Word: tristar
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...Price for Error. Lockheed Chairman Daniel Haughton thought that the proposal was impossible, but he was in no position to reject it out of hand. His company has sunk $1 billion into developing its 256-passenger TriStar jet, needs engines to power the plane, and has no chance of enforcing its contract with the old, bankrupt Rolls-Royce. Haughton will negotiate further in an effort to try to improve the proposed terms...
...British government proposed formation of a new company, to be owned 50-50 by it and Lockheed, that would produce RB-211 engines for the TriStar. The partners would pledge by cross-warranty to carry on-the British to keep producing. Lockheed to keep buying. The government would immediately put $144 million into the new firm. That may sound good for Lockheed, as this figure is Haughton's own estimate of the money that will be required to complete development of the engines. But there is a catch: Lockheed would have to pay any further development costs-and British...
Profitable Delay. Lockheed's customers and creditors are anxious to save the company because they have so much money tied up in the TriStar. Eastern Air Lines, TWA and Delta have advanced more than $200 million in down payments for the plane. The airlines were supposed to begin flying the TriStars this November, but their executives will be happy to wait. Burdened with overcapacity now, they figure that they will be able to report higher profits this year if they do not have to pay for an expensive new jet. If it accepts the British terms, Lockheed will probably...
Beyond negotiating a better deal with the British, Lockheed's choices are limited. It could switch to General Electric or Pratt & Whitney engines for the TriStar, but that, too, would mean delay and additional expense. The other visible alternatives are a shotgun merger or financial collapse...
Sitting Duck. The downfall really began in 1966. The Labor government, desperate for export earnings as the pound staggered toward its 1967 devaluation, prodded Rolls to go all out to win an international competition for the engines for the Lockheed TriStar. Rolls responded enthusiastically, spending an estimated $1,000,000 on its sales campaign, including $192,000 on transatlantic air fares alone. In 1968 the company won an order to build 540 engines for $840,000 each. Lockheed executives crowed that it was "the best price deal we ever made." David Huddie, then head of Rolls' aero-engine division...