McDonnell Douglas

Background

The company was formed from the firms of James Smith McDonnell and Donald Wills Douglas in 1967. Both men were of Scottish ancestry, were graduates of the Massachusetts Institute of Technology, and had worked for the aircraft manufacturer Glenn L. Martin Company.

Douglas had been chief engineer at Martin before leaving to establish Davis-Douglas Company in early 1920 in Los Angeles. The following year, he bought out his backer and renamed the firm the Douglas Aircraft Company.

McDonnell founded J.S. McDonnell & Associates in Milwaukee, Wisconsin, in 1926 to produce a personal aircraft for family use. The economic depression from 1929 ruined his ideas and the company collapsed. He worked at three companies, joining Glenn Martin Company in 1933. He left Martin in 1938 to try again with his own firm, McDonnell Aircraft Corporation, this time based at Lambert Field, outside St. Louis, Missouri.

Douglas Aircraft profited during World War II. The company produced about 10,000 C-47s, a military variant of the Douglas DC-3, from 1942 to 1945. The workforce swelled to 160,000.

Both companies suffered at the end of the war, facing an end of government orders and a surplus of aircraft. Douglas continued to develop new aircraft, including the DC-6 in 1946 and the DC-7 in 1953. The company moved into jet propulsion, producing the F3D Skyknight in 1948 and then the more "jet age" F4D Skyray in 1951. In 1955, Douglas introduced the U.S. Navy's first attack jet, the A4D Skyhawk. Designed to operate from the decks of the World War II Essex-class aircraft carriers, the Skyhawk was small, reliable, and tough. Variants of it continued in use in the Navy for almost 50 years, finally serving in large numbers in a two-seat version as a jet trainer.

Douglas also made commercial jets, producing the DC-8 in 1958 to compete with the Boeing 707. McDonnell was also developing jets, but being smaller it was prepared to be more radical, building on its successful FH-1 Phantom to become a major supplier to the Navy with the F2H Banshee and F3H Demon; and producing the F-101 Voodoo for the United States Air Force (USAF). The Korean War-era Banshee and later the F-4 Phantom II produced during the Vietnam War helped push McDonnell into a major military fighter supply role. Douglas created a series of experimental high-speed jet aircraft in the Skyrocket family, with the Skyrocket DB-II being the first aircraft to travel at twice the speed of sound in 1953.

Both companies were eager to enter the new missile business, Douglas moving from producing air-to-air rockets and missiles to entire missile systems under the 1956 Nike program and becoming the main contractor of the Skybolt ALBM program and the Thor ballistic missile program. McDonnell made a number of missiles, including the unusual ADM-20 Quail, as well as experimenting with hypersonic flight, research that enabled it to gain a substantial share of the NASA projects Mercury and Gemini. Douglas also gained contracts from NASA, notably for part of the enormous Saturn V rocket.

The two companies were now major employers, but both were having problems. McDonnell was primarily a defense contractor, without any significant civilian business. It frequently suffered lean times during downturns in military procurement. Meanwhile, Douglas was strained by the cost of the DC-8 and DC-9. The two companies began to sound each other out about a merger in 1963. Douglas offered bid invitations from December 1966 and accepted that of McDonnell. The two firms were officially merged on April 28, 1967, as the McDonnell Douglas Corporation (MDC). Earlier, McDonnell bought 1.5 million shares of Douglas stock to help its partner meet "immediate financial requirements". The two companies seemed to be a good fit for each other. McDonnell's military contracts provided an instant solution for Douglas' cash flow problems, while the revenue from Douglas' civil contracts would be more than enough for McDonnell to withstand peacetime declines in procurement.

Formation

McDonnell Douglas retained McDonnell Aircraft's headquarters location at what was then known as Lambert–St. Louis International Airport, in Berkeley, Missouri, near St. Louis. James McDonnell became executive chairman and CEO of the merged company, with Donald Douglas Sr. as honorary chairman.

In 1967, with the merger of McDonnell and Douglas Aircraft, David S. Lewis, then president of McDonnell Aircraft, was named chairman of what was called the Long Beach, Douglas Aircraft Division. At the time of the merger, Douglas Aircraft was estimated to be less than a year from bankruptcy. Flush with orders, the DC-8 and DC-9 aircraft were 9 to 18 months behind schedule, incurring stiff penalties from the airlines. Lewis was active in DC-10 sales in an intense competition with Lockheed's L-1011, a rival tri-jet aircraft. In two years, Lewis had the operation back on track and in positive cash flow. He returned to the company's St.