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McDONNELL DOUGLAS CHAIRMAN ISSUES STATEMENT

 McDONNELL DOUGLAS CHAIRMAN ISSUES STATEMENT
 The following is an employee message from John McDonnell, chairman


and chief executive officer of McDonnell Douglas, regarding the corporation's first quarter earnings that were announced yesterday.
 Our First Quarter Results
 To All Teammates: April 22, 1992
 Today we announced first quarter results that showed continued improvement in financial performance across most of our aerospace programs -- despite the difficulties created by major downturns in the defense and commercial aircraft markets.
 Compared with the first quarter of last year, our commercial aircraft business had a $15 million increase in operating earnings. There were 26 MD-80s delivered in the first quarter, compared with 31 in the first quarter of 1991, but the program was able to achieve higher earnings as a result of improved margins.
 Our missiles, space and electronic systems had a $14 million increase in operating earnings, despite a 12 percent or $95 million reduction in revenues due to post-Cold War spending cuts in several programs by DoD and foreign customers. All three companies in this segment had higher earnings despite lower revenues.
 There was a $79 million drop in operating earnings in military aircraft programs as a whole, but this was entirely due to a single factor -- an $80 million loss provision due to increased estimates of the cost at completion of our fixed-price contract for development and initial production of the C-17. Apart from the C-17, our principal military aircraft programs were all profitable in the first quarter.
 Including the loss provision, our net earnings for the quarter were $52 million, down 10 percent from the first quarter of 1991. Without it, our earnings would have been up 74 percent, to $101 million.
 But there is some good news in the C-17 program too. We are almost out of the woods on the most difficult phase of the program. We have now completed over 90 percent of the work to be done in the development of this new aircraft. We are continuing to meet our cost estimates in Lot 3 production (production aircraft seven through 10), which is very important because it provides a benchmark for projecting production costs in follow-on contracts. Meanwhile, the first test aircraft, T-1, continues to perform well in its flight test program at Edwards Air Force Base.
 Total debt for our aerospace businesses increased by $185 million during the first three months of this year, mainly as a result of reduced commercial aircraft deliveries and bookings. At $2.571 billion on March 31, 1992, our total aerospace debt was still $734 million lower than it had been on the same date last year.
 Looking ahead, we face two critical challenges. The first is to continue to improve competitiveness in our principal markets by driving down costs and improving quality in everything we do. Continuous improvement is a prerequisite for survival in depressed market conditions.
 We also have to carve out a bigger share of the principal markets we serve. Hats off to the missile systems company for beating out General Dynamics to win the bigger share of the just-awarded FY 92 Tomahawk missile purchase. If we are successful in securing a large order for F-15s from Saudi Arabia -- and that is still a big If -- it will help secure employment for several years for 7,000 teammates at MCAIR and many more people at supplier companies, and support the U.S. defense/industrial base at a time of falling defense spending.
 It is especially critical that we win back a larger share of the commercial aircraft market. The global alliance that we are trying to build will do that. It is designed to give us the resources and capabilities we need to compete and succeed across-the-board against Boeing and Airbus.
 We are on the right track operationally and strategically. We must continue to improve to become the preeminent team of customer-focused people creating the highest quality aerospace products and services.
 John F. McDonnell
 Chairman and Chief Executive Officer
 -0- 4/23/92
 /CONTACT: Andrew Wilson, 314-233-1038, or Barbara Anderson, 314-233-2865, both of McDonnell Douglas/
 (MD) CO: McDonnell Douglas ST: Missouri IN: ARO SU:


AL -- LA011 -- 1775 04/23/92 10:48 EDT
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Date:Apr 23, 1992
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