Douglas Likely to Get Major Pentagon Order
The Pentagon appears virtually certain to order 80 additional McDonnell Douglas C-17 cargo jets, congressional sources said Monday, a decision that would provide an important underpinning for Southern California’s aircraft industry well into the 21st Century.
Senior defense officials are scheduled to begin a series of lengthy meetings today to weigh exactly how many C-17s they will buy, but the prospects for the biggest possible order have markedly improved in the last month as the aircraft has won a series of crucial endorsements.
A key member of Congress, who asked not to be identified, said senior defense officials have said in private meetings that the decision to buy the 80 aircraft is not guaranteed but appears highly probable.
With a potential value of more than $16 billion, the C-17 decision represents one of the biggest investments by the Pentagon in several years and will have an important influence on some of its biggest contractors.
The future of the C-17, along with such crucial programs as the Northrop B-2 bomber and Douglas Aircraft MD-95 jetliner, will help determine whether Los Angeles County continues to be a key aircraft production center.
Just a few years ago, many experts said the industry was dying in Southern California as B-2 production was winding down in Palmdale and Douglas’ commercial programs in Long Beach appeared to be headed for extinction. Both operations now seem to have new life.
A big C-17 order would keep McDonnell’s production line in Long Beach running until at least 2005, helping sustain a skilled labor pool and the region’s competitive strength in aircraft industry. The program employs 8,500 in Long Beach and 27,000 nationwide.
A big Pentagon order would also allow McDonnell to recover the huge losses on the program that occurred several years ago when it ran into serious technical difficulties. McDonnell is also counting on the Pentagon order to help it win overseas sales.
Undersecretary of Defense Paul Kaminski, who will make the final decision, has received unanimous recommendations by senior military officials of every service that he buy the maximum number of C-17s and forgo buying any Boeing 747 jets, which are under consideration as a less costly alternative to the McDonnell jet.
Kaminski will weigh three formal options: 80 more C-17s and no 747s; 60 more C-17s and 18 747s; or 46 C-17s and 36 747s. McDonnell officials have expressed growing confidence about the upcoming decision, which is expected to be announced by Friday.
“We are optimistic,” a McDonnell spokesman said. “We have done the best possible job at improving the health of the program.”
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A Defense Department spokeswoman declined to comment on the assertions by congressional sources, citing the confidential process that the Pentagon uses in reaching major acquisition decisions. But military service leaders have been uncommonly upbeat in their C-17 evaluations recently.
“There is enthusiasm for it,” Air Force Secretary Sheila Widnall acknowledged in an interview last week aboard a C-17 on a flight to New Mexico. “I am very optimistic about the C-17. It was a well-designed aircraft.”
Rep. Jane Harman (D-Rolling Hills), a member of the House National Security Committee and a major C-17 supporter in recent years, added: “All the signs are good. This would be the right decision for the country and particularly for Southern California.”
The pending decision is an outgrowth of the cost and technical problems in the program two years ago, prompting the late Defense Secretary Les Aspin to put the entire program on so-called probation and see whether McDonnell Douglas could improve its performance.
The Pentagon had originally planned to buy 240 C-17s, but cut the order in half after the Cold War ended. After the C-17 began experiencing serious problems in the early 1990s, the order was cut to 40 aircraft and the firm was put on notice that no further purchases would occur until its performance was raised.
An order for 80 more aircraft this week would restore the program to the full 120 planes.
Widnall said there was a need to restructure two years ago and set aside what had become a contentious dispute between McDonnell and the Pentagon. The effort, she said, has been successful, yielding “an extremely competitive aircraft.”
Since McDonnell began developing the C-17 in the mid-1980s, its costs have grown far above original projections, but the firm has stopped the cost growth over the last two years and is now offering prices that are significantly below past C-17 orders.
“It is a low price,” Widnall acknowledged.
As the Pentagon began formulating a plan in August for the future of the program, McDonnell provided cost estimates that the price for future C-17s (excluding development, engineering, spare parts and ground equipment) would drop to about $190 million if it was allowed to build 80 additional aircraft. The average cost of the C-17 aircraft has been $323 million.
The $190-million cost estimate was based on the assumption that production rates would rise to 12 aircraft per year. Somewhat higher production rates would result in even lower costs.
