Lockheed Bailout: It’s Uncle Sam’s Way
The real problem with Lockheed Corp.’s plan to pay a reported $33-million settlement of toxic exposure claims by workers is not that the company expects to recover most of that expense from the taxpayers. The real problem is that Lockheed is only doing what other federal contractors have long done, not just to cover injury claims but costs of environmental cleanup as well. Worse still, the Pentagon has been reluctant to change the rules.
The settlement resulted from a long-running lawsuit by 624 Lockheed workers who claimed that they suffered a variety of injuries from exposure to toxic chemicals during the production of Stealth fighters and other military aircraft in the 1970s and ‘80s.
Lockheed admitted no liability but settled the case last summer for a sum said to be $33 million.
Last week, Lockheed announced it will apportion the cost of the settlement among its customers. A company spokesman called the settlement “a legitimate cost of doing business,” adding that “such costs are allocated to all of our customers--not just the government.” Trouble is, Lockheed is not unlike other federal contractors in that the Department of Defense and other federal agencies account for 80% of its sales--meaning that the American taxpayer ends up taking the biggest hit.
Lockheed is hardly on the ropes financially. The company’s 1992 stockholders report says corporate earnings rose 16% over the previous year, dividends 6% and the stock price nearly 30%.
The rationale for federal regulations that permit taxpayers to foot the bill is that defense contractors face enormous potential liabilities in manufacturing their products to federal specifications and they should not have to incur unforeseen liabilities as a result. That rationale has apparently also permitted defense contractors to obtain Defense Department reimbursement for millions of dollars in environmental cleanup costs without congressional scrutiny or public debate. Lockheed is expected to spend at least $263 million to clean up contaminated soil and ground water just at its Burbank site--and then pass on most of that expense to the government.
At a congressional hearing last week, General Accounting Office officials reported that the Pentagon will reimburse the 15 largest defense contractors for a substantial part of the $3.1 billion they expect to pay for environmental cleanup. Rep. John Conyers Jr. (D-Mich.) has called the practice “secret bailouts” that show “no one (at the Pentagon) is really minding the store.”
Maybe. At the very least, these massive reimbursements can send the wrong message to contractors about the need to maintain high standards of workplace safety and sound environmental practices. The Pentagon needs to take a good, hard look at its reimbursement policies and then, most likely, raise its standards accordingly.
