Lockheed, Northrop reportedly eyeing plane unit: General Dynamics division might fetch $1.5 billion.

A Los Angeles County company could solidify its position as a dominant player in the military aircraft manufacturing business if General Dynamics Corp. decides to sell its Fort Worth, Texas, division, said industry analysts.

But whether that would result in any significant local job growth is questionable and probably doubtful, they added.

According to published reports, two local companies, Northrop Corp. and Lockheed Corp., are interested in buying GD's military aircraft division, which makes the F-16 fighter plane and has annual revenues of about $2.56 billion.

Industry experts speculate that the potential asking price of the unit could range between $1 billion and $1.5 billion, which they said either of the reported suitors could afford.

None of the three companies would comment on whether there are any active negotiations but one industry source said GD has circulated a prospectus on the unit to potential buyers.

If either Lockheed or Northrop succeeds in buying the division, it would instantly make the company a leader in the military aircraft manufacturing business, the analysts said. Both companies currently manufacture military aircraft and to add the F-16 project to a shrinking inventory of projects would make the buyer a dominant player.

"If General Dynamics does sell, that would basically leave three (military aircraft) manufacturers -- Lockheed, Northrop and McDonnell Douglas," said Michael Beltramo, a industry consultant based in Los Angeles.

Grumman Corp. in New York also manufacturers military aircraft, including the F-14, a fighter aircraft.

Lockheed, which used to manufacture aircraft in Burbank, now builds military planes in Georgia. The company is now in the pre-production stages of building the F-22, a new fighter aircraft that could be worth up to $90 billion in new business. Northrop has 12,000 workers in Los Angeles Country who are employed on the B-2 project, which will be ending over the next four or five years. Northrop also does subcontracting work on the F-18 fighter aircraft in El Segundo.

The fact that Northrop and Lockheed have expressed an interest in buying the GD division is an indication the two companies are still committed to the military contracting business, even though defense spending is declining at a rapid rate, the analysts said.

"I know they have talked about the conversion to more commercial work but they also know that defense is where their expertise lies," said David Pizzimenti, an industry analyst with Nomura Research Institute in New York. "I don't think that it would be a healthy thing for either of them to jump into a different industry and they know that too."

At the same time that it was reported in several industry and consumer publications that Northrop was interested in buying the GD division, the Century City-based company announced it was creating a commercial aviation division.

Northrop has been building the fuselages for 747 commercial aircraft in Los Angeles County since the late 1960s and has said it wants to become more active in building passenger planes. However, last year 90 percent of Northrop's $5.7 billion in revenues came from military contracts.

One possible motive for Lockheed to purchase the GD division is to shore up its F-22 project, said some analysts. Lockheed is teamed with the Boeing Co. in Seattle and General Dynamics on the project.

Lockheed is the chief contractor on the program, but by buying the GD unit, it would increase its share of the revenues from the F-22, said Peter Aseritis, an industry analyst with First Boston in New York.

In 1991, almost 70 percent of Lockheed's $9.8 billion in sales were from military contracts.

The industry analysts said a downside of the possible purchase is that orders for the F-16, at least from the United States, are declining. In 1980, the Air Force ordered 180 of the fighter aircraft and in 1990, there were 108 orders.

In the fiscal 1993 defense budget, 24 have been ordered and the Air Force has said it wants to maintain that level of annual procurement until the end of the decade.

General Dynamics, the country's second largest military contractor after McDonnell Douglas, said its backlog of orders for the F-16 totals $9.8 billion. Last year GD had sales of about $20 billion.

Joseph Stout, a GD spokesman in Fort Worth, said employment at the unit has declined from 31,000 to 20,000 during the last three years. By 1994, employment is expected to drop to about 14,000, he said.

He said that while Air Force orders for the F-16 are declining, the company is looking for new markets overseas. He said the company currently has orders for the F-16 from Israel, Egypt and Pakistan.