Lockheed Opposes Navy Missile ‘Contest’ : Proposal on Trident II Makes No Sense, Kitchen Tells Stockholders

Lockheed Chairman Lawrence O. Kitchen said Tuesday that holding a competition to determine which company will produce the Trident II nuclear missile, a possibility under examination by the Navy, would make “absolutely no sense at all.”

Lockheed has been prime contractor for developing and producing the so-called fleet ballistic missiles for the Navy’s submarines for several decades, but outgoing Navy Secretary John F. Lehman Jr. recently called for a competition that would threaten Lockheed’s sole-source position in the program.

Kitchen termed Lehman’s initiative a “parting shot,” the motivation or rationale for which Lockheed does not understand. The company plans to firmly oppose any competition, he said.

Kitchen’s remarks came after the company’s annual shareholders meeting in Woodland Hills, which was concluded in only 45 minutes, near-record time for the often-rancorous annual meetings of defense contractors.

If Lockheed were to lose the Trident missile program, it would represent a sharp blow. Unless the Navy pursues the competition proposal, Lockheed later this year will begin the production of 82 Trident II missiles under a $5.7-billion production and development contract. In the current federal fiscal year, the company will book revenue of $1.46 billion on the Trident II missile program, representing about 14% of its calendar 1986 corporate sales.

Kitchen said Lockheed produces only 20% of the Trident hardware and buys 80% of Trident components from subcontractors. The large content of subcontracted parts sharply limits how much a competition between prime contractors could lower production costs, he said.

“It would cost hundreds of millions of dollars to bring on a second source,” he added. “You would have to duplicate the tooling.”

In other matters, Kitchen said Lockheed is examining how it might consolidate its aircraft manufacturing operations, which are divided among three units: Lockheed California, Lockheed Georgia and Lockheed Advanced Development Projects.

Kitchen also criticized as “atrocious” a government audit last year that alleged that the firm had overcharged the government $489 million for the C-5B cargo jet.

The Defense Contract Audit Agency claimed that the firm failed to disclose to the Air Force that it planned to seek labor wage concessions, which eventually reduced its costs on its fixed-price contract to produce the C-5B. Lockheed said it could not have predicted the outcome of future contract negotiations.

Kitchen said the firm is prepared to fight the allegation in court but added that the Air Force has already rolled back its estimate of the overcharging to $100 million. Lockheed believes that any labor overcharging, if it actually occurred, was in the range of $1 million to $15 million.

Meanwhile, the firm’s highly publicized fight to get congressional funding for continued production of P-3 Orion aircraft for fiscal 1988 has apparently failed in the House and Senate Armed Services committees, Kitchen acknowledged. Under current conditions, long-running production of the anti-submarine patrol aircraft would end later this year.