Pentagon Likely to Slow Production of Stealth Bomber

The Defense Department, in the first step of a potentially major schedule adjustment for the B-2 stealth bomber, is moving to approve a change in funding that will delay the craft’s peak years of production until the mid- and late-1990s, according to Pentagon officials.

The decision, which defense officials said is to be made by Monday, comes as the Defense Department completes an 11th-hour “scrub” of its five-year budget plan. It is expected to change the financial outlook at the Northrop Corp., the aircraft’s prime contractor, and slow the growth of employment at the firm.

It also is certain to increase the cost of the proposed $70-billion program, casting further doubt on whether Congress and a cost-conscious Bush Administration will approve the production of 132 planes, as now planned.

“It clearly will be stretched out,” a Pentagon official said, in the wake of a meeting Wednesday of the Defense Resources Board, the Pentagon’s senior decision-making body for program management.

“We’ve flattened out production to a more gradual increase than was planned,” added the official, who spoke on condition he not be identified. Deputy Defense Secretary William H. Taft IV, who chaired Wednesday’s meeting, is expected to reach a final decision on the timetable in meetings with department officials over the weekend.

The first of the bombers is to be delivered to the Air Force in 1991. Although the exact production schedule for the program is classified, the original Air Force schedule reportedly called for Northrop to begin building the planes at a pace reaching almost two a month by 1992.

Taft’s decision is expected to push that peak production period back by two to three years, at least, officials confirmed.

“That (peak) production rate is now unaffordable,” a defense official said.

A production stretchout usually results in a slower pace of industrial activity and a smaller work force. Northrop has already reduced its B-2 division work force from a peak of about 14,000 last year. The reductions occurred after the program was restructured and slowed down at the direction of Congress.

Northrop employs 1,600 workers at the Palmdale, Calif., plant, where the plane is to be assembled. By 1991, Northrop had expected employment there to rise to 2,800, according to Northrop spokesman Tony Cantafio. In total, Northrop currently has 12,600 employees in its newly created B-2 division.

Northrop and four of its major subcontractors--Boeing Corp., Hughes Radar Group, LTV Aerospace and General Electric Co.--together employ more than 34,000 workers on the program. A slower production start-up is likely to dampen plans for expansion at those and hundreds of other B-2 bomber subcontractors, including 12 in Southern California.

A stretchout of two to three years in B-2 production would have serious financial consequences for Northrop, which derives about half of its sales from the program. At $500 million per aircraft and a production rate of two per month, the company stands to realize $12 billion in B-2 sales at the program’s peak.

As the potential for a stretchout has become more widely discussed in recent days, Northrop shares traded on the New York Stock Exchange have fallen sharply. They dropped from $31.875 to $29.125 this week, a decline of 8.6%.

Seek Billions in Cuts

The Defense Department decision comes as the military services struggle to lop billions of dollars from their five-year spending plans, scaling back the projected growth of the defense budget from 5% to 2% annually between 1989 and 1993.

Advisers to President-elect George Bush have forecast even lower levels of defense spending, calling the current annual spending level of $300 billion “about right” after it has been supplemented to account for inflation.

The Air Force is backing the adjustment in the production schedule in the hope that further changes thus will be minimal, officials said. They added that the delays also would allow the service to incorporate improvements in the plane that may be suggested during its flight test schedule, which is set to begin as early as next month.

Influential lawmakers, including the chairmen of the House and Senate Armed Services committees, have acknowledged that budget cutbacks will force further delays in a program already slowed by technical difficulties.

“We probably are going to have to slow down the stealth . . . considerably,” Sen. Sam Nunn (D-Ga.), chairman of the Senate defense panel, said on CBS-TV’s “Face the Nation” Nov. 27.

But, in the end, stretching production over a longer period is almost certain to increase the overall cost of buying 132 B-2 bombers, as Northrop and its subcontractors keep facilities open longer to produce the planes. The program already has grown by as much as 18% over initial Air Force estimates. Northrop is capable of proceeding quickly to high rates of production, having already built the first production version of the intercontinental aircraft. That version was officially unveiled on Nov. 22.

A Pentagon official said that the Defense Department has not formally considered scaling back the 132-plane purchase in a search for savings. But some analysts say that may be inevitable. Further delay, one warned, could not only raise the program’s cost, but scuttle production altogether.

“The longer you push it out and stretch it, the likelihood of its ever going into production diminishes,” said David J. Smith, a Washington-based investment and banking consultant to the aerospace industry.

Staff writer John M. Broder contributed to this story.