assembly of the fighter will be done in Georgia, the program will generate 4,000 jobs in Southern California at the peak of the development stage in the mid-1990s.
TRW Inc. and Hughes Aircraft Co. will each employ at least 1,000 of that total, with most of the others at additional subcontractors. Lockheed itself will employ about 400 to 500 ATF workers in Southern California, Pruden said.
As for hiring Northrop ATF workers, he said: ''I wouldn't be surprised. We will need a lot of people.''
McDonnell, the McDonnell Douglas president, said the loss will mean about 500 layoffs at his company by year end.
''Despite the loss, we still intend to remain the free world's premier fighter builder,'' he said - a reference to the company's F.A-18 Hornet for the Navy and Marines, as well as international customers.
Northrop is a subcontractor on the F.A-18 as well; the program is expected to continue well past the turn of the century.
McDonnell Douglas also is producing 302 T-45 jet trainers for the Navy and Marines. And there's potential for foreign sales of the F-15 Eagle, the fighter the ATF is designed to replace.
McDonnell Douglas also has another huge military aircraft contract, to produce 120 C-17 cargo planes. They are built, though, at its troubled Douglas Aircraft division in Long Beach, Calif., where cost overruns have plagued both it and the company's passenger jet operations.
Capellupo, the McDonnell Aircraft president, also cited the proposed A-X fighter, a possible replacement for the A-12 attack fighter, which the Pentagon canceled in January because of cost overruns and delays. Capellupo wouldn't speculate if the A-12 failure contributed to the latest setback. McDonnell and General Dynamics had been the lead contractors on the A-12.
Engine-builder General Electric Co., headquartered in Fairfield, Conn., builds engines at a plant near Cincinnati, and in Lynn, Mass. The Ohio facility employs 18,000; the Lynn plant has about 7,000 workers.
Roughly 1,000 designers and engineers at GE worked on the ATF engine, said GE spokesman Robert Risch in Lynn. He said the loss of the contract would have an impact on GE but not a crippling one.
''Not to say it's not important - this is a huge program,'' Risch said. ''There's no question that those who lose will be in much tougher shape and will have to regroup and go from there.''
As Northrop began its own regrouping, officials wouldn't speculate on what gave Lockheed the edge.
''We don't know. It's just too soon,'' said spokesman Jim Hart. ''We did our best. We really think we did a good job.''