Northrop Corp. has delayed the first flight of the top-secret stealth bomber until August, a four-month slip in the schedule that could run up the cost of the huge program by hundreds of millions of dollars, The Times has learned.
The first flight of the bomber had been set for spring, but two key employees in the firm's bomber organization say the flight was recently postponed. Three Wall Street securities analysts said they, too, have learned of the delay in the program formally known as the Advanced Technology Bomber.
The Air Force said it would have no comment on the report of a delay in the aircraft's first flight. Northrop is not permitted under its secret Air Force contract to make any comments about its bomber, which is designed to avoid detection by enemy radar through a variety of secret technologies.
Air Force officials did confirm, however, that they suspended some stealth contract payments to Northrop after the company recently failed an Air Force review of the purchasing system at its Advanced Systems Division in Pico Rivera, where work on the plane is being conducted.
Northrop has been operating its purchasing system without formal Pentagon approval ever since work began secretly on the bomber sometime in the early 1980s. According to congressional sources, the suspension of progress payments means that the Air Force has found deficiencies in the purchasing system.
Air Force officials declined to say how much money they are withholding from Northrop on the stealth work. The Pentagon is already withholding $130 million from Northrop because of its problems with late deliveries of MX missile guidance systems.
The disclosures about the stealth contract payment suspension and the flight delay raise serious questions about the status of the bomber program, which accounts for more than half of Northrop's revenues, according to estimates by securities analysts.
"It is unfortunate," First Boston aerospace analyst Wolfgang Demisch said. "Northrop doesn't need another cash-flow headache at this point."
Northrop has been forced to write off $214 million against profits in the past two fiscal years on a secret program widely believed by analysts to be the stealth bomber. Those writeoffs were considered to have been the first indications of schedule or technical problems in the bomber program. The company has said it anticipates no further writeoffs on the program.
In the only formal statement ever made about the stealth bomber's cost, former Defense Secretary Caspar W. Weinberger said in 1986 that the cost of purchasing 132 aircraft would be $36.6 billion in 1981 dollars.
The delay apparently results from matters that are highly classified. Two Northrop sources, as well as congressional sources, declined to discuss them. But the Northrop sources, who work on the bomber program in business functions, sharply disputed statements by Air Force officials over the past year that there are no problems in the stealth program. The Northrop sources, citing job security concerns, requested anonymity.
"I am surprised that the Air Force says it doesn't have problems on this program," a source at the House Armed Services Committee said. "The Air Force does have a credibility problem with the Congress on this program."
He added, "This is technologically a very demanding program," implying that such problems were not unexpected.
Although a delay of four or five months would have little cost effect if it occurred early in the program, Northrop has built up its stealth bomber organization to include more than 13,000 employees at its facilities in Pico Rivera and Palmdale. In addition, aerospace analysts believe that subcontractors and associate contractors on the program employ about the same number of people.
Unless the company can somehow get back on schedule, carrying 13,000 employees for an additional four months would cost the government $250 million to $500 million, according to securities analysts and a Northrop source. In addition, subcontractors' and associate contractors' costs would rise in tandem, possibly doubling the cost growth, analysts noted.
"Your principal cost is that your meter just keeps running," Demisch, the analyst, said. "I would say conservatively that kind of a schedule slip would cost several hundred million dollars and possibly much more."
Joseph Campbell, an analyst at Paine Webber, went further, saying, "I hear the total bill is going up by $1.5 billion to $2 billion."
Costs Not Fully Understood
In a statement last May, Air Force Chief of Staff Gen. Larry D. Welch seemed to back away from earlier Air Force statements that the Advanced Technology Bomber program would not experience an overrun.
"I am not going to say that we understand all of the costs and risks associated with the ATB program. Because clearly, that's a naive thing to say at this point in that program," Welch said.