Grumman Corporation - Company Profile, Information, Business Description, History, Background Information on Grumman Corporation

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History of Grumman Corporation

The manufacturer of the U.S. Navy's F-14 "Top Gun" fighter aircraft, Grumman Corporation was acquired by Northrop Corporation, another U.S. aerospace manufacturer, in 1994, ending 65 years as producer of military aircraft and electronic surveillance equipment and beginning a new era as a component of Northrop's organization. In addition to manufacturing aircraft and military hardware, Grumman manufactured postal and firefighting vehicles.

Leroy Grumman left the Navy in 1920 to become a test pilot and chief engineer for Grover and Albert Loening, who manufactured an airplane called the Fleetwing. In 1923, Vincent Astor's New York-Newport Air Service Company lost one of its Fleetwings over the ocean. Cary Morgan (a nephew of J.P. Morgan) was killed in the accident, which a later investigation revealed was caused when Morgan fell asleep with his foot obstructing the pilot's controls. Nevertheless, bad publicity surrounding the accident put Astor's company out of business. Grumman and a fellow worker named Leon Swirbul purchased the airline from Astor and later transformed it into a manufacturing company, building amphibious floats for Loening aircraft.

Unlike other aircraft manufacturers who entered the business as barnstormers or hobbyists, Leroy Grumman was a graduate of the Cornell University engineering school. Leon Swirbul was a product of the disciplined military aviation program. Both men continued to work for the Loening brothers while operating their own company, which they had named Grumman Aircraft Engineering. However, when Keystone Aircraft purchased Loening Aeronautical in 1928, the entire operation was moved to Keystone's headquarters in Bristol, Pennsylvania. Grumman and Swirbul decided to remain in Long Island and operate their own company.

After building a number of experimental airplanes, Grumman Aircraft manufactured its first fighter, designated the FF-1, for the Navy in 1932. This design was improved upon in subsequent models and led to the development of the successful F4F Wildcat, Grumman's first fighter with folding wings. With folded wings, twice as many airplanes could be stored on an aircraft carrier as before. The company also manufactured a line of "flying boats" called the Goose and the Duck.

Coincidentally, a second factory for manufacturing warplanes was dedicated by Grumman on the morning of December 7, 1941, as the Japanese were bombing Pearl Harbor. At the outset of the war Grumman had an advantage over non-military manufacturers because the company didn't require retooling. Automobile manufacturers, for instance, had to be converted from the production of cars and trucks to battle tanks and airplanes, assembly lines for sewing machines had to be refitted to produce machine guns. Grumman's only task was to increase its output and develop new airplane designs.

During the war, Grumman developed new aircraft such as the amphibious J4F Widgeon, the TBF Avenger naval attack bomber, and a successor to the Wildcat called the F6F Hellcat. The Hellcat was developed in response to the Mitsubishi Zero, a highly maneuverable Japanese fighter with a powerful engine. Grumman aircraft were used almost exclusively in the Pacific war against Japan, and provided the American carrier forces with the power to repel many Japanese naval and aerial attacks. U.S. Secretary of Navy Forrestal later said, "In my opinion, Grumman saved Guadalcanal."

No other aircraft manufacturer received such high praise from the military. Grumman was the first company to be awarded an "E" by the U.S. government for excellence in its work. The award further increased the high morale at Grumman. The Grumman company turned out over 500 airplanes per month. To maintain that level of productivity the company provided a number of services to its workers, including day care, personnel counseling, auto repair, and errand running. In addition, employees were substantially rewarded for their efficient work. The company had always had an excellent relationship with its employees, largely as a result of policies set down by Leon Swirbul, who oversaw production and employee relations while Grumman involved himself in design, engineering, and financial matters. By the end of the war, Grumman had produced over 17,000 aircraft.

The sudden termination of government contracts after the war seriously affected companies such as Boeing, Lockheed, and McDonnell Douglas, as well as Grumman. Many aircraft companies first looked to the commercial airliner market as an opportunity to maintain both their scale of operation and profitability. The market suddenly became highly competitive. Although Grumman manufactured commercial aircraft, it elected to remain out of the passenger transport business. Those companies which did manufacture commercial transports lost money, and some even went out of business. Grumman continued to conduct most of its business with the Navy. In addition to its F7F Tigercat and F8F Bearcat, the company developed a number of new aircraft, including the AF-2 Guardian and the F9F Panther and F10F Jaguar, Grumman's first jet airplanes.

