Northrop's sagging image aided by disclosure of 'black' projects.

Northrop's sagging image aided by disclosure of |black' projects

Recent revelations about secret Northrop Corp. military projects could be an attempt by the company and the military to boost the chances for continued funding of Northrop's controversial B-2 project, industry analysts said.

Or, it could mean that Northrop is pressuring the military to declassify its programs to demonstrate that the company is strong financially, despite the loss of the advanced tactical fighter project in April and uncertainty over B-2 funding, they added.

Another possible reason is that the military is feeling increasing pressure from Congress to declassify projects because of previous problems with secret programs, the analysts speculated.

But regardless of the reason or reasons, the disclosures have undoubtedly helped Northrop and its image of a weakened defense contractor because of its recent setbacks, the analysts said.

The consensus among the analysts is that the projects were declassified because Congress is putting more pressure on the military to open up defense spending to more public scrutiny and end its reliance on the so-called black budget for classified projects.

"After the A-12 debacle (a canceled Navy project) it has become extremely difficult to justify keeping a major project in the black," said Wolfgang Demisch, a leading industry analyst for UBS Phillips & Drew securities in New York. "I think it's going to be increasingly difficult for the military to keep projects in the black."

In the past few weeks, the Department of Defense and Northrop have revealed the existence of two major weapons programs that had secretly been under development at the company for the past five years. In addition, Aviation Week & Space Technology, a respected industry journal, reported Northrop is developing a super-secret reconnaissance aircraft that can be used as a support plane for the F-117A fighter or the B-2.

Defense industry analysts in Washington said it may be more than coincidence that the revelations were made now, when the future of the B-2 is being debated in Congress. In 1990, $2.7 billion of Northrop's $5.4 billion in net sales were from the B-2 project.

In addition, analysts questioned why the projects were revealed shortly after Northrop lost the competition for the ATF to Lockheed Corp. The ATF contract could be worth as much as $95 billion in business over the next decade.

"It doesn't do Northrop's reputation any good among its stockholders and Congress if their projects are secret," said Kevin Page, an analyst for the Project on Government Procurement, a Washington, D.C.-based think tank.

Page argued that the disclosures could help the military and Northrop win continued funding of the B-2 because the once-secret projects are tied to the stealth bomber program that is the primary project for the Century City-based contractor.

In early June, the Pentagon revealed the existence of a $15 billion program to build a conventionally armed stealth cruise missile. Northrop is the main contractor on the project.

Two weeks later, Northrop announced it had been awarded a $344 million contract for continued development of a self-guided BAT (an assigned name rather than an acronym) weapon that could be used to arm the cruise missile.

Washington analysts noted the military has recently been promoting the B-2 for its conventional-weapons capability, as well as its nuclear-arms-carrying potential. In revealing the cruise missile, the military said it could be transported and launched from the B-2, as well as many other aircraft.

Northrop denied putting any pressure on the military to reveal the existence of the secret programs and said the decision to disclose a secret project is entirely up to the Department of Defense.

Lt. Col. Mike Gannon, an Air Force spokesman at the Pentagon, said the programs were revealed because to keep them secret would have cost too much money for security. "The Air Force has been getting more and more questions about the existence of such a (missile) program and how it would fit into the B-2 and it was felt it had reached the testing stage where to keep it secret would be too costly," Gannon said.

Washington analysts said they could not point to a specific instance when a contractor put pressure on the military to reveal secret programs for the benefit of the company but noted that it's highly unlikely that officials would acknowledge such a scenario.

"But it's entirely plausible that the real reason the programs were brought to light was because of the B-2 and the future of Northrop," said Matt Hansen, a researcher at the Center for Defense Information. "I would think there is a lot of nervous nailtapping going on right now about the B-2 and it's interesting that these projects came out now when the military and Northrop are trying to get funding for the bomber.

"When you put together the B-2, the missile and the BAT you get a very interesting combination and a lot of development money that was hidden from the public for many years."

The B-2 in its early stages of development was part of the Pentagon's black budget. The B-2 project has been controversial since its inception, with many in Congress saying it is unnecessary and too expensive. Each B-2 costs as much as $865 million to make.

PHOTO : The B-2: Accounted for $2.7 billion of the company's $5.4 billion in 1990 net sales