Pentagon Cancels Northrop Stealth Missile Program : Defense: The cut will eliminate 1,700 jobs. Behind schedule, the contractor has lost $622 million on the project.
The Pentagon cinched its belt another notch tighter Friday, canceling Northrop Grumman’s $13.3-billion program to build an advanced stealth missile. The program employs 1,700 workers in Hawthorne.
Northrop officials said the Pentagon had not yet disclosed the specific terms of the cancellation Friday, leaving the firm unable to say how quickly the 1,700 jobs might be eliminated.
The job cutbacks will be in addition to 8,650 Northrop jobs previously slated to be cut in 1995, a cutback forced by the winding down of the massive B-2 bomber program in Palmdale.
Cancellation of the new missile program is an especially tough blow to Southern California’s aerospace industry, which is losing plenty of older, spent programs like the B-2 and must retain the few new programs like the Northrop missile that have staying power.
Northrop was behind schedule in the missile program and has lost $622 million on its fixed-price contract to develop the weapon, formally known as the tri-service standoff attack missile.
As its problems deepened, the estimated cost of the program rose and led the Pentagon to cut back its planned purchases--actions which drove the cost of each missile higher and higher. The projected cost for each missile has increased many times over, Deputy Defense Secretary John Deutch said.
The weapon was intended to be a “silver bullet” carried by the firm’s B-2 stealth bomber, but Deutch said the missile had become “too expensive a silver bullet.”
Air Force officials said they were caught unaware of the cancellation, which was made by Defense Secretary William Perry. Securities analysts said they believed the cancellation would be made under terms favorable to Northrop, though an Air Force spokeswoman said punitive terms were a possibility.
Northrop spokesman Tony Cantafio said the missile “was technically a very demanding program but we made significant progress. There were no technical show stoppers we know of.”
Cantafio added, “We are disappointed with this announcement and the impact it will have on the 1,700 Northrop Grumman employees working on the program.”
Byron Callan, Merrill Lynch aerospace analyst, called the termination a “mixed blessing” for Northrop shareholders, since it will end short-term losses that the company has been posting. Callan said he had discounted any long-term earnings benefit from the program.
The cancellation is just the latest program that has slipped through Northrop’s fingers following earlier losses of the Tacit Rainbow missile, the Air Force’s new stealth jet fighter and a Navy attack jet.
At one time, the firm had four major stealth weapons programs, but now has only the B-2 bomber that is in its declining phase. And the loss of the tri-service missile guts Northrop missile business, which began in the 1950s with development of the nation’s first cruise missile.
Meanwhile, the Pentagon, in disclosing the results of a six-month review of major programs Friday, spared every other big ticket weapon. A number of programs were dealt relatively minor cuts, however.
Lockheed’s F-22 jet fighter program in Georgia took a $200-million funding cut, the Bell Helicopters/Boeing V-22 a $100-million cut and the Litton Industries destroyer program a $1.5-billion cut. * RELATED STORY: A35
