Northrop’s Jones to Retire : Longtime CEO’s Era Marked by Successes, Much Controversy
Thomas V. Jones, the maverick chief executive of Northrop Corp. who piloted the company’s rise to become one of the hottest defense contractors of the 1980s, announced Thursday that he would retire before year-end.
The resignation will end a 29-year reign that was marked by numerous technological successes but was also scarred by charges of bribery and fraud.
Kent Kresa, 51, Northrop’s current president and chief operating officer, will succeed Jones as chief executive. However, Jones, 68, will remain as non-employee chairman of the Los Angeles-based company.
The announcement of Jones’ resignation came as a surprise to many aerospace observers, who speculated that it may have been triggered in part by a federal investigation of Northrop’s role in alleged bribes of South Korean officials. Two company directors interviewed by The Times refused to comment on that speculation.
However, Jones denied that the bribery probe has anything to do with his stepping down, saying instead that his move is part of an orderly transition that he first set into motion in 1985.
“I will be 69 years old (this year), and I know that I didn’t want to be 70 years old and in this position,” Jones said Thursday in an interview. “I’m not tired. I feel good . . . but there are other things to do.”
Under Jones’ iron hand, the firm has grown from a small aerospace concern outside the inner circle of key defense contractors into possibly the nation’s premier military aircraft builder. The company has invested millions in research and development to push forward the frontiers of technology, but its successes have been tarnished by several major scandals in the 1970s and 1980s.
‘Farsighted Visionary’
“Thomas Jones has presided over an era of relentless growth and prosperity at Northrop,” wrote Ralph Nader and William Taylor in their 1986 book, “The Big Boys,” about powerful American business leaders. “Its track record testifies to his unrivaled mastery of the intricate and sometimes harsh forces that govern the world of military contracting.”
“For the most part, you can say Tom Jones is Northrop and has been Northrop, for better and for worse,” said Herbert Hafif, a Claremont attorney and chief legal adversary of Northrop, with several major cases pending against the company. “Some of the better accomplishments of Northrop over the years are attributable to him, such as bringing the company into the forefront of aviation, being innovative in his approach, the vision he had. But the way in which that company has been run--the arrogance, the disregard for taxpayer interests and disregard for corporate morality--is also his legacy.”
Jones, a Stanford University engineering graduate, joined Northrop in 1953 and became chief executive in 1960, making him the youngest head of a major defense firm. He quickly became known as a master salesman, guiding the firm from near-bankruptcy into a prosperous seller of the inexpensive yet dependable F-5 fighter in the 1960s.
Jones traveled the globe tirelessly, making presentations on behalf of the aircraft in the 1950s. Sales exploded in the 1960s, with orders from Iran, South Korea, Greece, Canada, Norway and other countries throughout Asia, Europe and Africa. Sales were helped by Jones’ relationships with foreign leaders, including the Shah of Iran and the Saudi royal family.
That program, however, was started without a customary Air Force contract, thus casting Jones as a maverick not beholden to Pentagon brass.
Jones furthered that reputation in the late 1970s when, also without Air Force blessing, he initiated development of the F-20 fighter, a modernized version of the F-5 that he also hoped to sell to foreign governments.
Achieved Acceptability
But in part because the Air Force would not purchase the fighter--even though it was generally deemed a technological success--foreign governments balked and the program was scrapped without a single sale. Jones calls the F-20 fiasco, which cost the firm $1.2 billion, one of his biggest disappointments.
“He’s been a super marketer, the only thing he couldn’t sell was the F-20,” said Paul H. Nisbet, aerospace analyst at Prudential-Bache Securities in New York.
But Northrop in the 1980s achieved Air Force acceptability when it won the prime contract to develop the Air Force’s B-2 stealth bomber. That surprised many observers who thought the firm lacked the experience and size to handle such a giant, $68-billion program. Jones considers the B-2 his crowning achievement, and its first test flight is scheduled for later this year.
Northrop also is lead contractor for one of two teams of aerospace companies vying for the lucrative contract to build the Advanced Tactical Fighter, the successor to the F-15 and the Air Force’s biggest new aircraft program over the next decade.
Winning that contract could mean more than $25 billion in additional business for Northrop, analyst Nisbet said, and establish it as a leading military aircraft maker well into the next century.
“He was a great entrepreneur. . . . Northrop grew tremendously in the 1980s under his leadership,” said retired Air Force Gen. Lawrence A. Skantze, who served on the committee that awarded the B-2 contract to Northrop.
However, despite these successes, Northrop and Jones have been subjects of several controversies.
The executive pleaded guilty and was fined $5,000 in 1974 for contributing to the campaign of then-President Richard M. Nixon, violating a law that prohibited such donations by government contractors. His $150,000 in illegal donations came at a time when Northrop was pushing to sell a prototype of the F-18 fighter in Europe and the United States.
Bribe Charges Resurface
Northrop and Jones also came under investigation in the mid-1970s for payoffs of foreign officials in order to spur F-5 sales. As a result, Northrop signed a consent decree in 1975 barring it from making payoffs.
In recent months, charges of bribes have resurfaced, focusing on an alleged Northrop scheme to induce South Korea to buy the now-defunct F-20. Northrop, investigators alleged, planned to win Korean good will by building a hotel-office complex in Seoul. But the project was never built and no F-20s were ever sold. A $6.25-million payment by Northrop is still unaccounted for.
Northrop officials deny any wrongdoing.
Northrop’s legal woes continue on another troubling front. Earlier this month, a federal grand jury indicted the company and five current and former employees on charges of allegedly falsifying tests on components for nuclear-armed cruise missiles and for supplying equipment that they knew failed to meet government specifications.
Northrop also has been charged by the government with fraud in two civil cases for allegedly faking missile-part tests. In addition, it is facing investigations for allegedly misusing consultants in bidding for federal contracts.
The cases so far appear to involve only lower-level employees. Nonetheless, an outsider says, Jones’ name is often associated with Northrop’s problems.
“You could paint a picture that Northrop is a major success story--or a disaster waiting to happen,” said Michael Beltramo, a management consultant in the aerospace industry. “I think it just depends on what point of view you take.”
Timing a Surprise
Some outsiders wondered Thursday whether the problems may have accelerated Jones’ decision to retire. “I can’t help but think that this is possible damage control, being that he has been associated with this South Korean charge,” one aerospace analyst said.
“I am somewhat surprised at the timing of the announcement,” said Lawrence Harris, an analyst at the Bateman Eichler, Hill Richards investment firm in Los Angeles. He noted that Northrop officials are looking forward to the debut flight of its stealth bomber within the next several months. Some outsiders have assumed that Jones would not retire until the B-2 is airborne, although that is still possible if the bomber takes flight before year-end as expected.
In Thursday’s interview, Jones denied that he is retiring because of pressures brought on by the scandals or because Northrop’s board had asked him to step down.
“Once you’re in this position (the top spot), you’re subject to all kinds of speculation,” he said. “You get too much credit when things go well and too much criticism when things are not going so well.”
Staff writer George White contributed to this story.