During the 1950s, Grumman developed two new amphibious airplanes called the Mallard and Albatross; new jets included the Tiger, Cougar and Intruder. It also diversified its product line by introducing aluminum truck bodies, canoes and small boats. In 1960, Grumman's co-founder Leon Swirbul died.

Grumman created a subsidiary in 1962 called Grumman Allied. The subsidiary was established to operate and coordinate all of the company's non-aeronautical business, and allow management to concentrate on its aerospace ventures. When the National Aeronautics and Space Administration (NASA) completed its Mercury and Gemini space programs, it turned its attention to fulfilling the challenge made by the late President Kennedy, namely, landing a man on the moon before 1970. The Apollo program called for several moon landings, each using two spaceships. The command modules, manufactured by McDonnell Douglas, were intended to orbit the moon while the lunar modules, built by Grumman, landed on the moon. Grumman's contract with NASA specified construction of 15 lunar modules, ten test modules and two mission simulators. Only 12, however, were actually built.

Design problems already faced by Grumman engineers were compounded by their limited knowledge of the lunar surface. The lunar modules had to meet unusual crisis-scenario specifications, such as hard landings, landings on steep inclines, and a variety of system failures. Nine thousand Grumman personnel were devoted to the lunar module project, representing a reorientation of the company's business--Grumman had entered the aerospace industry.

The United States made its first manned moon landing in July 1969, with several more to follow through 1972. Grumman's spaceships performed almost flawlessly and represented a new and special relationship between the company and NASA. Grumman was later chosen by NASA to build the six-foot thick wings for the agency's space shuttles.

Through the 1950s and 1960s, Grumman maintained a good relationship with the Pentagon. While that relationship continued to be good during the 1970s, it was marked by a serious disagreement over the delivery of 313 of Grumman's F-14 Tomcat fighter jets. At issue was who was to pay for cost overruns on a government-ordered project--the company or the taxpayer? Grumman was losing $1 million per F-14 and refused to deliver any more to the Navy until its losses were covered. The company pleaded its case in full-page advertisements in the New York Times, The Wall Street Journal, and the Washington Post. Grumman argued that completion of the contract under the present terms would bankrupt the company. The matter was later resolved when the Defense Department agreed to cover Grumman's losses, and the company agreed to a new contract procedure which would automatically review project costs on an annual basis and make adjustments when necessary.

Grumman's swing-wing F-14s became operational in 1973 and soon established itself as the standard carrier-based fighter jet for the U.S. Navy. Assigned to intercept attacking jets and protect carrier battle groups, the Tomcat had variable geometry wings that swept back when it was sprinting and swept out when it was landing. It could independently track 24 targets and destroy six of them at a time. F-14s performed successfully in intermittent raids and dogfights with Libyan pilots over the Gulf of Sidra.

In addition to the F-14, Grumman manufactured the E-2C Hawkeye, an early warning airborne command center able to track over 600 objects within three million cubic miles of airspace. The Israeli Air Force used E-2Cs to direct its air battles with Syrian pilots over Lebanon's Bekaa Valley in 1982. During those battles, Syria lost 92 of its Soviet-built MiGs while Israel lost only two of its jets. In the Falkland Islands War, Britain's HMS Sheffield was sunk by an Exocet missile launched from an Argentine Super Etendard attack jet. U.S. Navy Secretary John Lehman asserted that if the British had an E-2C in the Falklands, they would have had unchallenged air superiority and would not have lost any ships to Exocet missiles. Both examples illustrated the value of the Hawkeye.

The Navy's A-6 Intruder attack bomber and EA-6B Prowler radar jammer were also manufactured by Grumman, which also re-manufactured 42 General Dynamics F-111 bombers for the U.S. Air Force. The new aircraft, designated EF-111, was designed to jam enemy radar surveillance "from the Baltic to the Adriatic." According to Grumman's chairperson Jack Bierwirth, "it's one of the great exercises to fly this plane against the E-2C." This volley of electronic countermeasures showed the extent to which Grumman's only competition for a long time was itself.

