Pentagon Tells of McDonnell Plea for Funds

McDonnell Douglas Corp., the nation’s biggest defense contractor, faced such a severe cash squeeze early this year that it sought a $1-billion advance from the Pentagon on contract work, senior defense officials said Wednesday.

But the officials, who faced intense questioning by members of the House Government Operations Committee, said they denied the request and provided no special consideration for the defense giant.

The contractor requested the advance shortly after Defense Secretary Dick Cheney canceled the Navy’s A-12 Stealth fighter program Jan. 7.

In a letter written at the height of the Gulf War, McDonnell Chairman John McDonnell requested $1 billion in advance payments for the company’s C-17 cargo planes, F-15 and F/A-18 warplanes, Apache helicopters, Tomahawk and Harpoon missiles and other weapons.

The Jan. 24 letter said the advance might be the only way for the contractor to meet its requirements because of its “current financial position . . . coupled with the extremely tight world financial markets.”

Undersecretary of Defense Donald Yockey said he rejected the request and instead recommended cost-saving steps for the contractor to take.

Several committee members challenged that version of events and said a letter a week later from Eleanor Spector, the Defense Department’s director of defense procurement, appeared to offer $770 million in advances on the contractor’s C-17 work.

Spector denied it.

“It did not provide them a penny; zero,” she testified. “There is a gross misunderstanding of what this (memo) is.”

She said the memo, which listed $770 million in various payments, “was a negative to the company, not a positive” because she was telling McDonnell Douglas it would not get those payments as early as it had expected.