Lockheed Gets $5-Billion Navy Plane Contract

Lockheed has won a competition to design and build 125 new naval patrol aircraft, potentially a $5-billion program that could keep the firm’s Burbank and Palmdale facilities busy through the next decade, industry officials said Thursday.

The Navy selected the Lockheed airplane, intended to detect and destroy enemy submarines across vast areas of ocean, over competing designs by McDonnell Douglas and Boeing. The Navy did not officially announce the decision, but naval officials privately have notified the companies this week.

Lockheed has been building the existing Navy patrol plane, the P-3 Orion, for more than two decades and it expects that current Navy and foreign government orders will keep it in production until at least 1991.

Until then, Lockheed will develop the new patrol aircraft, which will be a derivative of the old P-3--most notable for its boxy airframe and four turbine-powered propellers. It is derived from the Electra passenger aircraft of the 1950s.

The P-3 program has supported about 3,000 jobs at the firm’s manufacturing facilities in Burbank and its final assembly hangar in Palmdale. Had Lockheed lost the competition, those jobs would have been eliminated.

It is unknown how many jobs the new patrol aircraft program will support, because the production rate of the 125 new aircraft is uncertain. Lockheed now builds six P-3 aircraft per year and it is likely that the new aircraft will be built at a faster rate, which may require more workers.

The new derivative--known as the Long Range Air Anti-Submarine Warfare Capable Aircraft, or LRAACA--will feature a longer fuselage and new General Electric engines that are more powerful and use less fuel.

In addition, Lockheed expects to trim the weight of the aircraft through the use of composite materials. With new automation features in the cockpit, the aircraft will carry a crew of nine, versus 12 for the older aircraft.

Despite the competition and the selection of Lockheed, the future of the new patrol aircraft is anything but certain. With the prospect of tighter future defense budgets, the Congress may eventually not appropriate the funds to build the new airplane or the Navy may decide to put its money elsewhere.

If the program goes into production, however, Lockheed stands to win substantial foreign business. West Germany, South Korea, Pakistan and the Persian Gulf Cooperation Council have indicated an interest in buying either P-3s or LRAACAs.

The LRAACA program has become immersed in political controversy over the last year, involving sometimes competing interests of the Navy, the Naval Reserve, various Defense Department factions and Lockheed.

Only last year, Deputy Defense Secretary William H. Taft IV overruled Navy officials and requested funding from Congress for six additional P-3 aircraft to keep the production line running for one more year.

Navy officials have sought to end the P-3 program, which is viewed in some quarters as an obsolete weapons system perpetuated by political lobbying by Lockheed. Adm. Stuart Platt, former competition advocate, was an ardent opponent of the Lockheed monopoly.

Meanwhile, the powerful Naval Reserve, which operates 35% of the Navy’s P-3 patrols, has strongly supported more P-3 production and has considered the new LRAACA a risky program.

“How are we going to afford the LRAACA when we can’t even afford to buy all the P-3s we need now?” one reserve officer asked last year when the LRAACA issue arose.

Early model P-3s are now so old that as many as 200 of the aircraft will have to be retired during the 1990s. Thus, the Navy is likely to experience a shortage in its future patrol capability, some experts say.

The LRAACA would detect submarines through a variety of electronic sensors it carries, including sonar buoys that it drops into the ocean and magnetic detectors that sense the steel hulls of submarines under water. Lockheed said the value of the program is $4 billion to $5 billion.

The aircraft can attack both submarines and surface ships with torpedoes, mines, bombs and missiles that it carries in a bomb bay and under its wings.

Navy officials declined to comment on why they did not make an expected announcement Thursday of Lockheed’s selection.

But officials at both Boeing and Douglas Aircraft in Long Beach said they were notified by the Navy that their proposals were “outside of the competitive range.”

A Boeing spokesman said it received a letter from the Navy saying its proposal was priced too high. Lockheed officials said they were still waiting for a formal announcement from the Navy and could not comment officially.

A Douglas official said his company received a similar letter. “We would be disappointed if Lockheed was selected because we feel we have the better airplane,” Thomas M. Ryan, senior vice president for government products at Douglas, said in a telephone interview Thursday. “We would regret that.”

Douglas had proposed modifying its new MD-90/91 jetliner for the LRAACA, but that the development of that commercial aircraft has been delayed by as much as a year. As a result, Douglas officials told the Navy that the firm would not be able to launch the program until next summer at the earliest, Ryan said.

Separately, Lockheed reported Thursday that it earned $300 million on sales of $2.4 billion in the third quarter, up from profits of $101 million on sales of $2.7 billion the year earlier.

But much of the income was based on the gains from the sale of its Dialog Information Services unit and sharply lower federal income taxes. The company also reported “other income” of $23.7 million, principally from the sale of land at its Burbank manufacturing complex.

Profits from its ongoing programs were $160 million in the quarter, down from $200 million in 1987, reflecting the winding down of the C-5b aircraft program and increased investments in the advanced technology fighter program.

The company also took a write-off on its failing shipbuilding business. It disclosed that it auctioned off equipment at its Seattle shipyard and will sell the property after failing to find a buyer for the business as a going concern.

Lockheed said employment at the end of the third quarter was 88,211, down 11,052 from the start of the year owing to the C-5b program. The decline includes the loss of 1,500 jobs at the Burbank and Palmdale facilities, a spokesman said.