Each afternoon 6,500 employes of Hughes Aircraft Co.'s missile factory here drive past a series of small, sandblasted signs as they head from their fenced compound toward the Nogales highway.
"How Do You," "Spell," "Job Security," the signs read from the sandy border of the access road. And then: "Q-U-A," "L-I-T-Y," "Do It Quality."
It is a painfully apt exhortation for Hughes, which had to shut down assembly lines early last month after the Pentagon complained about shoddy workmanship in three of the nation's premier missiles. The action was highly unusual for the U.S. defense industry but reflected what some officials have called an industry-wide problem of lax controls.
The shutdown made people nervous in Tucson, where Hughes is the largest private employer, but it did not come as a shock, many residents said in interviews last week.
Pentagon whistle blower A. Ernest Fitzgerald told the Air Force more than two years ago about what he calls "catastrophic" management practices at the plant, and last fall The Arizona Daily Star detailed many of the problems.
So several residents said they wonder not why the Defense Department took tough action, but why it waited so long.
Last spring, for example, the Pentagon proposed doubling its annual budget at Hughes' missile division from $1 billion to $2 billion after problems had been reported here and in the Pentagon.
"Why should they build a decent missile?" Fitzgerald, an Air Force management analyst, said last week. "Until now, they've gotten paid for building bad ones, and then gotten paid for repairing them.
"One of my general friends said the other day, 'What's wrong with Hughes?' " added Fitzgerald, who was once fired for exposing cost overruns on another Air Force program. "I said, 'What's wrong with the Air Force to let this go on so long?' "
Until recently, the Air Force dismissed Fitzgerald's complaints and impeded his inquiries, he has said, while Hughes rejected all criticism. On July 19, Hughes President D.H. White said in a letter to The New York Times that "what is involved . . . is not correcting 'shoddy workmanship,' but achieving a higher degree of perfection."
Now, however, the Air Force is withholding progress payments to Hughes, which has transferred its plant manager and closeted its workers for weeks of analysis and improvement efforts. Hughes' recent openness about its problems has won praise from workers, city residents and Pentagon officials.
"If they wanted a change in attitude, they're getting it, I guarantee you," one Hughes engineer said last week.
The young engineer and a colleague were discussing the company's troubles over lunch at a Mexican restaurant. They said the firm has grown too rapidly under the Reagan administration's military buildup and has been pressed to move complex projects from development into production too quickly.
More serious, they said, is a complacency in top management fed by years of cost-plus contracts, when the government paid for all mistakes. And the laxness has been encouraged, they said, by a warm and forgiving relationship with the Air Force, hundreds of whose officers have retired to Tucson or southern California to work for Hughes.
The Hughes Aircraft Co., based in southern California, is named for billionaire Howard Hughes, its original owner. Hughes took over Air Force Plant No. 44 in Tucson in 1951 and, although the factory is still owned by the Air Force, Hughes Aircraft has operated it since.
"I remember how excited everyone was about it," said Abbey Grunewald, a retailer who has lived here since the 1940s. "Here was this rinky-dink town in the middle of nowhere . . . . It was the biggest thing that had ever happened."
"Howard Hughes used to spend a lot of time here, too," she added. "He'd fly in with his entourage. It wouldn't be in the papers, but somehow everyone would know."
The company, which despite its name has never built an airplane, built thousands of Falcon air-to-air missiles in the Tucson plant.
After Hughes died, the company stayed in the hands of the nonprofit Howard Hughes Medical Institute, where it remains today. That unusual arrangement frustrated the Internal Revenue Service, and several employes said it also allowed top management to operate without having to be accountable to any stockholders.
At the same time, though, it allowed the company to plow profits into research instead of dividends. In the 1970s and early 1980s, the company won contracts for increasingly sophisticated radars, targeting devices and tactical missiles -- the TV-guided Maverick, the imaging infrared and laser-guided Mavericks, the $1 million long-range Phoenix and the Advanced Medium-Range Air-to-Air Missile (AMRAAM).
Aided by the administration's rapid increases in military spending, sales of the company's missile group grew from $415 million in 1980 to $700 million in 1983 to the $900 million that had been expected for this year. In Tucson alone, employment grew from 3,900 in late 1981 to 6,500 today.
