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Overseas Sales. For Lockheed, big foreign sales are especially critical. The nation's second biggest defense contractor (after General Dynamics), Lockheed has been financially shaky ever since it ran into mammoth cost overruns on the C-5A cargo plane in the late 1960s. It received a near lethal blow in 1971 when Britain's Rolls-Royce, maker of the jet engines for the company's civilian L-1011 TriStar, went bankrupt, and Lockheed eventually lost $300 million, due in part to canceled orders. A recent rescue operation, under which Textron Inc. would have provided $100 million in new cash in exchange for a 46.8% interest in Lockheed, fell through in February. Lockheed two weeks ago announced that its profits for the first half of 1975 nearly doubled from a year earlier, to $24.7 million, but this is based partly on cost calculations that assume Lockheed will eventually sell 300 TriStars; whether it can is in serious doubt. Lockheed still bears a debt load of nearly $1 billion. The current scandal seems as unlikely to unhorse Chairman Daniel Haughton, who has headed Lockheed since 1967, as any of the company's former crises. His defenders on the board of directors believe Haughton is not personally responsible for many of the company's biggest problems.
The company's survival has been due largely to U.S. Government business and to a huge expansion of overseas sales, primarily of the C-130 Hercules troop-and-cargo transport. Foreign sales have grown from $146 million in 1970 (when the political payments began) to $650 million last year. Sales have been high in Iran and Saudi Arabia, and speculation is that many of the payments have gone there.
The Government bailed out Lockheed in 1971, when it agreed to guarantee repayment of as much as $250 million in bank loans to the company; Lockheed currently is using $195 million of the credit. The Government Emergency Loan Guarantee Board, set up to oversee the program, is looking into the possibility that Lockheed violated its obligations by failing to tell the board about the $22 million in foreign payments.
The Government's dilemma is subtly symbolized by the position of SEC Chairman Ray Garrett. As a member of the Loan Board, his chief concern is to ensure that Lockheed survives until the Government is released from its commitment at the end of 1977. But as SEC chief, he would normally be expected to concentrate on seeing that the reporting rules are obeyed, whatever the damage to the company. Garrett's solution: he has disqualified himself from the SEC's deliberations as to what to do about Lockheed.
More generally, the Government has strong political and balance of payment reasons to encourage sales abroad by U.S. arms and aerospace manufacturers, and sometimes has not hesitated to promote them. The Government interest does not, of course, extend to condonement of bribery. But it probably precludes any effective measures to stamp it out, like passage of a law making the payment of foreign bribes a crime in the U.S.