Review Faults Lockheed on Quality : Aerospace: Panel examining launch failures says company put too much emphasis on trimming costs.

An independent review of expensive and well-publicized launch failures of Lockheed Martin Corp.’s rockets and satellites finds the company focused too heavily on cutting costs and not enough on supervising the quality of its work, according to sources familiar with the review panel’s findings.

The report has been shared with Lockheed’s top management. Senior officials at the Pentagon and on Capitol Hill are expected to be briefed this week. A public release of the findings could come within days.

Lockheed spokesman James Fetig would not discuss the findings, but he acknowledged the panel’s review was complete.

“Management has received a briefing from the panel,” Fetig said. “The findings are under review.”

The aerospace industry has seen massive downsizings since the end of the Cold War. Now the slew of failures at Lockheed and its major rival, Boeing Co., has prompted some in the industry to question whether the “best and the brightest” are gone from a business in which insiders like to say, “It is rocket science.”

Lockheed’s Denver-based Astronautics unit, where its Titan rockets are made, and its Sunnyvale, Calif., satellite-manufacturing business have both had large-scale staff reductions in the last year.

Some experts, including officials at other companies, have said an industrywide emphasis on trimming costs has led to corners being cut on quality assurance and oversight. Sources familiar with the Lockheed report say it mentions the issues of industry mergers and downsizings but that these are not a main focus of the report.

Seattle-based Boeing also has had failures of late with its Delta series of rockets. In one instance, a TRW Inc. satellite being placed atop a Delta rocket was damaged by rain after Boeing workers failed to seal both sides of a shield intended to protect it from the elements.

The problems with the Lockheed and Boeing space programs led Pentagon and White House officials to launch their own investigations earlier this year. The companies stand to lose millions of dollars in unearned performance fees if held responsible for the failures.

Lockheed convened its probe, headed by former NASA official and Martin Marietta President A. Thomas Young, in May after a string of launch failures from August 1998 through April. More than $2 billion worth of military and private satellites were either destroyed or deployed into useless orbits after launch from Lockheed’s Titan, Centaur and Athena rockets.

The Air Force has already determined the causes of two of the Titan failures, one of which occurred April 30 when Lockheed software programmers misplaced a decimal point in instructions that set the rate at which the rocket rolls after launch. An April 9 failure was attributed to an improperly designed electrical connector on a Boeing upper stage used to send a $250-million Defense Department satellite into orbit.

As a result of the problems with its rocket and satellite businesses, Bethesda, Md.-based Lockheed has installed new management in both operations and begun to change some of its operating procedures. Lockheed has said more than 200 changes in engineering, design and manufacturing procedures have already been made.

“In terms of what’s going on in the future, I would say a lot of the things are being addressed,” said Credit Suisse First Boston analyst Pierre Chao.