General Dynamics Corp. agreed to sell the Navy 14 F16 fighter jets at far less than their normal price in order to keep Northrop Corp. from gaining a U.S. market for its fledgling F20 fighter, Pentagon sources said yesterday.
The Navy announced yesterday that it would buy the F16s, currently in the Air Force but not the Navy inventory, to use as mock "adversary" planes in training exercises. The decision represents a serious reversal for Northrop, which has spent more than $600 million developing the F20 and has yet to sell one.
"The real story is that this is a case of predatory bidding, predatory bidding for the benefit of the Navy," one official said. "At one point, a General Dynamics guy said, 'We'll give you the planes if we have to.' "
A General Dynamics spokesman disagreed, although he said he does not know whether his firm will profit on the contract. "We certainly were competitive, but to even imply it was predatory is unfair and absurd," he said. "We won fair and square."
The Navy also turned down a chance to buy real "adversary" planes, Soviet MiG21s obtained by Vought Corp. from China and offered for the training program.
Pentagon sources said the MiGs cost more than F16s and were too unlike the newest Soviet planes to be useful, while F16s can be modified to fly like the newest MiGs.
The Navy's rebuff of Northrop came despite intense lobbying by California's congressional delegation and represents the latest twist in a long-running and hard-hitting competition among the nation's few producers of jet fighters.
Northrop has experienced particular difficulty in recent years since it began developing the F20 with the encouragement of the Carter administration only to see it fall by the wayside under the Reagan administration.
The Carter administration, trying to limit arms sales to developing nations, encouraged Northrop to develop the F20 as a capable but relatively inexpensive fighter flown primarily for defensive missions.
Under the Reagan administration's more liberal arms-sales policies, Third World nations have been encouraged to seek the F15, F16 and F18 top-of-the-line fighters flown by the U.S. military.
The F20, three of which have been built, is vying directly with the F16 in several Asian and Mideast countries, according to industry and Pentagon sources. Northrop officials said they believed that they could gain enough prestige for success overseas if they sell even a few F20s to the U.S. Navy or Air Force.
General Dynamics apparently agreed with that analysis and agreed to sell 14 planes for $154.7 million, about $11 million per plane. Northrop reportedly wanted about $15 million for each F20.
Industry officials said Northrop may still sell the F20 to the Air National Guard or as an "aggressor" aircraft to the Air Force.
General Dynamics, under investigation for alleged overcharging on submarines in the late 1970s, sells F16s to the Air Force for about $16 million each, officials said.
The Air Force and Navy prices are not comparable because the Navy "aggressor" plane has older radar and no cannon, Pentagon officials said. But General Dynamics certainly included no profit or overhead in its price, they said.
"I don't know how the hell they can stuff all that in an airplane and sell it at that price," one disappointed Northrop official said. "Predatory is right, as opposed to truth in negotiation."
A Pentagon official said the price is undoubtedly going to give General Dynamics "some complications" in foreign sales. "But they figured they can afford that if they can knock out the F20," he added.
Sen. Pete Wilson (R-Calif.), a member of the Senate Armed Services Committee who worked to restructure the Navy budget to give Northrop a shot at the "adversary" contract, could not be reached yesterday. An aide said, "If nothing else, I guess we saved the taxpayers some money."