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San Francisco Chronicle Thursday, September 9, 1999

Lockheed Vows To Change Its Frugal Ways

Tom Abate, Chronicle Staff Writer   Thursday, September 9, 1999


Lockheed Martin Corp. yesterday promised to change its penny-pinching ways after an independent review panel issued a scathing report on company practices that led to an embarrassing string of rocket and missile mishaps.

``We found systematic problems in accountability, quality, loss of experienced personnel, reliance on subcontractors and an emphasis on cost,'' said Thomas Young, the former aerospace official who headed the review panel.

Four months ago, Maryland-based Lockheed asked 11 outside military and aerospace experts to investigate six straight misses of its new anti-missile system, which is being designed in Sunnyvale, and three botched lift-offs of its Titan IV rocket, which is built in Denver.

Lockheed President Peter Teets said the company accepted the findings and promised to change. ``Perhaps we have cut corners where we shouldn't have,'' he said, adding the company should have put ``mission success before cost performance or schedule performance.''

Teets also said Lockheed planned a ``significant retention plan to incentivize, reward and keep'' senior employees.

Lockheed's problems surfaced earlier this year, after two Titan IV rockets failed to lift their payloads into orbit and another blew up on the launchpad. Built by Lockheed's Denver Astronautics division, the $400 million rockets have been the chief launch vehicle for government spy satellites. The string of failures prompted calls for congressional and White House investigations.

Less spectacular but more important for Lockheed's financial health has been its fumbling effort to develop an anti-missile system called the Theater High Altitude Area Defense or THAAD.

Lockheed has spent some $2.12 billion since 1992 trying to get THAAD to intercept incoming missiles high in the atmosphere. The first six launches, though, resulted in six costly misses.

``That tarnished Lockheed's reputation,'' said John Pike, a Defense Department analyst with the Federation of American Scientists in Washington, D.C. ``They looked like the gang that couldn't shoot straight.''

THAAD's prospects brightened in June and August when the fledgling interceptor knocked down two targets. Defense analysts say THAAD, which is being developed in Sunnyvale, is essential to Lockheed's future.

If it succeeds as a regional anti-missile defense system, it could lead to an even larger contract to build a national anti- missile shield, and provide a follow-on project for the Sunnyvale plant, which is now making the last of the nation's Trident submarine-launched missiles.

But a Lockheed engineer who asked to remain anonymous said THAAD's shortcomings can be traced to cost-cutting moves, instituted after the end of the Cold War, that have stripped the company of its senior talent.

Bay Area employment has plummeted from 25,000 in 1985 to the current 7,950. These departures have caused a brain-drain, said the Lockheed engineer.

``Whole classes of longtime employees, the people with the most costly benefits, were encouraged to take early retirement,'' the engineer said. ``Experienced people are what you need to debug a new system.''

Lockheed has also lost a series of important contracts, and the engineer said this can also be traced to the brain drain.

1999 San Francisco Chronicle