The Lockheed Bailout Battle

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The company, however, was not a secure enough risk for the nation's banks. Indeed Lockheed's creditors have testified that the company may well need more than $250 million. Opponents of the loan guarantee—including politicians from both parties, many economists and Lockheed's competitors —questioned whether the TriStar would ever be profitable. Chairman Haughton said that his company must sell 255 to 265 of the planes to make money on them. Lockheed reports 103 firm orders and 75 options for the TriStar so far, but its two biggest customers—TWA and Eastern—have been making arrangements to buy an almost identical plane, the McDonnell Douglas DC-10. The first DC-10s were delivered last week, and they are scheduled to go into service with American and United in mid-August. At best, Lockheed's Tri-Star will not start carrying passengers until next April.

On the jobs question, opponents of the guarantee noted that if the TriStar went down and Lockheed workers were cut adrift, there would be more work for people making the DC-10 and its General Electric engines—and perhaps also for Boeing, which is considering building a similar plane. Would it be fair for Washington to support Lockheed workers at the expense of others?

Most important, opponents worried about setting a precedent. Would the Government always step in to save a huge, politically powerful company that had tumbled into trouble over a commercial project? Many Lockheed critics noted that businessmen usually decry Government intervention, but they then run to the Government when they want help. Economist Alan Greenspan, a frequent Nixon adviser, warned that if the Administration made private credit available to one privileged firm, the supply of credit that is available for all will be reduced.

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One of the strongest arguments against the rescue was made by New York Senator James Buckley, a conservative Republican. Said he: "If the inefficient or mismanaged firm is insulated from the free-market pressures that other business firms must face, the result will be that scarce economic and human resources will be squandered on enterprises whose activities do not meet the standards imposed by the marketplace."

Whether or not Congress decides to save Lockheed, the wounds from so furious a battle will be long in healing.