Lockheed hits sky high

On seventh attempt, contractor succeeds in anti-missile test

Credibility on the line

Management praises achievement

analyst skeptical of reliability

June 11, 1999|By Greg Schneider | Greg Schneider,SUN STAFF

The nation took a step toward achieving a ballistic missile defense yesterday when the Army's THAAD missile system managed to knock a target rocket out of the sky after missing on six previous tests.

The success also boosted morale at contractor Lockheed Martin Corp., which confessed to worsening financial problems this week and had been tainted by the repeated THAAD failures.

"They lost a lot of credibility," said financial analyst Paul Nisbet of JSA Research Inc. "They needed some good news for a change."

And they got it. After being fined $15 million for a miss in March and facing the loss of $20 million more if yesterday's test failed, Lockheed Martin engineers cheered when the THAAD missile hit its target rocket at dawn over the test range in White Sands, N.M.

"This is one of the most outstanding technological achievements in the history of the aerospace industry," said Thomas A. Corcoran, who was named president of Lockheed Martin Space & Strategic Missiles Sector in October in a housecleaning to get the THAAD program on track.

The Pentagon has spent about $3.8 billion on the $14 billion program, which is considered a bellwether of the technology needed to create a National Missile Defense system.

The increasingly embarrassing failures of THAAD have provided fodder for critics who say it has been folly to spend more than $50 billion overall on "Star Wars" -- a variety of programs to create shields against missile attacks.

"With only one success out of seven attempts, I think that THAAD has demonstrated how difficult this is," said John Pike of the Federation of American Scientists.

THAAD -- which stands for Theater High-Altitude Area Defense -- is designed to protect troops in the field from a ballistic missile attack by destroying an enemy rocket as it rises to the fringe of space.

Congress mandated such a program after the 1991 Persian Gulf war demonstrated U.S. vulnerability to ballistic missiles such as Iraqi Scuds.

Beginning in April 1995, though, Lockheed Martin failed in six consecutive attempts to make the THAAD missile destroy its target. Congress became increasingly irate over the failures, which cost about $12 million to $15 million per test.

Last year's miss prompted the overhaul of management in the Missiles & Space Sector, and Lockheed Martin agreed to reimburse the Pentagon for any further failures. Congress even threatened to bring in a backup contractor.

On March 29, after a year spent painstakingly refurbishing the program, the missile failed again -- missing its target by as little as 30 feet.

Yesterday's test took on melodramatic overtones by coming only a day after Lockheed Martin confessed financial woes to Wall Street, projecting a loss for the second quarter of the year and cutting earnings expectations for all of 1999 by half.

Yesterday's successful test did not halt the slide of Lockheed Martin stock, which closed down 81.25 cents yesterday at $34.0625.

But company morale climbed sharply. "It's very sweet news, I can tell you that," said corporate spokesman James Fetig.

The Hera target rocket was launched shortly after 5 a.m., and the THAAD missile fired several minutes later from about 100 miles away on the high desert range. Radar, control and targeting systems all worked flawlessly, officials said, and at 5: 19 the THAAD missile hit and destroyed the target at an altitude of between 36 and 60 miles.

The company has to make the system work again by July 16 or face a $20 million penalty. In all, Lockheed Martin faces about $60 million in further penalties if THAAD fails to log three hits by Jan. 16.

Military officials, who have at times seemed provoked over the fumbling of such a high-profile program, were upbeat yesterday.

"I am extremely happy and gratified for all the members of the THAAD team who have withstood extreme scrutiny to reach the success of today's flight," said Lt. Gen. John Costello, commander of the Army Space and Missile Defense Command. "We need THAAD now. Our soldiers deserve no less."

Not everyone agrees. Pike, of the Federation of American Scientists, said the new version of the Patriot missile -- also built by Lockheed Martin -- will be enough to handle short-range threats such as Iraqi Scuds. "And THAAD will never work well enough to deal with nuclear or chemically tipped missiles," he said.

On the financial side, analyst Nisbet warned that one successful test does not make up for an earnings predicament that could still worsen at Lockheed Martin.

"It's like putting a little bit of iodine on a cut," Nisbet said. "The gash is still bleeding."

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