Navy Awards Hughes Key Missile Contract : Defense: Job cuts help the company outbid McDonnell Douglas for the Tomahawk, but the win will add few jobs.
Hughes Aircraft Co., besting McDonnell Douglas Corp. in one of the most closely watched Pentagon contests of the year, was picked Friday to be the sole builder of Tomahawk missiles in a contract valued at nearly $1 billion.
The Navy award calls for Los Angeles-based Hughes to build about 1,000 missiles over the next five years, assuming all the options on the contract are exercised.
Both Hughes and McDonnell have been making the cruise missile, which is launched from ships and submarines to strike sea and land targets, since the early 1980s. Hughes obtained the Tomahawk business when it bought General Dynamics’ missile line in 1992.
Although the victory provides on obvious financial boost for Hughes, a unit of General Motors Corp., it won’t have an impact on Hughes’ Southern California work force. Hughes builds the Tomahawk and several other types of missiles at its 7,000-employee plant in Tucson.
Ironically, Hughes job cuts in Southern California during the past two years contributed to its victory on the contract.
After Hughes bought General Dynamics’ missile line, it consolidated its missile operations in Tucson and vacated plants in Canoga Park, San Diego and other places, eliminating about 5,000 jobs. The money saved by the move helped Hughes’ Tomahawk bid by limiting the price it proposed charging the Navy.
The award is “proof that our effort to become more competitive by consolidating . . . is working,” Chairman C. Michael Armstrong said in a statement.
The contract probably won’t require a large increase in jobs in Tucson because the workers there should be able to absorb the extra work, according to Hughes spokesman Glenn Hillin.
With the Navy’s missile needs declining in the post-Cold War era, the Pentagon decided a year ago to have both companies vie for a “winner-take-all” contract to make the Tomahawk during the rest of the decade.
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The Navy estimates the change will save it $50 million a year in fixed costs.
“This is a very large victory for Hughes,” said C. Donald Scales, head of the defense practice for EDS Management Consulting Services in Los Angeles. “It obviously positions them well going into the next century.”
Hughes’ proposal was chosen because of its price, technical expertise and the Hughes’ management experience, among other factors, said Navy spokesman Lt. Conrad Chun. He declined to elaborate.
For McDonnell Douglas, the decision it likely to have dire consequences for its work force in Titusville, Fla., where the company builds its Tomahawks.
The St. Louis-based defense giant had said that if it lost the contest, it would probably close the 1,200-employee Titusville site after completing its existing Tomahawk backlog in mid-1995. McDonnell has only one other major missile program, the Navy’s Harpoon missile for destroying enemy ships.
“We have been studying a number of plans” to shutter the Florida plant, and “now we’ll do that in earnest,” McDonnell spokesman Tom Williams said.
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“We’re surprised and disappointed” by the Navy’s decision, Williams said. “We believed we had submitted a very cost-effective proposal that included realistic pricing and provided high value.”
The Tomahawk, a 3,000-pound missile with a range of more than 700 miles, led the U.S. attack on Iraqi forces in the early days of the Persian Gulf War in 1991.
Hughes also builds the Advanced Medium Range Air-to-Air (AMRAAM), Standard, Maverick, Sparrow and TOW missiles for the Pentagon.
