McDonnell Douglas Late in Paying Some Suppliers


McDonnell Douglas has fallen behind schedule in paying some subcontractors, owing to a reorganization of its purchasing system at the Douglas Aircraft unit in Long Beach, company officials said.

The payment snafu has resulted from a change in the delivery schedules Douglas sets for suppliers--part of an effort to reduce the time it takes to build an aircraft, said company spokesman Don Hanson.

“We are no more than a few days behind schedule on any of them,” he said. Hanson said the payment delays affect only a small number of firms and are not caused by a shortage of cash. “There have been no directions from above (St. Louis headquarters) to stop paying people,” he said.

McDonnell, however, is facing a financial squeeze that has sharply increased the company’s debt in recent years--the result of losses on military programs and heavy investments in commercial aircraft developments.


The firm has delayed issuing its fourth quarter earnings statement, following the cancellation earlier this month of the A-12 attack jet by Defense Secretary Dick Cheney. The Pentagon has said it will seek to recover $1.9 billion in payments it has made to McDonnell and its partner, General Dynamics, for work on the A-12.

Several small Douglas subcontractors contacted by The Times said they have not had any problems collecting payments from Douglas.

But one small machine shop said it has been unable to collect for several weeks. The manager of the shop, who asked not to be identified, said he was facing insolvency and would not be able to meet his payroll tomorrow.

“A lot of people in this industry run close to the bone,” he said.


McDonnell had counted on some cash-flow relief once deliveries of MD-11 jetliners began, but the firm has delivered just four MD-11s since it obtained government certification of the aircraft in early November.

McDonnell had intended to deliver five of the $100-million jets before Dec. 31, but delivered only three. With just one more delivery during January, it has not yet caught up with even its 1990 delivery schedule. The company hopes to deliver another 39 aircraft by the end of 1991, Hanson said.

At Douglas Aircraft’s flight ramp in Long Beach, there are a relative handful of MD-11s being prepared for delivery, and no surge is imminent, knowledgeable sources said.

Hanson said the firm has a corporate ombudsman, William Brinks, who can assist suppliers who are having severe problems with payments. “We have people who can step in and say, ‘Write this guy a check right now,’ ” Hanson said.


But small suppliers are reluctant to complain to corporate executives, fearing they will lose future contracts, according to the manager who is facing a payment problem.