Lockheed Awards Major Military Job to S. Korean Firm

In one of the first major contracts to send military airframe work overseas, Lockheed Corp. on Monday selected Daewoo Heavy Industries of South Korea to assemble the outer wing sections of the Navy’s P-7A anti-submarine patrol aircraft.

The pact, potentially worth $108 million, stunned union officials at Lockheed’s Southern California plants, which have experienced major layoffs in recent years and are in fierce competition for dwindling defense work.

“It is a bold step, though it is certainly unfortunate from the standpoint of the U.S. industrial base,” said Stuart Platt, a retired rear admiral. “It is something that the military will have to watch cautiously.”

It was Platt who formulated the Navy’s policy of demanding more competition among U.S. aircraft producers during the mid-1980s, but the consequence of driving U.S. weapons production overseas was not one of the stated intents of that policy.

Bryan Carver, president of the union representing Lockheed workers in Burbank and Palmdale, said he was “upset” by the contract and vowed to contact members of Congress, who also have expressed concern about the loss of American jobs overseas.

“The military aircraft industry hasn’t needed to go overseas, but now it has come to this,” said Carver, president of the International Assn. of Machinists and Aerospace Workers District 727.

The Navy plans to spend between $4 billion and $5 billion to buy 125 of the P-7A aircraft, which will replace the Navy’s current anti-submarine aircraft, the Lockheed P-3C Orion.

A Lockheed spokesman said Daewoo’s offer was selected over bids by Avco Aerostructures, an American unit of Textron, and Canadair, a Canadian aerospace company. The spokesman said Daewoo provided a superior “price and schedule” package to Lockheed.

Final Assembly Here

Defending the contract, the spokesman noted that 52% of the aircraft’s structural work will be performed in Marietta, Ga. The aircraft will be assembled in Palmdale.

The spokesman also noted that the Daewoo contract is not the first foreign award on the P-7A. Dowty, a Canadian firm, was selected to produce the aircraft’s landing gear at a potential cost of $200 million.

Lockheed said Daewoo Heavy Industries will assemble the outer wing sections in Changwon, South Korea, and ship them to Lockheed’s Palmdale plant, where final assembly of the P-7A will be done.

Only last year, Lockheed closed a small plant in the Watts-Willowbrook area of Los Angeles that the firm had built in the 1960s to help provide employment to the riot-torn neighborhood. At the time of the closing, Lockheed said it did not have enough work to keep the plant open.

Indeed, the U.S. military aircraft industry is suffering from significant excess capacity and a dearth of new work as U.S. defense budgets shrink. Experts say more than one of the seven major military aircraft producers will leave the industry in the 1990s because of a lack of work.

Much of aircraft production is labor intensive, and industrial workers in the United States are among the highest paid in the world. By shifting work to low-wage places such as South Korea, Lockheed could be creating a powerful competitive advantage, Platt noted.

“What they are looking for here is to bring down the U.S. (manual) labor in this program,” he said. “What they are working on here is that the differential in labor rates has to exceed the cost and time to ship it back and forth.”