A Lift for Lockheed

"I've never been enthused about a Lockheed bill. I still say that now." Yet when Kentucky's Marlow Cook made that statement last week, he had just cast the vote that broke a 48-48 tie in the Senate and saved Lockheed Aircraft Corp. from financial collapse.

Cook's ambivalence toward a $250 million loan guarantee for the aerospace giant was widely shared on Capitol Hill and contributed to considerable confusion in the lines of battle. Such conservative Republicans as Barry Goldwater and James Buckley, who normally support the Nixon Administration on important questions, opposed the bill lest the rules of free enterprise be violated. Such liberal Democrats as Alan Cranston and Hubert Humphrey, who would otherwise oppose a government handout to big business, supported the bill out of solidarity with organized labor. In the absence of clear-cut doctrinal guidelines, the bill--which had narrowly (192-189) passed the House a few days earlier--split both parties almost evenly.

What proved to be the most persuasive argument in favor of saving Lockheed was the question Of employment. "I think jobs certainly were the key issue," said John Tower of Texas, leader of the pro-Lockheed forces in the Senate. "I would not take upon myself," admitted Montana's Lee Metcalf, who also voted for Lockheed, "the responsibility of closing out all these jobs." As many as 60,000 jobs were at stake at Lockheed, at the firm's suppliers and subcontractors in 35 states, and at stores and offices in peripheral communities.

The biggest chunk of those jobs are in Lockheed's headquarters in Burbank and the TriStar plant at nearby Palmdale, Calif. Thus when the Senate clerk announced the vote, there was great joy in those towns. Telephone lines were jammed as relatives and friends spread the news. Champagne flowed at the local union halls. Restaurants were crowded for the first time in months. Ever since Lockheed began laying off some 9,000 TriStar workers last winter, local residents had been putting off decisions about whether to buy new cars or refrigerators. Sales-tax receipts in Burbank had fallen 24% from last year, and the hard-pressed city government had been forced to impose a hiring freeze. "Burbank was in a state of suspended animation," said Assistant City Manager James Algie. Agreed Lockheed Spokesman John Dailey: "It was like everyone had exhaled at once --and none of us knew we'd been holding our breath."

Not out of the Woods. A new optimism has also taken over Lockheed's corporate headquarters. The company is now rehiring laid-off workers at a rate of 200 a week. Executives who only the day before the vote had been making apocalyptic warnings of a Lockheed failure were now predicting that the firm might not need all of the $250 million that Congress had underwritten. Just two days after the vote, Lockheed released surprisingly healthy first-half earnings figures: $11.3 million after taxes, up $3.8 million from last year.

The formalities of collecting on the loan guarantee should be completed within weeks, but Lockheed has a few other problems to take care of before the company is out of danger. Rolls-Royce engineers must work a few more bugs out of the TriStar's engines. Lockheed salesmen must persuade British European Airways to order at least 20 TriStars, a condition that TWA has specified for retaining its 33-TriStar order. Finally. Lockheed must rejuvenate its TriStar marketing program, which was inactive during the long period of uncertainty over the plane's future. The company has only 103 firm TriStar orders--at least 152 short of the number Lockheed Vice President Charles S. Wagner says the firm must sell to break even on the project. As Lockheed Chairman Dan Haughton said last week in a memo to employees: "We aren't out of the woods yet by a long shot."

Paltry Profits. The outlook for the aerospace industry as a whole is even more uncertain. Its biggest clients--the Defense Department, NASA and the airline industry--are all cutting back on expenditures for new equipment. Aftertax profits in the industry were a paltry 2% last year as compared to 4% for manufacturing companies as a whole, and Wall Street analysts say that the aerospace profit outlook for 1971 is just as bleak.

One of the most troubling questions raised by the bailing out of Lockheed is whether the federal action has established a precedent. The measures passed by Congress provide for an emergency loan-guarantee board headed by the Treasury Secretary. The board would have power to guarantee loans of up to $250 million to any firm whose demise would "seriously affect the economy or employment in the nation or any region thereof." Though the intent of Congress was clearly to make Lockheed the sole beneficiary of its action, the precedent may now exist to bail out any number of companies provided that they are important enough and sick enough. Congress may thus find it increasingly difficult to resist pressures from powerful alliances of industry, organized labor, the financial community and local political interests that would like it to come to the rescue of inefficient or mismanaged firms.

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