Skunk Works May Keep Exuding Smell of Success : Aerospace: Although the Cold War is over, experts are betting on the future of the top-secret Lockheed unit.

Lockheed’s iconoclastic Skunk Works has routinely churned out the world’s most exotic and innovative aircraft during the last four decades, defying the conventions of the Pentagon bureaucracy along the way.

The credo of the Burbank operation has been to work quickly, quietly and with the most advanced technology in aerospace--yielding such breakthroughs as the F-117A stealth fighter, which had pinpoint bombing accuracy during the Persian Gulf War.

But the Skunk Works, like every military aircraft producer in the nation, is facing a fight for survival in the aftermath of the Cold War. Almost certainly, several venerated names in the industry will be relegated to the blue yonder by the close of the 1990s--their accomplishments parked in museums.

Although its survival is anything but assured--it has had some recent setbacks, for example--the Skunk Works is likely to endure the coming industry shakeout and may even prosper in an era that will play to its strengths, say industry executives, consultants and securities analysts.

The Pentagon has vowed that it will conduct fewer big-money production programs and concentrate on building prototypes of advanced-technology weapons--the Skunk Works’ forte.

“The defense budgets of this decade are fraught with great uncertainty, but I think we have some unique capabilities that will allow us to withstand the shakeout,” said Sherman Mullin, president of Lockheed Advanced Development Co., the official name of the Skunk Works.

The viability of the Skunk Works, whose name is a reference to the original foul-smelling plant Lockheed purchased for the operation, turns on a simple reality: If the facility has a major aircraft program for the 1990s, it will survive. Without a significant piece of business, its technology leadership and its tight-knit staff are likely to wither, says Robert Paulson, director of aerospace practice at the consulting firm McKinsey & Co.

Mullin will only say that the company does not presently have such a production program, though the firm had a “good solid year” in 1991. The Skunk Works does not disclose its revenue, but reliable estimates put it at $600 million to $700 million annually.

“What we are living off right now is advanced programs not yet approaching production and post-production programs,” Mullin said.

Pundits widely believe that Mullin--who operates out of a windowless office at the Burbank airport--has something big up his sleeve for the future. Certainly, he is doing something with his 5,000 employees in Burbank and Palmdale, says Prudential Securities analyst Paul Nisbet.

Sightings of an unusual new aircraft around California have been reported in the trade press the past six months. And the U.S. Geological Survey in Pasadena has detected unusual sonic booms over the Los Angeles basin on its seismic instruments, said USGS seismologist Jim Mori.

He said the instruments indicate that an aircraft smaller than a space shuttle has been traversing Southern California at a velocity three to five times the speed of sound, faster than any known aircraft.

There is no evidence that links such a hypothetical aircraft to Lockheed except that the Skunk Works has built every other such plane in history. Presumably, such an aircraft would be a successor to the SR-71 spy plane that was retired in 1990.

The SR-71, developed under Skunk Works founder Kelly Johnson, was the first jet capable of flying Mach 3--three times the speed of sound--way back in 1964. It remains the fastest aircraft in history, having set the world speed record in a flight from Los Angeles to Washington, D.C., that took 68 minutes and 17 seconds.

As its name implies, the Skunk Works has always had a healthy irreverence for the intellectually stifling ways of the defense procurement system. As a top-secret operation, it has escaped much of the scrutiny and political controversy inherent in the defense business.

When retired Skunk Works chief Ben Rich received the Howard Hughes Trophy this year, he recalled that late one night when the F-117A was being readied for a test flight, the engineers couldn’t find a special bracket. Looking around for sheet steel to make one, they spotted a metal cabinet, which was promptly cut apart. The flight went without a hitch.

“The Skunk Works has a history of success and a can-do attitude,” said Howard Rubel, an aerospace analyst at C. J. Lawrence Inc. in New York. “In tough times, customers go to suppliers with a history of success.”

Aside from “black world” or top-secret military work, the Skunk Works has a significant business modifying and updating F-117A fighters and U-2 spy planes and doing the stealth technology work on the F-22 fighter that Lockheed’s operation in Georgia is developing. At its peak, the F-22 will account for 200 jobs at the Skunk Works, Mullin said.

The Skunk Works got into a new area recently when it won a National Aeronautics and Space Administration study contract. After paying $2 billion for its last manned spacecraft, NASA wanted to know why the next one, the proposed HL-20, can’t cost a third less.

To reach that goal, NASA must drastically reduce the anticipated 11 years to build the ship, said Lockheed’s HL-20 program manager, David Urie. Quick turnarounds are what the Skunk Works does best. It accomplishes them by avoiding what Urie calls “analysis paralysis”--something ingrained into the psyche of many contractors.

“When we think we have the right answer, we commit to it and take the next step,” he said.

As bright as the future may seem, however, the signals from the Skunk Works are not all positive. Last month, Lockheed said it would not build a new $60-million headquarters facility in Palmdale. The facility, which would have meant moving out of Burbank by 1993, was publicly announced only last November.

Explaining the abrupt reversal, Mullin said, “With the uncertainties that are obvious in Washington, we would be better off taking a lower-cost plan than to construct that building. If and when the business situation warrants, then we will go forward.”

One major setback came last November when Sen. Sam Nunn (D-Ga.) failed during a crucial closed conference committee hearing to obtain a resumption of F-117A production.

While keeping the Skunk Works around would be nice, secret weapons programs will become increasingly difficult to justify in the absence of a Soviet threat, said Lawrence Skantze, a retired Air Force general.

And the Pentagon is not inclined to guarantee the Skunk Works or any other company’s survival, Defense Secretary Dick Cheney said in an interview last week.

“I am reluctant to see us operate in a way that shields those people in industry from the normal pressure of competition, because if we do that long enough, they are not going to be very good companies,” Cheney said. “If you protect them from that process, sooner or later you are going to end up with a defense industry that is not competitive, that is not state of the art and that is not producing the kind of quality product that you want.”