Hughes Starts Shipping Its Missiles Again

Hughes Aircraft Co. said Tuesday that it delivered three missiles to the Air Force in late December, the first such deliveries in five months since the military services found “serious weaknesses” in the firm’s quality control.

The El Segundo-based firm said that it sent out one Maverick missile on Dec. 21 and two additional missiles the following week, when it scheduled special factory work shifts on its final assembly line during the holidays “to get those missiles out,” a company official said.

“This delivery is certainly the most positive news that has come out in a long time,” another Hughes official said. “It is really a plus.”

Implicit in the delivery of the missiles last month is that the Air Force formally accepted the quality of the missiles, a major milestone for Hughes. The firm produces missiles for the Air Force, Army and Navy at a complex in Tucson, which employs 6,500.

Hughes has restarted final assembly operations on all of the missile systems that fell into disfavor with the Pentagon last year and hopes to resume deliveries of the Navy Phoenix missiles and the Army TOW missiles by next month.

An Air Force spokesman confirmed that the service had taken delivery of three Maverick “training” missiles, which do not include warheads or rocket motors. The government installs its own warheads and rocket motors on virtually all ordnance.

The delivery of three missiles is only a first step toward a full recovery of operations, and Hughes still faces the enormous task of making up for lost production. It shut down manufacturing last August amid growing Pentagon concern that Hughes’ methods were sloppy.

The Pentagon had invoked a “suspension” on deliveries of Hughes missiles and eventually cut off progress payments to the company while the firm came up with a plan to correct the problems.

The dispute between the Pentagon and Hughes is among the most protracted and significant in defense contracting history. The Pentagon withheld $125 million in payments to Hughes in the dispute.

Despite the resumption of deliveries, the Air Force and Army are still withholding 50% of payments to Hughes until they are satisfied that the company has fully resolved its problems. The Navy restored full progress payments last November.

Meanwhile, Hughes is moving ahead with plans to meet its large volume of contract backlogs. The firm plans to hire 500 additional assembly workers and electronic technicians.

The Pentagon “would like us to get into a substantially increased rate of production as soon as possible,” a Hughes official said. “We have to demonstrate our production capability, and I think we are going to do that fairly soon.” All three armed services are major Hughes customers. The Maverick is primarily an air-to-ground anti-tank missile. The Phoenix is a long-range air-to-air anti-aircraft missile. The TOW is primarily a helicopter-launched anti-tank missile.