B-2 Program Faces Major Budget Squeeze : Funding Cuts for Stealth Bomber Raises Layoff Concerns at Northrop

Northrop’s B-2 bomber program will be hit by enormous budget cutbacks, amounting to $855 million in fiscal 1990 and $3.2 billion the following year under a new Pentagon budget provided to Congress Tuesday by Defense Secretary Richard B. Cheney.

The cutbacks create new uncertainty about the future of the program and also point to job reductions, though it remains to be seen just how deeply Northrop and other contractors on the program will have to cut into the estimated work force of 34,000 employees working on the aircraft.

In addition, a one-year delay ordered by Cheney in the start of full-scale production of the bomber and the related budget cuts are expected to further drive up the future cost of the bombers, which at $500 million per unit is already the most expensive aircraft ever developed.

“The B-2 is an enormously complex new technology. It is an enormously expensive technology,” Cheney told the House Armed Services Committee in presenting his recommendations for cutting $10 billion from the Pentagon budget.

He told the committee that he has asked for a full-scale review of the program by the Defense Acquisition Board, a powerful Pentagon panel that reviews major weapons programs.

“I would be less than forthright with you today if I didn’t highlight for you the fact that we’ve got problems with the B-2 and a lot of work is required before we’re going to be in a position to be able to say how much it’s going to cost or when it will be available,” Cheney said.

Northrop Chairman Kent Kresa said in an interview Tuesday that the company had already anticipated some layoffs at its B-2 division in Pico Rivera and Palmdale, related to adjustments in the composition of its work force.

“We have said there will be some cuts,” Kresa said. “They will go on because of this slowdown in the pace. . . . Until we see the detail on the budget, I would rather not predict employment one way or another.”

The Los Angeles-based aerospace firm has reduced employment at its B-2 division from a peak of 14,500 in 1987 to 12,200 currently. The drop has resulted from the winding down of engineering development efforts and the lack of a rapid buildup to begin full-scale production.

Low-rate production is now going on, but the Air Force has never disclosed how many bombers are currently being built. It is widely believed that Northrop is currently building six of the Stealth bombers, so called because they are intended to elude detection by enemy radar through a number of new technologies.

Under Cheney’s new defense budget, the funding for the B-2 will be $855 million below what former President Ronald Reagan had requested last January in the fiscal year that starts October 1.

Those absolute numbers are still classified, but congressional sources said the $855-million cutback means that the B-2 program will be left with roughly the same funding as it received in the current fiscal year and a small decline in real terms after accounting for inflation. Analysts have put the 1989 Stealth funding at roughly $5 billion.

Problems Called ‘Minor’

On Sunday, Cheney disclosed that he would delay the start of full-scale production of the bomber, citing budget constraints and technical problems on the program. He appeared to go even further in the House hearing Tuesday when he declined to give any assurances on the technical capability of the aircraft.

Kresa, however, characterized the technical problems as “minor” and said he did “not know what particular things” Cheney was referring to when he cited problems on the program.

“The B-2 bomber is proceeding quite well,” Kresa said. “We are proceeding on a schedule that we had projected with the government some time ago.”

But Northrop has experienced significant delays in achieving the first flight of the bomber, which originally was scheduled to occur in late 1987. When the aircraft was officially “rolled out” in ceremonies last November, Air Force officials said it would fly in the first quarter of 1989. The flight is now expected to occur by spring or summer, the service said.

“There have been some delays in verifying the operation of the subsystems to a level of confidence that assures we will have a successful first flight,” an Air Force statement said recently.

Earlier this month, the Air Force said the technical problems include difficulties with the fuel system, flight control software and hydraulics. It also cited an incident in which a duct on the aircraft’s environment control system ruptured during a test, requiring time “just to tear down and get at the problem area.”

Kresa said the duct scattered pieces in a highly controlled area of the aircraft. “It is like breaking a cup. You have to clean up the things on the floor,” he said. That problem was solved, he added.

Even if Northrop corrects all of the technical problems, the delay in production is expected to cause potentially significant political problems. The gap provides critics of the program one more year to muster strength and will drive up the cost of the aircraft, according to Paine Webber aerospace analyst Jack Modzelewski.

“At some point, you reach a break point where no matter how good the technology is, the cost is too high,” said a key House staff member.

The already high cost of the program is compounded by uncertainty about the eventual cost, the staffer said. Indeed, the review by the Defense Acquisition Board by Cheney was motivated partly by uncertainty about the cost, in spite of numerous cost studies that have already been made by government and civilian agencies.

“The key to this is that if somebody told you today what this program is going to cost in total, I would be skeptical,” the staffer said. “The Air Force cost estimates assume they are going to receive multiyear funding, but, before we agree, some other things have to happen. A first flight would be a good start.”

RELATED STORY: Part I, Page 1