New Plant Closings Cloud Mcdonnell's Future in Missiles New Contracts, Sale of Business Possible
Christopher Carey Of the Post-Dispatch, St Louis Post-Dispatch (MO)
McDonnell Douglas Corp.'s decision last week to close two factories raises questions about the future of its missiles business and its 1,000-employee plant in St. Charles.
Although McDonnell's missiles business is still strong, the loss of a key government contract in September has limited its growth prospects.
The company now depends largely on international sales of its Harpoon missile, made in St. Charles.
"They have a presence there, and it's a profitable one," said Wolfgang Demisch, who follows the company for BT Securities in New York.
McDonnell also hopes to interest the U.S. government in an advanced version of the Harpoon-derived Standoff Land Attack Missile.
McDonnell is in the running for a missile contract worth more than $1 billion that the British government plans to award next year.
One of the plants the company will close later this year makes the Tomahawk cruise missile, which soon will be produced exclusively by General Motors Corp.'s Hughes Aircraft unit.
Hughes won the competition to become the government's sole Tomahawk supplier, a deal that could be worth as much as $1.5 billion.
The McDonnell plant, in Titusville, Fla., will run out of Tomahawk work in August. About 1,000 people at the operation west of Kennedy Space Center will lose their jobs over the next five months.
McDonnell also is closing a plant in St. Charles that makes wire bundles and ground-support equipment for aircraft and missiles systems.
The company will lay off 300 people there and transfer 500 to other operations in the St. Louis area.
McDonnell probably will remain in the missile business despite its diminished role, Demisch said.
But it ultimately might sell out to a bigger player and concentrate its resources on other areas, he said.
"It is quite plausible that at some point or other they would dispose of that," he said.
Hughes, Raytheon Co., Loral Corp., Rockwell International and Lockheed Martin all might be interested in the business, Demisch said.
"Any one of them would be a potential counterpart to a transaction," he said.
McDonnell, however, is optimistic about the outlook for the missile business as an independent concern. …