On the first business day after details of President Reagan's new arms-control plan were reported earlier this month, the congressional switchboard lit up with phone calls from anxious defense contractors.
The president's proposal to halve the strategic arsenals of both superpowers and eliminate mobile missiles triggered an "immediate spasm" from America's major weapons makers, who reacted "like anyone with a financial interest in jeopardy," said a Senate aide.
As Reagan begins his summit with Soviet leader Mikhail Gorbachev, many U.S. contractors fear that weapons they have researched and developed for years will become objects of superpower bartering before entering the lucrative stage of full production. In a year of defense budget restrictions and procurement scandals, they view Reagan's proposal as ominous and a potential loss of tens of billions of dollars.
At stake in the president's plan are such ambitious programs as Northrop Corp.'s Stealth bomber, Lockheed Corp.'s D5 submarine-based missile, General Dynamics Corp.'s Trident nuclear submarine and the mobile Midgetman missile.
"If I was a contractor running around with a brand new technology system that costs a lot of money, I'm not sure I'd be optimistic," said David Smith, a defense analyst for Sandford C. Bernstein Corp. "The industry is resigned to taking some lumps."
Among contractors registering the strongest tremors are Boeing Co. and Martin Marietta Corp., two aerospace giants working on the Midgetman missile and banking on multibillion-dollar production contracts. Officials from both firms called and visited Capitol Hill offices earlier this month to gauge the prospects of a recent U.S. proposal to Moscow to ban mobile strategic missiles, according to congressional aides.
Boeing executives were "very upset by what they perceived as negative effects" on Midgetman, an aide said. "They were saying, 'Wow, what does this mean for us?' "
Another staffer said Martin Marietta emissaries from the company's Midgetman project in Denver were "crazed. They don't know what to do. The one system which they were fairly confident of was suddenly a symbolic offering for the summit."
Air Force officials also said they have been contacted by worried Midgetman contractors. But the officers agreed with congressional aides that the approaches have been designed mostly to gather information rather than lobby for the program.
Several contractors said that while their programs could suffer under Reagan's plan, they feel constrained from speaking out for fear that they might appear to be putting pecuniary interests above the nation's arms-control interests. They all asked to remain anonymous.
Other corporate executives, defense industry analysts and consultants interviewed recently were less anxious. They say they believe that the arms-control process is still too uncertain to set off alarm bells in corporate board rooms and view Reagan's plan as an opening statement, portions of which are certain to be rejected by Moscow.
Wolfgang Demisch, a defense analyst for First Boston Corp., said many contractors are "concerned but not aggressively so" because they recognize the difficulties of reaching an agreement and the gap between proposals by the two nations.
Demisch said industry officials are preoccupied with more immediate threats to their pocketbooks, such as the Gramm-Rudman-Hollings deficit-reduction plan and procurement changes under study by a presidential panel.
"Not much is going to come out of the summit except atmospherics," said a California aerospace contractor. "It'll take years of hard negotiations."
The U.S. plan outlined to Gorbachev in Moscow earlier this month by Secretary of State George P. Shultz embraces the general concept of a 50 percent cut in nuclear arms proposed by the Soviets, but differs in key details. No substantial U.S. concessions were offered on research, testing, development or deployment of Reagan's Strategic Defense Initiative, also known as "Star Wars" -- a potential bonanza for U.S. defense firms.
A ban on mobile missiles proposed by Reagan could be costly for the two contractors developing Midgetman, whose price tag has been projected at $44 billion over the next decade.
Boeing and Martin Marietta each were awarded about $50 million to develop competing armored vehicles to tow and launch Midgetman, with the Air Force scheduled to select the best model for full-scale development late next year. Both companies have landed other Midgetman development contracts, including $444 million to Martin Marietta for engineering, assembly and testing of the missile.
But one defense company official said, "Contractors make money when a system is procured."
Reagan's proposed ban might have alarmed Martin Marietta and Boeing, but most industry analysts see little reason for worry. Moscow is unlikely to trade a U.S. weapon still on the drawing board for a Soviet missile in hand, they argue. Pentagon officials say the Soviets have begun deploying the SS25 mobile missile and are expected to field a mobile version of the SS24 in two years.
What is more likely to attract Moscow, analysts say, is the substantial cut in U.S. submarine-based missiles that would be required by Reagan's proposed ceiling of 4,500 warheads on both land- and sea-based missiles.
The Navy plans to outfit at least 17 Trident nuclear submarines by 1992 with a new generation of multiwarhead missiles called the D5, a highly accurate weapon touted as the first U.S. sea-based missile with the potential to destroy Soviet land-based intercontinental ballistic missiles in hardened silos.
If the Navy deployed the D5 -- which can carry seven or eight warheads -- in the 24 missile tubes of each Trident, the U.S. submarine-based missile fleet alone would account for more than 2,800 warheads.
Lockheed has a $5.7 billion contract to supply the Navy with the first lot of 82 D5s by 1991. But an arms-control accord limiting nuclear warheads could halt Navy plans to buy another 578 missiles worth $27.5 billion over the next five years.
"A shorter production run is bound to hurt in the long run," said an industry official.
With the number of submarine-launched missiles capped, the Navy would be expected to curtail plans for new missile-carrying Trident submarines, built by General Dynamics. Plans for the next five years call for at least five new Tridents at $1.5 billion each, added to the current fleet of 12.
Industry officials said aerospace firms could be big losers in any deal to place limits on long-range bombers. The U.S. plan calls capping strategic bomber forces at 350.
The Air Force, according to its estimates, has 570 active and mothballed strategic bombers, including 265 B52s whose navigation and weapons delivery systems are being upgraded by Boeing in a $1.8 billion contract. The Air Force has earmarked at least another $20.5 billion for 100 B1 bombers produced by Rockwell International Corp. and scheduled for delivery by 1988.
Analysts said a 350-bomber ceiling could limit future B1 sales and the B52 modernization program. It also would cloud Northrop's super-secret Stealth, potentially a $20 billion program. Stealth is supposed to hide from enemy radar and be the bomber of the 1990s.
"All companies are concerned when their programs are at stake," said an aerospace executive. "We're in the business to make money."
The Pentagon plans to equip its strategic bombers with air-launched cruise missiles (ALCMs), but the Reagan proposal would halve the 3,000 computer-directed drones now projected. Boeing is near the end of its $1.5 billion contract for 1,739 ALCMs.
Several contractors said that while nuclear arms control might curtail or end strategic programs, their companies could benefit if the Pentagon shifted emphasis to conventional military equipment.
But a defense industry consultant said an arms-control agreement could create a "false security blanket," softening public perceptions of a Soviet threat and fueling a further squeeze on defense spending.
"Detente is bad for defense budgets," said the consultant.