McDonnell to Reduce MD-11 Delivery Plan : Aviation: The company will produce 36 instead of 40 this year. It sets a goal of 62 for 1995.

McDonnell Douglas said Friday that it will reduce its planned deliveries of MD-11 jetliners in the next two years and increase them in later years, reflecting current weakness in the airline market and difficulties in increasing production of the new aircraft.

Production rates on the commercial MD-11 program have been considered the most critical issue in McDonnell Douglas’ future profitability and its ability to generate cash to cover its heavy debt burden. Analysts have questioned McDonnell’s ability to meet the tougher production goals it is setting for itself in the mid-1990s.

Separately, the Air Force on Friday awarded the firm $329.7 million under a preliminary agreement to produce four additional Air Force C-17 cargo jets. A final contract worth a total of about $1 billion is expected to be issued within 60 days.

The revised MD-11 production plan will cut deliveries from 40 aircraft this year to 36, representing a reduction of roughly $400 million in sales and $280 million in cash flow in 1991, analysts said. Douglas would reach 50 aircraft per year in 1993, 61 in 1994 and 62 in 1995.

Douglas had originally planned to reach a production rate of one MD-11 jetliner per week by late this year and produce about 50 of the $100-million aircraft next year. Under the revised plan, Douglas will reach the one-per-week rate in late 1992 and then increase to 1.25 per week in 1994.

Douglas Vice President Joe Pirkle said in a statement that the slower buildup in future production will benefit the company by allowing it to focus attention on quality and to produce a total of 10 extra aircraft by 1995.

Aerospace analyst Lawrence Harris said investors have been very concerned about Douglas’ ability to meet its production targets on the MD-11, but he said the reduction in deliveries this year should not affect the ultimate profitability of the program.

Of greater concern, Harris said, is whether Douglas can later step up production to a rate of 1.25 per week or 65 per year. “I don’t think they can get above 50 per year,” he said.

Douglas spokesman Don Hanson said that historically the firm produced more than 50 DC-10s in one year and that it has also improved the efficiency of its operation in Long Beach.

Hanson said the reduction in deliveries over the next two years will actually reduce the firm’s inventory costs. Such a reduction could also help the financially strapped firm, whose credit rating has been downgraded four times.

The C-17 award made Friday is subject to final negotiation, a company spokesman said. The firm is producing three test aircraft and six production aircraft under existing contracts but has fallen significantly behind schedule.

The C-17 has long been scheduled to fly this June, but sources close to the program said they expect the first flight to occur during the summer or even later.