Lockheed, GD Teams Study Sale of F-16 Plant

FORT WORTH – Lockheed Corp. has appointed a team of employees to explore whether it should purchase General Dynamics Corp.’s Fort Worth-based tactical aircraft business, industry sources said yesterday.

Lockheed, based in Calabasas, Calif., is also said to have requested personnel records on most members of the Fort Worth Division's management team.

Lockheed, based in Calabasas, Calif., is also said to have requested personnel records on most members of the Fort Worth Division’s management team.

In response, GD has also designated a group of employees – some from Fort Worth and others from its Falls Church, Va., headquarters – who are working with Lockheed, sources said.

Lockheed has emerged as the most likely suitor for the operation, which produces the F-16 fighter for the Air Force and employs 20,000 people in Fort Worth.

Sources at both companies said that no agreement has been reached and that “serious negotiations” were not taking place.

A timetable to reach an agreement has not been set.

Meanwhile, as part of its analysis of the division, Lockheed has queried top GD managers to ascertain their interest in staying at their jobs should an agreement be reached.

Gordon England, general manager of the Fort Worth Division; and Dain Hancock, F-16 program director, were among those asked, the sources said.

It was not known how the two executives responded.

GD and Lockheed spokesmen declined to comment yesterday.

It is normal in mergers and acquisitions for a suitor to ask top managers to stay in place. Often, managers are offered special compensation packages, including stock-option bonuses, to remain with a company or acquired business unit.

“They (Lockheed) want to confirm whether people will stay or not,” a GD source said.

“They want a good man in each job,” the source said. “But in the long run, there may only be a handful of people that stay or are interested in staying.

“I think they want the core of our management structure to remain in place, at least for a while, if they both come to an agreement on this.”

Lockheed, based in Calabasas, Calif., is also said to have requested personnel records on most members of the Fort Worth Division’s management team.

The Fort Worth Star-Telegram reported Saturday that GD had been talking with Lockheed and Boeing Co. over the sale of the division, a focal point in the ailing Tarrant County economy.

The plant produces the F-16 and is a partner with Lockheed and Boeing in development of the F-22 Advanced Tactical Fighter. GD is also involved in efforts to win several other tactical fighter programs.

Analysts say Boeing appears to have had only a passing interest in acquiring the operation, although they add that other companies could still come forward and make GD Chairman William Anders an offer.

Anders has been the architect of the divestment plan for GD, which has spun off several large operations.

The company has said in the past that it wants to keep its core businesses: fighter aircraft, tanks, submarines and space launch systems. Selling the Fort Worth unit would depart from that plan.

GD’s stock price, which had jumped $3 to close at $100 on Monday, fell $1.875 to finish at $98.125 in trading yesterday. About 155,000 shares changed hands.

Meanwhile, Lockheed was unchanged at $45.625 yesterday on volume of 118,900 shares.

Still, Wall Street defense analysts seem to think that both companies are nearing an agreement.

“It’s pretty far along,” said Jack Modzelewski of PaineWebber in New York.

“My general sense is that there have been some pretty active discussions. But I don’t get a feeling that this is imminent,” he said.

Several industry analysts who follow GD and Lockheed say the companies are looking closely at the costs associated with the $60 billion F-22 program.

Analysts say Lockheed wants to consolidate its work on that project with GD’s, which would raise its 35 percent stake to 67.5 percent.

Such a move, however, might bring into question how Lockheed would plan for production of the aircraft, the next-generation Air Force fighter.

Lockheed could decide that it is more economical to locate all its work on that project at its facility in Marietta, Ga.

“There are three overheads being charged to the F-22,” Modzelewski said. “It could be that Lockheed feels it would be better off with just two.”

Lockheed is responsible for program management, the nose of the aircraft, the forward fuselage, leading wing edges, fins and stabilizers, flaps, landing gear and final assembly.

GD’s portion of the program – slated for Fort Worth production – is to include, among other things, production of the center fuselage, integrated navigation and electronic warfare systems, communication system, navigation and identification system, and the weapon system support system.

Boeing, at a Seattle facility, is to produce the F-22’s wings, aft fuselage, some aspects of avionics development, and testing and a pilot training system.

Modzelewski said Lockheed is probably also attracted by GD’s potential to win the Multirole Fighter program, a 21st-century replacement for the F-16.

Although Air Force orders for the Falcon will drop to 24 a year, some analysts say the Multirole Fighter could prove lucrative to Lockheed, particularly if the Air Force demands an aircraft with greater use of composite-materials and stealth technology.

Capt. Monica Aloisio, an Air Force spokeswoman, said yesterday that the Air Force will not comment on the matter unless GD announced a sale.

Jim Thornberry, a spokesman for the Defense Department’s Defense Contract Management Command in Atlanta, said he doubts that the Pentagon would object to an agreement for Lockheed to buy GD’s Fort Worth Division.

“The Defense Department cares if it is a foreign company and advanced technology is involved,” Thornberry said. “We don’t care as long as we still get the product that we have contracted for without interruption.”

Author: Michael D. Towle; Star-Telegram Writer

Fort Worth Star-Telegram – October 28, 1992