Aerospace: No End in Sight

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Yet for all its impact, aerospace profits remain low: 3.1% of sales against 5.5% for all U.S. manufacturers. One reason: in a little-noted change of vast consequence, cost-conscious Robert McNamara has switched Pentagon buying away from lax, cost-plus contracts toward fixed-price, incentive awards. Increasingly, defense contractors must sharpen both their engineering and their bids to win business. Efficient operators who trim costs or beat delivery schedules are rewarded with higher profits; fumblers are being winnowed out. Says Northrop Chairman Tom Jones: "It's a sporty course to run."

Beyond Shoes & Wax. In running that course, the industry is constantly aware of a paradox: aerospace products and systems may take many years to develop, but they can become obsolescent almost overnight. Lockheed, which employs 81,302 people, estimates that it must generate an average of $7,500,000 worth of new business every working day just to stay even. Says Courtlandt Gross: "This is quite a hungry mouth to feed, and it gives me plenty of anxiety." Lockheed President Daniel Jeremiah Haughton echoes his chairman: "Every morning this is a problem that gets up with me. I start reflecting on it by the time I've had a cup of coffee. And then I start wondering what our competitors are up to. I know that somewhere they're already at work doing something that's going to make it rough for us."

Lockheed's inevitable answer is diversification. The company makes neither shoes nor sealing wax, but its 43 plants do build ships, satellites, research submarines and even a 220-ft. hydrofoil vessel. Lockheed maintains President Johnson's Boeing-built 707 jet. Its 300 products range from metal micro-particles .025 in. in diameter—as small as sifted sand—to the Polaris missiles, capable of bearing hydrogen warheads from beneath the sea to targets 2,500 miles away. Lockheed's second-stage Agena rocket has put more payload in orbit than any other U.S. booster, telemetered more data from space than all other U S. spacecraft combined.

Like almost all other aerospace companies, Lockheed is expending money and energy on projects that have little to do with air, much less space. Company engineers devised a computerized system for the Alameda-Contra Costa Counties (Calif.) Blood Bank that cut inventory losses in half in two months by keeping track of supplies; using that system, every blood bank in the U.S. could theoretically run from the same computer. Lockheed last year concocted plans for a statewide information-retrieval system that would theoretically enable California to keep a Big Brother-like watch on its citizens; with the help of computerized data-storage units in various localities, officials in Sacramento could press a button to check up on local tax collections, highway repairs, personnel needs—eventually perhaps even alimony payments or political contributions. It may seem odd to laymen that space technology can be applied to such earthbound matters, but "systems management," the mastery of computerized complexity, remains the same in principle, whatever the problem to be solved.