Q: Was there a bias in the US government against the Tigershark (or Northrop) in the early '80's? Was there a bias all along toward the F16 (or General Dynamics)? It seemed that they moved very quickly to sell them as soon as Carter's decision was reversed.
A: The Air Force only gave a contract to Northrop as a legal device for USAF oversight of the program. Northrop needed the USAF participation primarily for legal purposes (there was no mechanism for flight testing, certifying, and doing weapons test of a combat aircraft through the FAA or on civilian test ranges). The USAF was however antagonistic to the F-20 from the very beginning, and for very good reasons from their point of view. The main reasons were:
Aside from the Air Force, Northrop was well connected with the 'California mafia' in the Reagan White House. But the attitude there seemed to be that Northrop had its 'piece of the action' (the B-2 plus other black programs) and therefore there was no broad support for the F-20 as opposed to the F-16. As time went on, and it was clear that the USAF/GD were telling customers they could never get proper logistics support for the F-20 as opposed to the F-16 which was fully supported by the USAF logistics network. Northrop sought to obtain some purchase of the aircraft by the US government so it could have that box filled in. Northrop could get some action through its White House political channels to get the F-20 considered by the Pentagon (the Navy aggressor competition, the penultimate USAF Air Defense Aircraft competition) but the antagonism of the Pentagon prevented any awards to Northrop in these cases.
Q: It seemed to take a long time to get the contract worked out. Lots of discussion about "spares" etc.
A: From a bureaucratic point of view the Air Force just couldn't handle the F-20. Pricing for the aircraft was based on Boeing commercial aircraft practice. As you are probably aware, the cost of aircraft production follows a 'learning curve' as the engineers and assembly workers develop better ways and become more efficient at building the aircraft. The first 10 aircraft cost a lot more than the second 10, and the 500th aircraft can cost a fraction of the cost of the 10th. The US government just pays on a cost plus profit percentage basis, so they pay a lot at first and less later on. However in commercial sales, nobody would pay $ 1 billion (in current dollars) for the first 747, or (in Northrop's case) $ 20 million for the first F-20's when F-16s (on ship number 500) were available for $ 10 million. So Northrop wanted to sell the aircraft like Boeing sold airliners - at a flat price for the first 500. Northrop would lose money on the first 200 aircraft but make it back on the next 300. From the classical government point of view this was incomprehensible - while they never worried much about contractors losing money, they measured profit levels on each annual contract, not over many years, and according to their standard methodology Northrop would be making 'excessive profits' on those aircraft number 300 to 500.
Similarly, Northrop wanted to offer its customers a fixed maintenance cost per flight hour. This was in effect a reliability/maintenance warranty. If the equipment was as reliable and easy to maintain as Northrop and its contractors said, they would make money. If not, the customer would still get his aircraft maintained at the same flat price. Again this was standard practice in the commercial world, but anathema to the Pentagon. They had developed an enormous logistics apparatus, including people with doctorates in logistics, and had military standards, computer programs, and standard squadron manning tables for calculating maintenance cost. The spares also had to be sold to the air force at a price calculated in accordance with government standard cost accounting procedures and audits, each one individually priced and tracked in government inventory, and so forth. So the fixed maintenance price simply could not be accommodated by the bureaucrats. Northrop was negotiating with Federal Express to depot the spares at no cost to Northrop or its customer and to provide 24 hour delivery anywhere in the world of those spares on demand, so that stocks would not have to be held at customer's air bases. All of this was simply too much.
Q. If you were a consultant advising Northrop management in 1985, what would you recommend they do? Drop the F20, or something else?
A: Things were really at a low ebb by February 1985. Based on any objective consideration of the known facts, Northrop would have to cancel the program. Consider:
There was really no objective point in going on. However at this point the Advanced Tactical Fighter competition was looming. The F-20 became a stalking horse for the ATF. Northrop seems to have engineered through its White House connections a competition for a USAF requirement to provide continental air defense of North America (a mission for which either the F-16 or F-20 were absurd). The two decisions became intertwined - from a political point of view, Northrop had to be selected either as the supplier of the government of the F-20 for the air defense role (thereby finally providing US government endorsement of the aircraft and leading to substantial foreign sales to Korea and elsewhere) or as one of the lead contractors to develop the F-22. By keeping the F-20 'in play' for just a while longer, Northrop could leverage the government to give it another major contract on top of the B-2, thereby leading to TV Jones' objective of making Northrop the largest defense contractor.
On the same Halloween day in 1986, the news came in that the F-20 was not selected for the Air Defense role but that the Northrop F-23 was selected for one of the two ATF development contracts. TV Jones' gambit had worked - Northrop was now in the big league bomber and fighter business. The F-20 team went out and had an epic wake that night. The F-23 went into development, but the writing was on the wall. Northrop was allowed to lose a lot more money on the F-23 development and not be selected again, despite (as usual) having the superior design. TV Jones retired, and the new lot that moved in were very interested in maximizing their stock options and bonuses while the B-2 profits rolled in. Their vision, successfully implemented, made Northrop the head of an unfocused by profitable defense conglomerate. Fighter aircraft were not part of that vision.
Working on the F-20 was one of the great experiences in the life of many participants. The lack of the usual government bureaucracy, the co-operative relationship between the company and its co-investing suppliers, the espirit-de-corps, the belief that they were creating an insanely great aircraft - all of this made the workers 'true believers'. Perhaps it can only be compared to the Apollo program or missile programs of the late 1950's in the intensity of the team development experience.
Q: Why was the government so antagonistic to Northrop?
A: Northrop had a focus on aerodynamic and avionics innovation and an unfortunate (though correct) belief in the superiority of its judgment over that of its customers. This was a heritage from its founder and the Flying Wing. Northrop always designed the most outstanding aircraft that were never built (or built by others). It never really learned to become a compliant member of the military-industrial complex, and coming from an urban district in Los Angeles, it never had the Congressional support that contractors in Texas or Georgia enjoyed from their delegations. Northrop managed to antagonize its government customers by its attitude of knowing better than they did what they needed. In overseas sales, Northrop often stumbled, getting caught in bribery scandals where more sophisticated aircraft companies did not.
Perhaps an analogy can be made between Northrop in the world of military aircraft and the pre-2000 Apple Computer in the PC industry. The products were technically superior but the marketing was incompetent. Both were focused on a market segment that went into relative decline (manned combat aircraft in Northrop's case, desktop PC hardware/operating systems in Apple's case). Neither was able to diversify successfully into other market segments. Both abandoned their main focus and reinvented themselves in the late-1990's. Both re-emerged as successful players in their sectors.
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© Mark Wade, 1997 - 2006 except where otherwise noted.
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