General Dynamics Corp. yesterday announced that it has set aside $500 million to cover cost overruns on two military programs, resulting in a $240 million loss for the company in the second quarter.

The quarterly loss would nearly wipe out the profit made by General Dynamics during all of 1989, when sales topped $10 billion.

The announcement from the nation's second-largest defense company was the latest evidence of the failing financial health of the nation's defense industry. It also underscored the dramatic impact of the Pentagon's tight new "fixed cost" procurement rules on companies that develop major new weapons systems for the military.

General Dynamics said that it is estimating a $450 million pretax cost overrun on the A-12, the U.S. Navy's highly classified next-generation attack plane that will fly from aircraft carriers, and a $50 million pretax cost overrun on a new Army combat radio system known as Sincgars.

Also yesterday, Northrop Corp. announced that its second-quarter earnings statement includes a $150 million write-off on a classified, fixed-price development contract in the company's missiles and unmanned vehicle systems business.

And McDonnell Douglas Corp. said it experienced after-tax losses of $89 million on the stealthy A-12 and $77 million on the fixed-price development contract for the T-45TS Goshawk, a training and simulation aircraft system. McDonnell Douglas did not take a write-off for those programs, saying it will ask the Navy to reimburse it for its unanticipated costs.

Yesterday's reports of massive losses from fixed-price development contracts follows a host of similar problems reported over the past year. Before yesterday the most dramatic was a $300 million charge by Lockheed Corp. on the new P-7 anti-submarine aircraft.

"I'd be hard pressed to find a fixed-price development contract which involved any degree of new technology which didn't wind up being unprofitable," said Wolfgang Demisch, an analyst with UBS Securities.

The fixed-price development contract is a legacy of the Reagan administration, which began forcing contractors to assume part of the risks of development contracts in an attempt to provide incentives for contractors to keep costs down. Many analysts and company officials say that the poor health of the defense industry is due as much to these procurement changes as to the cutbacks in the defense budget.

"Thus far, there has been a greater impact on defense industry profits from fixed-price contracts than from the decline in defense spending," said Lawrence M. Bateman, a defense analyst for Bateman Eichler, Hill Richards in Los Angeles.

Gordon Adams, director of the Defense Budget Project, a bipartisan, nonprofit group, said the problem is that during the development phase of a complicated new weapons system, there are so many unknowns that it is difficult to assess costs at the beginning of a project.

"In the days of wine and roses, {fixed-price development contracts} were okay because the thinking among contractors was: You could lose your shirt in research and development and get well in production," said Adams. However, as the shrinking defense budget forces the Pentagon to delay and curtail production, that strategy will no longer work, he said.

Over the past year, Bush administration officials have voiced concern about the impact of these contracts, and Deputy Defense Secretary Donald J. Atwood has said that in future years the government will pay the full costs of bringing new technology weapons to production. But contracts signed before that decision continue to plague companies.

In yesterday's quarterly financial statement, General Dynamics reported sales of $2.6 billion for the second quarter, a slight increase over sales of $2.5 billion in the second quarter of 1989, when earnings were $58 million ($1.39 a share).

McDonnell Douglas reported earnings of $57 million ($1.49 a share), compared with a net loss of $48 million ($1.25) in the second quarter of 1989. Second-quarter revenue was $4 billion, compared with $3.4 billion in the second quarter of 1989.

Although McDonnell Douglas teamed with General Dynamics on the A-12 and is sharing profits and losses equally, it estimated its after-tax losses on the A-12 -- if the Navy refuses to reimburse it -- at $89 million in this quarter (rather than $450 million) because it uses different accounting methods than does General Dynamics.

Northrop reported income of $29.3 million on sales of $1.4 billion for the second quarter of 1990, compared with a loss of $78.1 million on sales of $1.4 billion in the same quarter the previous year.