Congress Drops A Bomb On DefenseAmy Borrus
Northrop Corp. vaulted into the aerospace big leagues in 1981, when it won a contract to build the B-2 Stealth bomber. Now, Northrop could be headed right back to the minors, thanks to Congress' recent decision to block the purchase of any new B-2s this fiscal year.
In a stunning rebuke, House and Senate conferees working to complete the 1992 defense-spending bill turned down the Bush Administration's request for four more of the costly bat-winged bombers. Congress almost never kills a major weapons program. But communism's collapse, President Bush's unilateral cuts in U. S. nuclear forces, and technical glitches in the B-2 emboldened House Democrats to dig in their heels.
Congress did authorize $3.4 billion to keep existing production, research, and spare parts going, but it set tight strings on $1 billion more that could be used to build another B-2. Although Northrop insists it isn't giving up, one House Democratic staffer says: "The B-2 is dead."
Now that legislators have killed one defense program, it will be hard to stop Congress before it kills again. Growing pressure to slash defense to pay for tax cuts and domestic spending is the driving force. "All weapons systems that are expensive and geared primarily to the Soviet threat are vulnerable," says House Armed Services Committee Chairman Les Aspin (D-Wis.). Likely targets range from costly new missiles to giant submarines (table).
'TOO MUCH CAPACITY.' It's hard to underestimate the impact on Northrop. The company says it will continue to be profitable. But B-2 work generates half of the Los Angeles company's revenues and 45% of its earnings. An end to the contract could reduce Northrop to subcontracting for airframe makers McDonnell Douglas Corp. and Boeing Co.
That might be a fate other defense suppliers could come to envy. Congress already is thinking of cutting the projected $291 billion fiscal 1993 defense budget by up to $20 billion. And industry experts predict spending of at most $200 billion in 1991 dollars by the end of the decade. "A shakeout in the industry is inevitable," says Loren B. Thompson, deputy director of Georgetown University's national security studies program. "There's just way too much capacity for what the nation requires."
Where will budget-cutters turn next? Navy contractors may take the biggest hit. General Dynamics Corp.'s Electric Boat Div. and Tenneco Inc.'s Newport News Shipbuilding & Dry Dock can count on only a handful of orders at $2 billion a pop for the Seawolf submarine. The Navy originally wanted 30 of the boats, designed to counter a new generation of Soviet subs. And Aspin has his eye on Lockheed Corp.'s $40 billion Trident II submarine-launched missile program.
Debate on the size of the Navy will begin in earnest next year. Congress will be asked to provide initial funding for a new $4 billion aircraft carrier. The Administration's plans for a fleet of 450 ships, including 12 carriers, are certain to be slashed. The Navy would get about a third of a $200 billion-a-year defense budget, enough to support fewer than 400 ships, including at most 10 carriers.
IN JEOPARDY. Downsizing on that scale could doom Bath Iron Works Corp. in Maine, one of only two shipyards that still builds destroyers. The other is Litton Industries Inc.'s Ingalls Shipbuilding Div. in Pascagoula, Miss. Bath is vulnerable because destroyers are virtually its only business, and its costs are slightly higher: Bath charged the Navy $513.5 million for its latest two-ship order, vs. Litton's $500.9 million price tag.
Aerospace companies are bracing for cutbacks, too. One likely candidate: the Army's $35 billion Comanche helicopter program. A team headed by United Technologies Corp. and Boeing is to begin production of 1,292 copters in 1996. McDonnell Douglas' $35 billion contract to build 120 C-17 transport planes for the Air Force also is in jeopardy. Congress, though, may be able to offer McDonnell Douglas some cheap consolation if it approves Saudi Arabia's $4 billion to $6 billion order for 72 F-15 fighters.
Amid all the budget-slashing, though, one big program keeps perking along: the Strategic Defense Initiative. The price of the House's refusal to yield on the B-2 was $4.2 billion for Star Wars and acceptance of the Senate's plan to deploy ground-based missile defenses near Grand Forks, N. D. But, House Democrats warn, just wait 'til next year.
WHAT MIGHT DROP OFF THE MILITARY MENU Program/ Price per unit Main contractors Millions SEAWOLF SUBMARINE $2,000.0 General Dynamics, Tenneco TRIDENT II MISSILE 29.2 Lockheed A-X NAVY BOMBER 65.0 Bidders include Grumman, Lockheed, Boeing F-22 AIR FORCE FIGHTER 59.4 Lockheed, Boeing, General Dynamics COMANCHE HELICOPTER 8.5 United Technologies, Boeing C-17 TRANSPORT 207.6 McDonnell Douglas, Pratt & Whitney CVN-76 CARRIER 4,000.0 Tenneco DATA: DEFENSE DEPT., BW