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Flight and Fight

National | Lockheed builds a fighter for the world, rescue firms fight bankruptcy, and Napster fights to make money

Issue: "Enron's collapse," Jan. 26, 2002

Aerospace overseas
How far would a cool trillion bucks go in aiding aerospace? That's how much Lockheed Martin may pull down from sales of its new F-35 Joint Strike Fighter (JSF), a next-generation military tactical jet that will replace the F-16. But U.S. taxpayers' stake in the program is only about $200 billion, according to Pentagon officials; the rest of the cash may come from taxpayers in faraway lands. Lockheed is marketing the F-35 heavily in friendly foreign countries, according to Dana Pierce, an international business development official with the firm. In doing so, the aerospace giant is aiming to outgun foreign-made fighters, such as the Gripen, built by Sweden's Saab and Britain's BAE, and the Eurofighter, built by a confab of European firms. To attract foreign buyers, Lockheed is cutting parts-manufacturing deals with companies in countries that the firm hopes will become F-35 buyers. Great Britain already has chipped in about $2 billion for the plane's development. Italy, Norway, Denmark, Canada, and Turkey-many of whom already use and make parts for Lockheed's F-16-also are considering contributions to the F-35 program. Dutch officials last month visited Washington to discuss a potential $1 billion investment in the F-35 program. U.S. governmental approval is needed before foreign firms work on the plane. The bottom line on foreign involvement in the F-35 is ... well, the bottom line. Direct foreign funding of some aircraft components means non-U.S. firms develop new technologies at no cost to Lockheed, said Ms. Pierce, thus driving up net profit on the project. Further, hiring lower-cost foreign workers to build some portions of the plane has helped Lockheed keep the overall cost of the JSF competitive with other nations' new aircraft. The F-35 should start rolling off U.S. assembly lines in 2008. Rich rescuers
Even as Enron teeters on the edge of a spectacularly public death, a team of big-business paramedics is laboring round-the-clock to yank it back from the grave, according to a recent report by Business Week. Weil, Gotshal & Manges, a law firm specializing in corporate bankruptcy, plus more than a dozen other legal outfits, investment banking groups, and management consultants are crunching numbers and filing court papers in an effort to resurrect the energy and trading giant in some new and viable form. Business is good for firms like Weil Gotshal, as well as an elite group of their business-turnaround colleagues. Last year, 255 firms declared insolvency, breaking the record of 176 business bankruptcies set in 2000. Their rescuers form an elite club of perhaps fewer than 20 boutique business-rescue firms that charge up to $700 an hour to form restructuring plans that save companies from complete destruction. The Enron debacle has drawn some of the top players: Weil Gotshal is the most prominent bankruptcy specialist and is scrambling to administer legal CPR. Meanwhile, Blackstone Group, a leading investment banker, is applying financial tourniquets. The bill for all this attempted miracle-working? Weil Gotshal could ultimately rake in about $30 million and Blackstone is charging Enron $350,000 a month-plus a $35 million bonus if the company survives. Next-generation Napster
Napster, the upstart online file-swapping music service, says it's nearly set to unveil its new, lawsuit-chastened incarnation. The company last week launched a six-week online test in which 20,000 U.S. volunteers will try out the company's new paid-subscription format. How will Napster avoid music copyright infringements that in 2000 drove the Record Industry Association of America and the Motion Picture Association of America to sue the firm nearly out of existence? By using upgraded file-recognition technology, says CEO Konrad Hilbers, which will enable the service both to weed out unauthorized music, and to provide subscribers with tunes Napster has negotiated the legal right to sell. Though Mr. Hilbers would offer no official launch date or fee schedule, he said he has toyed with a subscriber price: 50 song downloads per month for about $5 to $10. While that's a huge saving over music-store prices, Napster may not be selling much music-store music. The company has not yet secured rights to sell downloads of songs from major record labels.

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