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Aviation History
1990
1990 - 2058.PDF
BUSINESS 'No Douglas sell-off', says McDonnell John McDonnell, the chairman of McDonnell Douglas, has un veiled the first part of his plan to restore the corporation to finan cial health—in the process dismissing rumours that trou bled Douglas Aircraft was about to be sold. McDonnell had already warned his employees to expect swingeing cutbacks in an effort to save $700 million a year in expenditure (Flight, 27 June- 3 July), and last week lived up to his word. The company is to slice up to 17,000 jobs from the payroll by the end of this year—a reduction of 11% of the workforce—in addition to savage cuts in over time, capital budgets, advertis ing, consultants, travel and "support activities". Many of the job reductions have already been achieved, particularly at Douglas, where the loss of 4,000 salaried po- Pratt & Whitney BY KIERAN DALY IN WASHINGTON DC The head of Pratt & Whitney's (P&W's) military engine activities says that the US Gov ernment should consider the effect on the nation's industrial base when selecting programme contractors. William Missimer, president of P&W's Government Engine business, warns that declining defence purchases mean it is no longer certain that individual companies will receive an ade quate share of work. Interviewed at P&W's West Palm Beach plant, he said: "We believe, and we are not alone, that it is a national issue in terms of the industrial base. With the dramatic change in international events and the decline in the defence budget we think that considerations on an individual programme basis need an over ride on a national basis. "In the old days when there were many programmes then you could delegate industrial base issues because there was enough action going on, that, on sitions and 3,000 contract work ers was announced in April. Of these, 1,700 salaried employees have since been found other pos itions, while 1,400 of the con tract workers still remain. None of the contracts will be renewed, while 2,400 additional salaried jobs are to also dis appear, leaving a net loss of 7,700 people at Long Beach (3,000 contracts and 4,700 sal aried). Paradoxically, Douglas is also hiring skilled workers to take up positions on the MD-11 and C-17 lines, so some of those made redundant may be re trained or found other jobs, Mc Donnell says. The financial trouble at the corporation results from cost overruns on military fixed-price development contracts, pre mature cutbacks in existing de fence programmes, and the continued poor performance of the Douglas transport division. William Missimer the law of averages, you could keep a good industrial base—and we did. "As the total market shrinks then the industrial base becomes* a key issue, to be considered at a higher level than individual pro grammes. Other countries have done this traditionally." As purchases of F-15s and F- 16s fall off, the future of P&W's military engine business is heavily dependent on the out- I come of the contest between its McDonnell confirmed that the company would need to borrow an additional $2 billion by the end of the year to certificate the MD-11 and build up inventory on the production line. McDonnell Douglas shares rose sharply in the days before the chairman's statement, on ru mours that Douglas would be sold off, possibly to a Japanese company, and that McDonnell himself would resign. He says simply: "The rumours are false". Although McDonnell acknowledges the problems- in Long Beach, he says: "We have the largest backlog in our his tory, and we are looking, over the next few years, at a very substantial growth in our busi ness. The greatest growth is going to be in our commercial and space businesses, while in defence it is declining". He adds: "One of the chal lenges we have been facing over ial base Fl 19 and General Electric's F120 to power the US Advanced Tac tical Fighter (ATF). Missimer says that the 8,000 workforce at P&W's Palm Beach military plant is to be reduced to 6,200 "through attrition", even if P&W wins the ATF competition, and will face more serious cuts if the F-119 is not chosen. Asked if the Department of Defense should select P&W on the grounds of the industrial base, he replied: "1 don't believe that we will put the Government in that position. The industrial base argument just enhances it". Vice-president business development and planning Dave Hymer adds: "We are not asking, for any favours, we are just asking for people to understand | the industrial base argument]". 9 General Dynamics, Hughes Aircraft, Lockheed, McDonnell Douglas, Northrop, Rockwell International and TRW, with California's state employment development department, have established the Aerospace Office Network to help defence-in dustry employees find new jobs within aerospace. • the last few months, is transfer ring resources to where the busi ness is"—a reference to moving elements of production out of Douglas to other company sites. This would involve parts of the MD-11 and MD-80 programmes, along with production of the Navy's T-45 trainer and the ACES II ejection seat. Mc Donnell wants to free space and manpower at Douglas to enable it to concentrate on improving production of the MD-80, MD- 11 and C-17, while offsetting the loss of work in St Louis and at its helicopter company in Arizona. Although there have been ru mours that the company is preparing to share at least $600 million in write-offs on the Navy's A-12 programme with partner General Dynamics, Mc Donnell refuses to comment. The Navy's new stealth strike aircraft is running several months late, and although the company is said to be seeking relief on the fixed-price development con tract, the chairman will only say: "We will obviously be working with the Navy to reach an overall amicable solution to the issues on the A-12 programme". • Lockheed leases USAF base space Lockheed has signed an initial j ten-year lease on hangar space at Norton AFB to carry out maintenance and modification of commercial Boeing 747s. The company has formed a new subsidiary, Lockheed Commercial Aircraft Center, to undertake the 747 work. Norton is one of the 86 mili tary bases scheduled for closure by 1994. Lockheed will begin operations in December 1990 and will use two of the four bays in Hangar 763. In the second phase, when the Air Force finally pulls out, Lockheed will occupy the two remaining bays. The company's forecast shows that employment generated by the maintenance activity will expand from 630 at the end of the first year to 970 by 1994. D irs for USA s mdust FLIGHT INTERNATIONAL 25-31 July 1990
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