Air Force Lifts Suspension of Northrop Unit

The Air Force said it has lifted its suspension of a Northrop division that was charged two years ago with falsifying tests on components for the service’s air-launched cruise missiles and the Marine Corps’ AV-8B Harrier jets.

Northrop made its peace with the Air Force by agreeing to fix faulty parts in the cruise missiles, beefing up its corporate ethics program, reimbursing the government for the cost of its investigation and tentatively settling two related civil suits.

The costs to Northrop total $21.8 million, a sum that it had already set aside and charged against earnings for the quarter ended June 30 in anticipation of the settlement.

The Air Force suspended the Norwood, Mass.-based precision products division on July 10, 1989, after Northrop had been indicted for false testing and conspiracy to defraud. Northrop settled the criminal charges in February, 1990, by pleading guilty to 34 counts of making false statements and paying a $17-million fine.

In a letter to shareholders Monday, Northrop Chairman Kent Kresa said that since the suspension, the company “has undertaken an intensive program of education and training in business conduct, ethics and compliance with government regulations for every employee at the Norwood site.”

Northrop promised to supplement the program with periodic refresher courses and to extend similar ethics training to its entire work force of 36,000.

The Air Force said Northrop will also:

* Replace the fluid in all gyroscopes in the cruise missiles’ flight data transmitters and make other repairs to ensure that they meet Air Force specifications.

* Provide new gyroscopes for radars in F-15 fighters.

* Pay the Justice Department $8 million to resolve a civil suit related to the cruise missiles and pay the Air Force $500,000 for its costs. (Both amounts were included in the charge against second-quarter earnings).

* Settle another suit arising from its failure to properly test rate-sensor assemblies on Harrier jets.