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The table that I have in the statement indicates that recently pressure on U.S. procurement policy has become especially intense. In 1977 the United States is confronted with the pending phaseout of four major aerospace projects and thus with the opening-up of four major production lines: (1) the B-1, which is produced by Rockwell International; (2) Minuteman III, which is produced by Boeing; (3) the C-5A and C-141 modification programs; which are produced by Lockheed-Georgia, and (4) the A-7, which is produced by Vought. Rockwell will receive partial compensation through its space shuttle program, which will handle the particular problem of how to preserve this particular contractor. Boeing, more significantly, will probably receive compensation through the MX or the cruise missile program.

I myself happen to be in favor of the cruise missile program. But according to the argument that I present in my prepared statement, policymakers will not really have a full array of options. They will not really be free to decide if they want a cruise missile program or not or if they want a Boeing, air-launched cruise missile program as opposed to a sea-launched cruise missile program.

According to this argument there will be enormous pressure to give Boeing either the MX or the cruise missile program, given the phasing out of the Minuteman III, and the important question is, is this a good thing?

Lockheed-Georgia and Vought face a far more uncertain future and raise very serious problems. I think it is significant that some people are considering that, in order to preserve Lockheed-Georgia, there should be adaptation of the C-5A to become a missile launching

program.

I myself would discourage this. I hardly think this is a cost-effective way to deliver missiles on the Soviet Union. However, given the difficulties of Lockheed-Georgia, we can predict that there will be pressures for this sort of weapons program.

Vought also faces a serious problem. In this case, there will be pressure to permit Vought to export the A-7 to foreign countries, some of which exports might create enormous diplomatic difficulties. The most recent case in that regard has been the possibility of exporting A-7's to Pakistan. This clearly would have caused great difficulties in our relationships with the new Government of India.

In the public debate over weapons policy and changing priorities, four major alternative paths for major production lines have been proposed. I discuss these four in my statement. Two of them I do not think are promising; two I think have a considerable amount of promise.

One proposal has been to convert production lines from aerospace to nonaerospace production. Mass transportation and disposal systems are the alternatives most often suggested. However, the normal experience of aerospace corporations with such conversions has been quite limited in scope or in success, and their executives generally take a pessimistic view of the possibilities. Significant progress down this path in the next decade is unlikely.

A second proposal has been to convert production lines from military aerospace to nonmilitary aerospace production. Here, commercial airliners are the alternative. Again, the actual experience with such con

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versions is not encouraging and even suggests that the cure is worse than the disease.

Thus, General Dynamics in the early 1960's entered the commercial airliner market with the Convair 880, only to lose so much money that the F-111 contract was needed to save the corporation from bankruptcy.

Similarly, Lockheed in the early 1970's entered the market with the L-1011, only to drive Rolls Royce into bankruptcy and consequently Lockheed itself into a position in which only Government guarantees of bank loans saved it from bankruptcy.

Furthermore, even the extraordinary Government effort to save the dubious L-1011 has not solved the problem of Lockheed-Georgia, to say nothing of any eventual problem of Lockheed-Missiles and Space, which is located in northern California. For the L-1011 is produced at a third, mainly commercial, Lockheed division, Lockheed-California, which is located in southern California.

As for Boeing, at first glance conversion might seem more plausible, since the company is already an established producer of superior commercial aircraft. But Boeing's major candidate for a new commercial airliner would be the SST, which was cancelled by Congress in 1971. And, as the recent controversy over American landing rights for the Anglo-French Concorde indicates, an American SST would face intense opposition from groups within the American public. But I would predict that, if for one reason or another the administration or Congress were to cancel the MX or the cruise missile, we would then see enormous pressure to produce an American SST. The only other major possibility available to Boeing is the C-141, a short takeoff and landing aircraft. If Boeing were to get that contract, Douglas (of McDonnellDouglas), which is trying to produce a similar aircraft, the C-15— would be in considerable difficulty.

Finally, let me focus on what I think are the two most promising possibilities for reshaping our defense production base. One would be to collapse defense production lines from 10-counting Northropinto a smaller number-this seems to be Jacques Gansler's position.

A persuasive case can be made that the United States needs new aerospace systems in only four production sectors, fighter-bombers and fighters; missile systems, particularly submarine-launched ones; STOL transports; and space systems; in addition, it needs a capacity to replace or improve units of already existing military transports and commercial airliners. If so, the United States needs only seven or eight major aerospace production lines.

