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Up in arms: Thomson withdraws its bid, but the fate of LTV's East Camden operations remains uncertain.

Some consider it a victory for national security, temporary though it may be.

Thomson-CSF, 58 percent of which is owned by the French government, last week withdrew its bid to buy the missiles division of LTV Corp.

LTV is one of the largest defense contractors in the United States. The company has extensive operations at East Camden, where it produces the Multiple Launch Rocket System.

Until last week, Thomson had been the court-approved choice to purchase the American defense company. A U.S. Bankruptcy Court judge on April 10 accepted a bid from Thomson and the Carlyle Group to purchase the two major units of LTV Aerospace and Defense Co. for $450 million.

What followed was a massive lobbying effort on each side.

Lobbyists from the Lockheed Corp. and the Martin Marietta Corp., companies that also bid on LTV, pointed out the possible national security dangers of selling defense operations to a foreign-owned entity. Company officials all but waved flags and served apple pie while condemning the sale.

Thomson officials defended their turf, pledging that LTV would still be an American-operated company controlled by a predominantly American board.

Caught in the middle are the company's employees in south Arkansas. About 950 people work for the bankrupt company at East Camden. They have been witnesses to the tug-of-war for control of LTV. Witnesses only.

"Locally, we have no say-so in the matter," says Tim Deaton, LTV's spokesman at East Camden. "Even at our division level, we have no real input."

Deaton says Arkansas employees are taking a wait-and-see approach. They have no choice.

The sale of LTV will be decided by the Bush administration following what could be a lengthy review process by the Department of Defense and other agencies.

Thomson officials say they will restructure their bid to satisfy congressional concerns.

Job Security?

Sen. David Pryor, D-Ark., is a Camden native with an obvious interest in the sale.

He joined several senators in writing a letter to President Bush prior to the court ruling. Pryor was concerned with two aspects of the sale, national security and the effect on jobs in south Arkansas.

"Should the federal bankruptcy court require LTV to accept the Thomson-CSF offer, we urge that you have the CFIUS |Committee on Foreign Investment in the United States~ review process include a fundamental review of our policy on technology transfer," the letter stated. "This review should consider the domestic economic ramifications and the national security impact resulting from this type of sale, the impact on the defense industrial base and the possible subsidization ... by a foreign government."

After the bankruptcy court accepted the Thomson bid, Pryor had a meeting with representatives of the French firm and found they were, in the words of a spokesman, "very positive about retaining jobs in Camden."

Now, the issue may be moot.

Thomson likely will become a minor player in the transaction.

Thomson officials reportedly will revise their bid to leave the Paris company with only a minority interest in the missiles division. The original bid had Thomson buying the missiles division for $300 million in cash from company profits and then selling a 15 percent interest to the Hughes Aircraft Co.

Carlyle was to purchase the aircraft division for $110 million in cash and $40 million in preferred stock and notes. The Northrop Corp. was then to purchase a minority interest in the aircraft division.

The Wall Street Journal reported last week that Thomson has been talking with three large U.S. defense contractors about taking a majority stake. They are the Raytheon Co., the Loral Corp. and Northrop.

The bankruptcy court has given Thomson and LTV a July 31 deadline to reach an agreement or Thomson must cough up $20 million to LTV. Also, Thomson has agreed to indemnify LTV for 70 percent of the value of contracts it might lose if the Defense Department decides that a Thomson-owned division cannot complete its current contracts on security grounds.

Despite a lower-profile Thomson involvement, it is expected that many Pentagon officials will have reservations. The national security questions have been raised too often and too loudly during the past three months.

"Thomson seems hell-bent on coming back," says a representative of the Martin Marietta-Lockheed effort.

The chairmen of Martin Marietta and Lockheed warned in joint congressional testimony in May that "technology is not transferred by members of any board of directors. It is transferred from engineer to engineer, detail by detail, over months and years."

A Hot Issue

Those for and against the sale have been vocal.

A former Pentagon official recently told The Washington Post, "How about having the French government run the U.S. Army? Obviously, you have to draw the line somewhere. I would draw it at |Thomson's purchase of~ LTV. Fundamentally, I just think it's wrong."

The mayor of Grand Prairie, Texas, is Duane McGuffey. The retired military officer wrote a commentary for the Grand Prairie News supporting the acquisition. Grand Prairie is home to LTV.

"Assuming Thomson passes the stringent standards of the DOD and CFIUS for shielding military secrets, their public commitments to Grand Prairie and its citizens have earned my support," McGuffey wrote.

Little Rock was prime lobbying ground in the weeks that followed the court's approval of the Thomson-Carlyle bid.

James Bell, chairman and president of Thomson, visited Little Rock and Camden with assurances that jobs would be retained.

"The opportunity of job growth is there," Bell said on one of his visits.

At the time, Bell was confident that CFIUS would approve the sale and the Bush administration would follow. However, he was surprised at what he called the political activity surrounding the transaction.

"I never thought we would be considered a hostile bidder," Bell said. "But we ended up in a hostile situation."

In late May, Bell toured the LTV facilities at East Camden and met with community leaders.

In June, Bell met with members of the Arkansas congressional delegation to tell Thomson's story. He also wrote a letter to Pryor outlining the company's plans for the Arkansas operations.

"I know you are keenly interested in the future of the facility," Bell wrote. "We are committed to retaining the LTV management and employees and indeed plan on setting activity in motion to provide for job growth.

"... Thomson-CSF is interested in expanding the Camden facility's capabilities. Thomson-CSF and the LTV missiles division have a unique blend of synergies -- LTV makes the missiles and Thomson-CSF makes the system they are used in. This combination enhances the ability of each to compete in a changing marketplace.

"This should provide expanded opportunities for both the Texas and Arkansas operations."


Not long after Bell left Arkansas, two members of the other side swept through Little Rock.

R.W. Taylor, vice president of corporate development at Lockheed, and Charles "Chip" Manor, director of media relations for Martin Marietta, visited the state to lobby for Gov. Bill Clinton's help in blocking the sale.

"The issue of foreign government ownership is critical," Taylor said. "This is an unprecedented case -- a foreign government trying to acquire a prime defense contractor in the United States.

"It's a matter of national security. There is great risk of technology falling into the hands of countries not allied |with the United States~."

Taylor charges that France aggressively exports arms.

Thomson officials counter that although the French government has a majority stake in the company, it does not provide Thomson with financial support or active direction.

Taylor and Manor also visited Camden. They said they could not guarantee that all employees would keep their jobs. Yet Taylor said LTV would "likely be a survivor long term" under the direction of Martin Marietta and Lockheed.

Taylor spent almost eight weeks at LTV headquarters in Grand Prairie.

"When they thought |the buyer~ was us, the mood was ebullient," he says. "Their future was clear."

As it is, the future of LTV and its employees is anything but clear.

"We're staying out of the whole deal," says LTV's Deaton. "And waiting."
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Title Annotation:Thomson-CSF pulls out bid to buy missiles division of LTV Aerospace and Defense Corp.
Author:Webb, Kane
Publication:Arkansas Business
Date:Jul 13, 1992
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