Lockheed, Airbus discussing alliance Partnership could double work force at Middle River plant

March 11, 1997|By Greg Schneider | Greg Schneider,SUN STAFF

Lockheed Martin Corp. is talking with Europe's Airbus Industrie about collaborating on commercial jetliners, a partnership that could toss a dagger at archrival Boeing Co. and promise significant new jobs at the Middle River aeronautics plant in Baltimore.

Sources said that the talks involve possible work on the A3XX jumbo jetliner, but that any partnership would not be extensive enough to qualify Lockheed Martin as a fifth member of the four-company consortium that makes up Airbus.

At the very least, Lockheed Martin is exploring roles as a subcontractor on other Airbus projects.

The Middle River plant, for instance, is bidding to build engine nacelles and thrust reversers for a stretched version of the A340 jetliner. The job could help double Middle River's 1,150-person work force in two years and provide work for the plant at least through 2016, said plant General Manager Raymond Roquemore.

Lockheed Martin acknowledges its overall discussions but offers no specifics: "We're exploring what opportunities there might be for us to work together on projects of mutual interest and mutual benefit," spokesman Keith R. Mordoff said yesterday.

He said that would be the company's only statement for now.

A spokeswoman for Airbus said the consortium has spoken with companies around the world about possible partnerships. "I cannot confirm or deny that talks have been made with Lockheed," said Sandy Smith, communications manager for Airbus Industrie of North America.

Lockheed Martin Chairman and Chief Executive Officer Norman R. Augustine flew to Toulouse, France, in mid-February to talk with Airbus executives about possible joint business opportunities, sources said.

The London Observer reported over the weekend that Lockheed Martin and a South Korean firm are close to signing a partnership agreement with Airbus. Smith and Mordoff both declined to comment on the report.

Near-disastrous experience

Before it merged two years ago with Martin Marietta, Lockheed had a near-disastrous experience with building commercial aircraft. Its L-1011 jetliner was widely considered a masterpiece of a plane, but its rocky record in the marketplace nearly dragged the company into bankruptcy.

After halting the program in 1981, the company vowed to steer clear of commercial aviation. One source familiar with the company and the current situation expressed skepticism that the talks with Airbus would involve the kind of investment necessary to develop the A3XX, which could cost at least $8 billion.

"Analysts and Wall Street would [frown] at getting into another venture outside core business, and having to make investment up front," the source said.

Boeing, the Seattle-based company whose 60 percent market dominance Airbus would dearly love to erode, has abandoned its own plans for a super-jumbo jetliner and suggested that demand for such a beast is far lower than Airbus claims.

Analyst Richard Aboulafia of the Teal Group says the truth is probably somewhere in between Boeing's projection of only about 400 potential orders and Airbus's expectation of almost 1,400 orders for a plane with 400-plus seats. He said Airbus needs a deep-pocketed North American partner to help with finances and U.S. sales.

Northrop Grumman Corp. reportedly broke off talks with Airbus, opting not to rattle its long-standing subcontractor relationship with Boeing.

The perfect partner, Aboulafia said, would be Lockheed Martin. Airbus would get what it needs, he said, and Lockheed Martin would benefit, too.

'Can't ignore jetliner market'

"If you're going to be a diversified aerospace power, you can't ignore the jetliner market, which Lockheed Martin does," he said.

With Boeing elbowing loudly into the military aircraft market through the pending purchase of McDonnell Douglas Corp., Lockheed Martin could make itself a stronger competitor by venturing into commercial work with Airbus, he said. Besides, the move would help Airbus weaken Boeing on the commercial front.

"The fit is so natural on so many different levels," Aboulafia said.

How far that fit could go is still being discussed, sources said. Partnering on the A3XX is a long shot, several said, but elements within Lockheed Martin are pushing for a far-reaching relationship.

Most likely in the short term: smaller-scale cooperation that could lead to something deeper in the future, sources said.

The Middle River bid for nacelle work is one of the most immediate possibilities. The plant has built thrust reversers for General Electric engines for decades, and under Roquemore's aggressive leadership is looking to parlay that expertise into more business.

'Real vote of confidence'

Roquemore said he had to get corporate approval to go after the Airbus work because it would require an investment of up to $170 million in the Middle River facilities. "The fact that they said, 'Yea, verily, go ahead and bid on it' -- I thought that gave us a real vote of confidence," he told a recent gathering of plant retirees.

The investment would be needed to outfit the plant to build nacelles, which are the cowlings that surround jet engines and affix them to wings.

The thrust reversers built at the Middle River plant, which is known as Lockheed Martin Aero- structures, are just one part of a nacelle. Thrust reversers direct the flow of a jet engine backward to help a landing plane come to a stop.

Roquemore said he expects Airbus to narrow its field of prospective contractors by the end of March and make a final selection in May.

Pub Date: 3/11/97

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