The most attractive candidates for preservation would be Boeingstrong in missile systems and commercial airliners Lockheed-Missiles and Space-submarine-launched missile system-McDonnell division-fighter-bombers and fighters-Douglas division-commercial airliners-Rockwell International-space systems-and Northrop strong in fighters for export.

Two other strong possibilities are Grumman and General Dynamics-fighter-bombers and fighters. Grumman, despite its recent troubles with the F-14, has a distinguished reputation for producing superior naval aircraft and space vehicles. And General Dynamics, despite its earlier troubles with the F-111, seems to have produced a fine aircraft in its F-16.

Two other production lines, Lockheed-Georgia and Vought, have in recent years shrunk considerably in terms of contracts, production volume, and employment. It might be best not to award any new major contracts to these two production lines but rather, with the aid of subcontracts and repair contracts, to let them decrease in size through attrition, in an orderly way, and with a minimum of disruption to the corporations and their employees. This means that there should be no contract for the so-called stretching of the C-141, which is being considered by the Air Force at this time. Certainly, there should be no contract for adoption of the C-5A for use as a platform for launching cruise missiles.

A second promising possibility for restructuring the defense industry would be to constrict production lines from $1 billion or more each in annual weapons sales to a smaller amount. Relatedly, a major weapons system would be shared between production lines, much as, in the case of the F-111, General Dynamics produced most of the airframe, but Grumman produced the rear fuselage. This approach would make it easier for the administration or Congress to avoid massive disruptions of a region when an old major contract is phased out, to reallocate funds among production lines by more incremental and gradual means, and to "fine tune" the overall process of defense production. In addition, an American aerospace industry composed of 10 or so smaller producers sharing major contracts would preserve all the advantages of competition, including multiple sources of innovation.

Finally, these last two paths for the aerospace industry might have another advantage in a longer perspective. For in the next decade U.S. policymakers may see a need to place great emphasis on a variety of PGM's and other new modes of weapons, as opposed to a continued emphasis on aircraft. A smaller and leaner American capacity for airframe production would permit U.S. policymakers to make this transition and to achieve a better defense for America without imposing sudden distress upon particular Americans, upon those airframe companies and employees which have provided us with our national defense in the past.

[The complete written statement of Dr. Kurth follows:]

Statement by James R. Kurth, Associate Professor of Political

Science, Swarthmore College, before the Joint Committee on Defense
Production, September 30, 1977.

Mr. Chairman.

am grateful to you and the Committee for the

invitation which you have extended me and for the opportunity to appear before you to discuss some issues raised by American defense production. It has always been important for the United States to obtain the best defense, including the best mix of weapons systems, for the money available. It is especially important today because of the impact of (1) the increase in the quantity and

three recent developments:

sophistication of the weapons systems deployed by the Soviet Union, (2) the increase in the fiscal constraints facing the U.S. government in a time of severe inflation and (3) the introduction of precisionguided munitions (PGM's), which some defense analysts believe will make many aircraft obsolete in the future, much as the airplane made the battleship obsolete in World War II and as the machine gun made the cavalry obsolete in World War I.

The recent history of U.S. defense procurement and the present structure of the American defense industry give reasons to think that the weapons systems we buy may not always be the best ones for the challenges that we face, that they may not always be the most cost

effective or provide "the best bang for the buck."

The most familiar

In the past decade and a half, the United States has bought a number of expensive military systems which were extensively criticized at the time of their procurement as not being cost-effective and which have continued to be criticized as poor investments. examples have been the F-111 fighter-bomber, the C-5A military transport, and two systems which were eventually cancelled but not before several billion dollars had been spent upon their development and production, the ABM system and the B-1 bomber.

In addition, the United States has procured progressively more accurate ICBM systems (MIRV's), which some defense analysts think have had the effect of destabilizing the strategic arms race, because of their "first-strike" capabilities, leaving us with less rather than more

security.

Why did the U.S. government buy these weapons systems? In each case, of course, there were official explanations given that the systems were of military value. But the real question is did they provide the most military value for the money expended, and there are good reasons to think that they did not.

It is possible to construct an alternative explanation for these
one that focuses on the

and other cases of U.S. defense procurement,

structure of the American aerospace industry and on the needs of particular aerospace producers at particular times! This alternative explanation becomes rather plausible if we attempt a somewhat systematic overview of two factors for the period from 1960 to 1977:

(1) aerospace systems which are military or military related (i.e.,

military aircraft, missiles, and space systems) and (2) aerospace

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