Lockheed finance GUARANTEE BY GOVT DEMANDED

Press, Volume CXI, Issue 32634, 16 June 1971, Page 17

Lockheed finance GUARANTEE BY GOVT DEMANDED

(N.Z. Preu Association—Copyright)

WASHINGTON, June 15.

Trans World Airlines and two of the nation’s biggest banks said today that they would not invest another dime in Lockheed’s 400-passenger TriStar jet project without a Government guarantee to repay $250 million in bank loans if the company went bankrupt.

Mr C. J. Medberry, chairman of the board of California’s Bank of America, one of the 26 banks which have lent Lockheed $4OO million to make the new jumbo jet, said that “prudent banking practice” forbade his firm putting more into Lockheed without a repayment guarantee. The T.WA chairman, Mr Charles C. Tillinghast, jun., went even further in his testimony on the Administration's save-Lockheed proposal before the Senate banking committee. He said that he would cancel T.W.A.’s order for the TriStar if Congress had not made “satisfactory progress” oh the measure by August 8. Congress is scheduled to go on a month’s recess on Aug-

ust 6. Mr Tillinghast admitted that a cancellation by T.W.A. would bring down the elaborate rescue proposed by the Treasury Secretary (Mr John B. Connally) and would force Lockheed into bankruptcy. “We have no intention to put a pistol to Congress’s head," Mr Tillinghast said of his deadline. But, he asked “what do you say to shareholders if you stay too long and the programme goes belly-up?” , T.W.A stands to lose up to sl2sm in down payments on the TriStar if Lockheed fails, A consortium of 24 banks stands to lose s4oom they have invested in the plane. Nonetheless, the banks and

T.WA. said that they would not put up the additional s2som Lockheed needed to build the sub-sonic jet. Mr Medberry said that only a commitment from the Government could save Lockheed, even if the money could be raised privately. Senate critics of the proposal say that it should be raised from outside the Government, which, they say, has no business underwriting a purely commercial venture. Mr Tillinghase said that T.WA. would switch its orders to the rival McDonnelDouglas DSIO Airbus if Congress delayed its decision foi too long. When Senator William Proxmire (Democrat) said that he did not see how Congress could complete loan guarantee legislation before autumn, Mr Tillinghast replied: “Then the patient may well die on the operating table."

Lockheed, the nation’s biggest defence contractor, has faced a financial crisis since February, when Britain’s Rolls-Royce, the TriStar en-gine-maker, went into receivership.

Mr F. D. Hall, the Eastern Airlines board chairman, defended Lockheed’s decision to choose the Rolls-Royce RB2II engine over the rival General Electric design now being used by McDonnellDouglas. Mr Hall, whose airline has ordered 37 TriStars, said that the Rolls-Royce engine was flexible enough to open the way to a whole family of aircraft stemming from the TriStar, including a transAtlantic airbus.

Both the T.WA. and Eastern heads said they would have to pull out of the project if Lockheed changed its engine contract, because of the delay involved in resuming production.