The electronic sophistication of Grumman's aircraft invited criticism from military reformers who argued that modern weapons had become too complex and therefore unmanageable. In the 1970s, these reformers, led by Gary Hart, widely publicized this view. The ultimate success of their movement could have had disastrous effects for Grumman. Following the costly disagreement over the F-14, the company's long term viability was threatened even more by these reformers under the Carter Administration.

Continued attempts to sell F-14s to foreign governments failed, as did lobbying efforts to sell more of the jets to the U.S. Navy. Consequently, Grumman made an effort to diversify its product line. The strategy was ambitious but failed. The company's Dormavac freight refrigerators had no market (losing $46 million), and its Ecosystems environmental management and research venture was unable to turn a profit, resulting in losses of $50 million.

In 1978, Grumman acquired the curiously named Flxible bus division from Rohr Industries. Many of the buses developed cracked undercarriage components, prompting some customers (such as the City of New York) to pull all of their Flxible buses out of service. Grumman filed a $500 million suit against Rohr, alleging that details of design flaws were not revealed prior to the sale. The suit was dismissed in court. Grumman's losses in this venture approached $200 million before the entire division was sold to General Automotive in 1983 for $41 million.

In 1981, Grumman faced a hostile takeover from LTV Corporation, a steel, electronics, and aircraft conglomerate based in Texas. Grumman's workers mobilized an enthusiastic demonstration of support for their company's resistance to LTV. Leroy Grumman, who retired from the company in 1972, raised employee morale when he voiced his support of the opposition to the LTV takeover attempt. A U.S. Court of Appeals later rejected LTV's bid to take over Grumman on the grounds that it would reduce competition in the aerospace and defense industries.

Leroy Grumman died the following year after a long illness. It was widely reported that Grumman was blinded in 1946 by a severe allergic reaction to penicillin administered during treatment of pneumonia. In fact, Grumman was not blinded. His eyesight did, however, begin to deteriorate many years later as his health began to wane.

The Grumman Corporation faced another threat when it became involved in a scandal involving illegal bribes to government officials in Iran and Japan. After the Lockheed Corporation was accused of such improprieties, the sales practices of other defense contractors such as Grumman came under scrutiny. During the investigation of Grumman, a Japanese official named Mitsuhiro Shimada committed suicide.

After the investigations subsided, the companies in question were free to concentrate all their efforts on more constructive matters. Grumman engineers, however, had something highly unconventional on their drawing boards. Grumman's chairperson, Jack Bierwirth, was credited with saying, "If you don't invest in research and development, you damned well aren't going to accomplish anything." With that in mind, Grumman, in conjunction with the Defense Advanced Research Projects Agency, developed a special jet called the X-29 specifically to demonstrate the company's advanced technology. The revolutionary feature of the X-29 was that its wings swept forward, appearing to have been mounted backwards. This feature gave the X-29 superior maneuverability. To counteract the inherent instability of such a design, the X-29 was equipped with a Honeywell computer system which readjusted the canards (wing controls) 40 times a second, maintaining stable flight.

The X-29 was tested under the auspices of NASA during 1984 and 1985. Never intended for mass production, only one X-29 was built as a "technology demonstrator." Bierwirth described projects such as the X-29 as "marrying electronics with computer programming, then putting wings on it."

John Cocks Bierwirth, a former naval officer, became Grumman's chairperson and chief executive officer in 1976. Regarding his mission as "essentially building the corporation of the future," Bierwirth divided Grumman's operations into nine divisions under centralized management. According to Bierwirth, Grumman's future was with aircraft, space, and electronics. However, work on such projects as a new post office truck were designed to maintain a stable and diverse product line. Bierwirth claimed, "We think we are a good investment for people who are interested in the long term and are willing to grow with the company; Grumman is not a three month in-and-out investment."

