McDonnell Profits Plunge 42% in 1st Quarter

McDonnell Douglas reported Thursday that its earnings plunged 42% in the first quarter compared to a year ago, the result of government reforms that have lowered profit margins on defense programs and of production delays on jetliners at the firm’s Douglas Aircraft unit in Long Beach.

The St. Louis-based aerospace firm earned $43 million on sales of $2.988 billion in the quarter ended March 31, down from profits of $61.1 million on sales of $2.996 billion in 1986.

Earnings on transport aircraft, which are produced at Long Beach, were $9.8 million, down sharply from $47.2 million.

A work slowdown that unions at the Douglas Aircraft plant have undertaken because they are working without a contract has reduced commercial jetliner deliveries, but Douglas officials have declined to elaborate on the effect of the union action.

Representatives of Scandinavian Airlines System, one of Douglas’ oldest and most important customers, have told The Times that they will seek penalties for late deliveries of MD-80 aircraft.

The Federal Aviation Administration also told The Times that it will be looking into union allegations that Douglas recently inspected and approved a key structural aircraft part, called a keel, that was out of specification. It was discovered only when a wing would not properly attach to the keel. If true, it would represent a deficiency in the firm’s quality control, the FAA said.

Another problem facing Douglas is that SAS has delayed confirming a huge order for new MD-11 jetliners because Airbus Industrie has attempted to underbid Douglas. A Douglas spokesman said no decision by SAS is expected until June.

McDonnell Douglas reported that transport aircraft revenue was lower in the first quarter, primarily because three fewer DC-10s were delivered than a year earlier. Douglas earnings also were reduced by development costs for the MD-11, an advanced DC-10 derivative.

The company said combat aircraft earnings were lower. It cited the effects of broad Defense Department actions to reduce prices and therefore profit margins in its new procurement practices. Cost-sharing on development of Pentagon programs is expected to total $120 million for the year, it announced.