Lockheed: A $40,000 Bankruptcy Sale, a Hidden Factory and the 1971 Bailout

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Allan Loughead and his brother Malcolm founded the Loughead Aircraft Manufacturing Company in 1912, flying sightseeing passengers in wooden seaplanes in California. After World War I the military dumped thousands of surplus planes for pennies, demand for new aircraft vanished, and by 1920 Allan was selling real estate and Malcolm hydraulic brakes. In 1926 they restarted with partners including Jack Northrop, spelling the name phonetically as Lockheed, and the Vega pushed sales past $1 million by 1928 at five planes a week. In 1929 majority shareholder Fred Keeler sold 87 percent to the Detroit Aircraft Corporation, Allan resigned, and when Detroit Aircraft went bankrupt in the Depression, Robert and Courtlandt Gross bought Lockheed out of receivership in 1932 for $40,000. Allan had raised $50,000 but never bid. Amelia Earhart flew a Lockheed Electra on her 1937 attempt to circle the globe.

In World War II Kelly Johnson's P-38 Lightning stayed in production from Pearl Harbor to VJ Day and was used to shoot down Admiral Yamamoto, while Lockheed and its subsidiaries built over 19,000 aircraft. Johnson's Skunk Works, named after the smelly former distillery where it started, produced the P-80, U-2, F-104, SR-71 and F-117. The C-5 Galaxy and the L-1011 TriStar, stalled by Rolls-Royce engine delays, drove Lockheed to seek a $250 million federal loan guarantee in 1971, approved after Vice President Spiro Agnew broke a Senate tie; Lockheed repaid it by 1977. Investigations then found $22 million in bribes paid in West Germany, Italy, the Netherlands and Japan, chairman Daniel Haughton resigned, and Congress passed the Foreign Corrupt Practices Act. Lockheed merged with Martin Marietta in 1995.

• To hide the Burbank plant, Hollywood set designers stretched a painted tarp over it with fake streets, rubber cars and chicken-wire trees with feathers glued on.
• The P-38 shot down more Japanese aircraft than any other Army Air Forces type.
• Opponents of the bailout included Senator William Proxmire and Admiral Hyman Rickover, while Treasury Secretary John Connally testified that free enterprise is not all that free.
• Raider Harold Simmons bought nearly 20 percent of Lockheed, eyeing a pension surplus of more than $1.4 billion, and lost the proxy fight.
• Martin Marietta CEO Norman Augustine received an $8.2 million merger bonus partly subsidized by the government.