But with growth came trouble. Critics said that the infrared, or heat-seeking, Maverick could not tell a tank from a burning bush in wartime and that its tests had been rigged, and the program fell behind schedule. The AMRAAM likewise fell behind.
On May 19, 1982, Fitzgerald sent his Air Force superiors a memo saying there were serious problems at Hughes. He said that workers were spending 17 hours to do an hour's worth of work, at which rate, he said, they would have to charge more than $100,000 for a color television set.
His civilian superiors gave him permission to investigate further, he has said in congressional testimony, but the generals in charge frequently would not give him the financial data he needed. But by the spring of 1983, Fitzgerald and his deputy, Thomas S. Amlie, believed that they knew enough to recommend that the Air Force shut the Tucson plant.
Last fall The Arizona Daily Star in Tucson reinforced Fitzgerald's complaints, reporting allegations of mismanagement, fraudulent time card forgeries and poor quality control.
The newspaper found that Hughes was the third most active employer of retired military officers in the defense industry. According to the Star and other sources, Hughes had hired Malcolm Currie, an under secretary of defense in charge of weapons development who became a company vice president; a lieutenant colonel who had headed the controversial Maverick test program; three Maverick program managers; two Defense Department auditors who had been in charge of monitoring Hughes contracts, and more than 200 others in just a two-year period.
The day after that article ran, retired Lt. Col. A. Grant Hird began working for Hughes. Hird had been, until two months earlier, the Air Force plant representative in Tucson.
Asked whether he regards the so-called "revolving door" between the military and industry as a problem, Hird said last week, "I would rather not say on that. I guess you know my opinion without my saying."
The newspaper also reported that Hughes employes were building cable television receivers and jewelry on government time and with government materials, which the company denied. Company officials also said that Fitzgerald's 17-hour allegation unfairly judged hand-assembled early models of new missiles by production-line standards.
But Air Force officials apparently were beginning to believe that all was not well at Hughes. Air Force Secretary Verne Orr met with Hughes officials last fall and told them improvements had to be made.
Last spring, FBI and Defense Department investigators seized records and parts from Rausch Manufacturing Co. in St. Paul, Minn., which supplies Phoenix missile parts to Hughes. Daniel Schermer, an assistant U.S. attorney in Minneapolis, last week would say only that the investigation, still going on, involves possible "fraud against the government," but other sources said that other Hughes suppliers also are under investigation.
But if the Pentagon had doubts about Hughes products, they were not reflected in its fiscal 1985 budget request to Congress. The administration proposed doubling spending on the infrared Maverick, from $303 million to $608 million; expanding the AMRAAM program from $58 million to $431 million; increasing spending on Phoenix from $333 million to $472 million; tripling the laser Maverick budget, from $36 million to $110 million, and increasing the budget for the Army's TOW antitank missile, the third product involved. from $217 million to $298 million.
Altogether, the tactical missile budget for Hughes more than doubled, from just under $1 billion to just under $2 billion. Navy officials assured congressional committees that problems with the Phoenix had been resolved.
But a "tear-down" of a Phoenix missile in June, a routine operation for a relatively new program, showed otherwise, the Navy said, revealing poor soldering, metal filings and other debris and shoddiness. That triggered a series of blows to Hughes that continued into last week, as the Pentagon examined and claimed to find flaws in one Hughes system after another: the TOW, the infrared Maverick, radars for the nation's top-of-the-line fighter jets and optical devices for bombing.
Tucson Mayor Lewis Murphy, a conservative Republican, said he wonders whether "a mountain is being made out of a molehill." Murphy telephoned the office of Sen. Barry Goldwater (R-Ariz.) last week urging the senator to make sure no political skulduggery is afoot.
A senior Pentagon spokesman, speaking to reporters on condition that he not be identified, said the "tear-downs" and subsequent suspension of payments show that the Air Force quality control system works. Senior officers are inspecting a Hughes get-well plan, due momentarily, and they are expected to resume payments gradually on some programs, while seeking second sources to manufacture some missiles and so provide competition for Hughes.
In Tucson, meanwhile, the level of concern is less than might be expected, especially for a city that has absorbed thousands of layoffs in nearby copper mines.
"If people felt the place was going to close down, there would be a lot of alarm," said David A. Yetman, a Democratic Pima County supervisor. "I haven't detected that. I think they figure, what the heck, it's like any other government contract; it's cost-plus, open-ended, a minor slap on the wrist and then business as usual."