McDonnell Douglas Shuts Tulsa Plant, Cites Loss of Contract
THE end of the cold war was felt in this midwestern city this month when the Pentagon's largest contractor decided to end its half-century presence here and cut 1,150 jobs.
St. Louis-based McDonnell Douglas Corporation had built and modified aircraft at Air Force Plant No. 3, a nearly mile-long building at Tulsa International Airport, since the plant was erected in 1942. It decided to halt operations there after losing a contract to modify the F/A-18 jet.
``It's always bad when you lose jobs,'' says Farren Bennett, a spokesman for the Metropolitan Tulsa Chamber of Commerce.
McDonnell Douglas announced its decision early in December. Last week, a delegation including Oklahoma Gov. David Walters and Tulsa Mayor Susan Savage visited McDonnell Douglas headquarters to offer $25 million in incentives to keep the plant going. But the company offered no hope of a change of plans.
McDonnell Douglas employed 132,000 nationwide in 1990, but was hit by simultaneous declines in orders both for military and civilian aircraft. The company has shrunk to 70,000 today.
At the McDonnell Douglas Aerospace East division, which works for the military, employment fell to 25,000 from 40,000, says Lee Whitney, a division spokesman. The 1,150 working in Tulsa was already a reduction from 3,200 in 1990, he adds.
Excess capacity was the issue. The company only uses 25 percent of the space it occupies at the Tulsa plant. That was not likely to improve, considering that the Pentagon has reduced spending by 65 percent in real terms since 1985 for procurement and for research and development, Mr. Whitney says.
``We're waiting to see the president's budget proposal for fiscal year '95,'' he adds. However, ``we've been sizing our business and preparing ourself for functioning in a very resource-constrained environment.''
Foreign markets offer no hope of making up the decline in orders by the United States military, Whitney says. The British military budget is one-tenth as large as that of the US, ``and it gets smaller from there.''
The current $70 billion in the Pentagon's procurement and R&D budgets is ``still a large market place,'' Whitney says. McDonnell Douglas believes the reductions in work force will allow it to be cost-effective, he says. Even if McDonnell Douglas had needed its Tulsa operation, there was another difficult hurdle to cross. Congress has directed government agencies to charge fair market value rent to its private sector tenants.
As a result, the Air Force wanted to raise the annual rent McDonnell Douglas pays to $5.4 million from $400,000. On top of that, it wanted the company to pay for half of an environmental cleanup that may total $10 million.
Six months of negotiations had resulted in the Air Force lowering its demand to $4.7 million - still far above what the company was willing to pay - when McDonnell Douglas decided that the plant was excess capacity anyway.
At one time Tulsa claimed to be the ``oil capital of the world.'' But aerospace became the leading industry. It now employs 33,000 - almost 10 percent of the city's 384,000 residents.
Mr. Bennett says the economy is growing in the five-county metro area (pop., 748,000). For instance, 1,700 new jobs were added between September and October alone. But he admits that those are not equivalent to the jobs at McDonnell Douglas, which paid an average of $40,000.
``At least there are some jobs out there,'' Bennett says. ``We take them where we can get them.''
American Airlines, which operates its SABER reservations system here, is the mainstay of the city's aerospace industry. With 9,200 employees, it is Tulsa's largest employer. But total employment is down from 10,000 in 1991, and further layoffs are expected in 1994.
Bennett notes that only 25 of the city's 300 aerospace firms employ more than 75 people. Those firms are growing, he says.