Aspin Fires AF General, Citing Troubled C-17

Defense Secretary Les Aspin fired one Air Force general Friday and said he has lost “confidence” in two others who allegedly arranged a secret bailout for the McDonnell Douglas C-17 cargo jet program in 1990.

All three generals, cited in a blistering memo by Aspin as exercising a “lack of judgment,” are expected to resign shortly from active duty.

In taking tough action, Aspin expressed intolerance for military leaders who protect weapons programs by suppressing damaging information. More broadly, it clearly asserts his control over a bureaucracy that has been warily taking measure of him since he arrived.

The $37-billion C-17 program, however, remains teetering on a political ledge, amid demands for cancellation by congressional critics angry over mismanagement by McDonnell and pleas by military leaders that they need a new transport aircraft for crises, such as in Bosnia. Top Pentagon officials are now considering the fate of the C-17, which is being produced in Long Beach.

While the action against the generals clears a longstanding cloud over the C-17 and should help focus debate on the technical and financial merits of the aircraft, it also amounts to another black mark on a long troubled program, experts said.

The C-17 project is about $1.2 billion over budget and more than a year behind schedule. McDonnell Douglas, the nation’s largest defense contractor, employs 9,700 workers in Southern California and 3,900 others around the nation on the program. It supports another 20,000 jobs at subcontractors.

If Aspin ultimately cancels the C-17, it would deliver a severe blow to the St. Louis-based aerospace firm, taking out one of two major defense programs intended to carry it through the 1990s. It would vanquish the last major military aircraft program from Los Angeles County.

Aspin’s action was triggered by a series of investigative reports by acting Pentagon Inspector General Derek Vander Schaaf, who found that five Air Force leaders had secretly funneled about $500 million to McDonnell in 1990 to stave off a cash crisis.

McDonnell Chairman John McDonnell told Congress last week that his firm was not paid “one penny” more than it deserved. The company declined to comment on the disciplinary action.

Aspin ordered that Maj. Gen. Michael Butchko, formerly the C-17 program manager, be relieved of duty at his current job as commander of the Air Force Development Test Center in Florida.

“Gen. Butchko was the person in charge as program director and bears the chief responsibility,” Aspin said. Butchko told reporters in Florida that he plans to retire June 1, rather than next year, but he defended his actions and insisted he had not been forced out.

“There is no reason for my shoulders to be bowed. I’m proud of my 31 years in the Air Force,” he said.

The dramatic dismissal of a senior officer has been a key political rite of passage for virtually all defense secretaries. Former Defense Secretary Dick Cheney dismissed several senior naval officers for mismanagement of the Navy’s A-12 program.

In addition, Lt. Gen. Edward P. Barry, formerly C-17 program executive officer, and Brig. Gen. John M. Nauseef, comptroller of the Air Force Materiel Command, can no longer work in the Pentagon procurement system. A. Allen Hixenbaugh, formerly C-17 deputy director for contracting, was also ordered removed from the acquisition system.

Aspin said he lacks “confidence that these individuals will perform” to the highest standards--a rebuke that makes all the generals’ retirement from military service “fully predictable,” a senior Air Force official said. Hixenbaugh, a civil servant, will be transferred.

“When the secretary of defense loses confidence in a general, he is done,” the Air Force official said.

Barry is commander of the Air Force Space and Missile Systems Center in Los Angeles, the highest ranking officer in the area. He declined comment Friday.

A fifth person faulted by the inspector general, Deputy Assistant Air Force Secretary Darleen Druyun, was exonerated by an order signed Friday by acting Air Force Secretary Michael B. Donely.

In a separate report, Air Force general counsel Myron Nordquist also faulted the actions of the generals, but he took strong exception to the inspector general’s finding that a bailout occurred and asserted that the inspector general’s report was legally flawed.

Nordquist’s report was also released Friday, asserting that the inspector general made more than 200 unsubstantiated statements of fact. Nordquist disputed the inspector general’s portrayal that senior Defense Department officials were kept in the dark about the C-17 cost overruns.

“When John McDonnell comes in and puts a hit on the secretary of defense (for money), why does that result in a two-star general being canned,” one Air Force official said. “Secretary Aspin has sent the message to send up the bad news. But is there the ability to deal with the bad news at the top?”

The bailout issue was first raised by the staff of Rep. John Conyers Jr. (D-Mich.), who said Friday the C-17 issues “graphically demonstrate the need to reform the whole Pentagon procurement system.”

In his statement, Aspin said it appeared that no criminal conduct was involved. But he disagreed with Nordquist’s position that the individuals’ actions were within the “range of normal management discretion.” Aspin made no statement about whether he agreed that a bailout occurred.

Clearly, Wall Street investors knew in 1990 that McDonnell Douglas was in serious trouble, because the firm’s stock took a nose dive, notwithstanding the firm’s assertions that everything was fine. In addition, the news media reported actively in 1990 about problems with the program.

The C-17 has had many technical setbacks. It currently does not meet the requirements for range and payload.

The first airplanes experienced serious fuel leaks. Last year, the wings on a C-17 broke in a ground test intended to demonstrate the plane’s structural integrity. And recently the flaps on a test aircraft have shown a tendency to crack. Earlier this month, a C-17 nearly crashed when it entered an aerodynamic stall, but the incident was blamed on pilot error.

Defense industry analysts did not agree on how Aspin’s action would affect the program.

Wolfgang Demisch, aerospace analyst at UBS Securities, said it is a positive development for McDonnell because the merits of the aircraft were being “poisoned” by the bailout allegations.

Although he gives the program an “even chance” of survival, Demisch said that Wall Street has bid down McDonnell stock by $15 to $20 out of fear that the C-17 will be canceled. The shares closed Friday at $60.25, up 37.5 cents.

Aspin appears to be signaling that he still wants the C-17 and that the firing of the general was the strongest symbolic step he could take short of attacking the program itself, said Lawrence Korb of the Brookings Institution.

But Loren Thompson, director of the Gogal Security Project at Georgetown University and the author of a recent report on the C-17, said a restructuring of the program is a certainty. He said he expects far fewer than the planned 130 aircraft will be acquired and that the contracts will be rewritten to reduce McDonnell’s loss, currently estimated at $1.3 billion.