Grumman's investments in research projects, however, did not prove as successful as Bierwirth hoped. Throughout the 1980s, with the notable exceptions of contracts for F-14 fighters and A-6 attack aircraft, Grumman was hobbled by research projects and product introductions that failed miserably. The company's diversification into the production of buses began the decade's string of failures, portending further mishaps to follow. The 851 Flxible buses purchased by New York's Metropolitan Transport Authority in 1980 were withdrawn from service three years later after repeated breakdowns, a failed venture for which Grumman paid $40 million in 1988 to settle legal claims against it. Other problems riddled the company, none larger nor more damaging in the long-term than its overwhelming dependence on government-funded military contracts. As Grumman's debt rose, exacerbated by research projects that swallowed vast amounts of cash and generated little profit, the company increasingly weakened, staggering, by the end of the decade, on untenable ground.

In 1988, the company named a new chief executive officer, John O'Brien, whose selection augured a return to more profitable days. O'Brien later became chairperson but resigned in 1990 amid allegations of illegal activities. He later plead guilty to bank fraud stemming from an investigation into bribery and political corruption, adding the public relations scandal and the financial charges that followed to Grumman's host of troubles. O'Brien's replacement was Renso L. Caporali, a Grumman employee since 1959, who began steering the embattled company in a positive direction.

Under Caporali's stewardship, Grumman experienced wholesale changes. The company's debt, which had risen to as high as $884 million in 1989, was trimmed 60 percent in the first three years of his tenure, payroll was reduced from a peak of 33,700 in 1987 to 21,000 by 1993, and Grumman's headquarters staff was cut by more than half. Perhaps more important, Caporali attempted to wean Grumman away from subsisting on military aircraft contracts by tapping the company's established expertise in data technology to produce tax processing systems for the Internal Revenue Service. Also, Caporali used the company's knowledge of integrating electronics and data systems. Caporali thus oversaw one of Grumman's few success stories in the past decade when the company's work on the Joint Surveillance Target Attack Radar System (JSTARS) program met with high praise in the Persian Gulf in 1991. Although Grumman could not expect to garner any profit from its involvement with the JSTARS project until 1994, the success of the project, triumphantly hailed by General Norman Schwarzkopf, was a public relations boon for company plagued by scandals and misfortune.

Although Grumman's condition was improving, it continued to rely on the federal government for the bulk of its revenues. In 1992, Grumman derived roughly 90 percent of its $3.5 billion in revenues from the government, an alarming percentage for a market sector experiencing little growth. Seemingly entrenched in this unenviable position, Grumman, pundits speculated, either needed to acquire additional business or be acquired itself. The latter occurred, leading to a bidding war for Grumman between the Martin Marietta Corporation and Northrop Corporation, which reached its climax in mid-1994, when Northrop emerged as the winner and acquired Grumman for $2.1 billion.

With its acquisition, Northrop gained the electronic surveillance expertise of Grumman as well as its established ties with the U.S. Navy, which complemented Northrop's long history of conducting business with the U.S. Air Force. Merged together, Northrop and Grumman, under the stewardship of Northrop's chief executive officer and chairperson, Kent Kresa, represented a larger force to navigate the turbulent waters characterizing the aerospace industry in the post-Cold War era.

Principal Subsidiaries: Grumman Aerospace Corp.; Grumman Allied Industries, Inc.; Grumman Data Systems Corp.

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Further Reference

Biddle, Wayne, "Meditations on a Merger: Grumman-Northrop, Etc.," The Nation, June 20, 1994, p. 87."Fighting Fit: Martin Marietta and Grumman," The Economist, March 12, 1994, p. 75.Grover, Ronald, and Dean Foust, "Firefight in the Defense Industry," Business Week, March 28, 1994, p. 31.Norman, James R., "Ninth Life?," Forbes, April 26, 1993, p. 72.Pellegrino, Charles R., and Joshua Stoff, Chariots for Apollo: The Making of The Lunar Module, New York: Atheneum, 1985.Ropelewski, Robert, "Grumman Corp: Destined for Diversification," Interavia Aerospace World, March 1993, p. 18."Shooting Star; Grumman," The Economist, May 25, 1991, p. 76.Thruelsen, Richard, The Grumman Story, New York: Praegeri, 1976.

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