Several major U.S. defense industryplayers were hindered late last year when
the Pentagon’s contracted supplier of flat-panel displays suddenly closed
OIS Optical Imaging Systems Inc., Northville, Michigan, once the foundation
of the Defense Department’s national flat panel display initiative, had
failed to find new investors or a potential buyer after suffering substantial
losses. Its market consisted primarily of government contracts, and it had been
unable to achieve success in the commercial sector.
The demise of OIS delayed the production schedules of specific prime contractors
that required flat-panel display applications. The firm was the supplier of
more than 80 percent of the Pentagon’s full-size flat displays.
The company’s shutdown “hindered our ability to meet some deadlines,”
said John Bernaden, director of public affairs for Allied Signal Electronic
and Avionics Systems. Allied Signal’s corporate headquarters is located
in Morristown, New Jersey.
The Defense Department, under Title III of the Defense Production Act, required
companies such as Allied Signal to enlist the services of OIS in applying active
matrix liquid crystal displays to systems and weaponry, according to industry
Title III of the Defense Production Act stipulates that its “mission
is to establish, expand, and maintain domestic capability for technologies and
industrial resources critical to the Defense Department. It achieves this by
partnering among service acquisition, support, and laboratory programs and industry.”
The national flat panel display initiative was designed to provide incentives
for companies and military establishments who enlist the services of domestic
manufacturers such as OIS.
The company had initially signed a production agreement for delivery of its
advanced CQ6363 high reliability active matrix liquid crystal display to be
used in the U.S. Army AH64 Apache helicopter to Allied Signal Government Electronic
Systems in Teterboro, New Jersey. Allied Signal was to then apply the displays
to instruments used in the helicopter. Allied Signal paid approximately $15
million to OIS under the terms of the agreement. As of April 1998, this was
OIS Inc.’s largest single production order.
When OIS folded, Allied Signal was left without the necessary means to complete
its part of the agreement.
One official from Allied Signal said, “We were directed by the Defense
Department to use OIS because the military needed this flat display ... There
was a lot of political help in getting [OIS] started. $50 million—OIS
Inc.’s total government endowments—was spent in taxpayers’
money ... It just smelled from the beginning.”
Following the shutdown of OIS, Allied Signal went to court to try and keep
the company running, or to at least obtain any leftover or half-built supplies,
“The Defense Department asked us to use this supplier, then the supplier
decided to go out of business,” he said. “Our job is to satisfy
Allied Signal is currently seeking substitute flat-panel display suppliers
in order to get back on schedule, said Bernaden.
OIS Inc.’s collapse also threatened to delay production and delivery
of systems such as Lockheed Martin Corporation’s F-16 fighter jet. Other
companies affected by the shutdown include General Dynamics, Warren, Michigan,
which at the time, was about to go into production on the new Abrams tank; the
Honeywell Defense Group, Albuquerque, New Mexico; and the McDonnell Douglas-Boeing
Company team that manufactures the U.S. Army AH-64 Apache helicopter.
Some officials accuse the government of not wanting to pay for these necessary
In an opinion piece published by CMP Media Inc., David E. Mentley, vice president
of Stanford Resources, said, “The solution is to face the reality that
the true cost of advanced cockpit-display technology must be paid by the customer
[the government]. It is not fair to ask a business to subsidize the development
of such a unique technology. When the aircraft makers needed special materials
for radar-absorbing coating and lightweight composite wings, they paid for the
development and the full price of the materials. For some reason, the U.S. government
does not want to pay the real price for the most important electronic system
in the airplane—the cockpit display.”
Mentley said the only workable solution is to build the displays in government-operated
labs in spite of high costs and inefficiencies.
The only other U.S. manufacturer of full-size flat-panel displays is dpiX Inc.,
Palo Alto, California. Pentagon program managers quickly turned their attention
to dpiX following the shutdown of OIS, said officials.
“OIS is a good supplier to the Defense Department, and we don’t
like to see it leave the field,” said Bruce Gnade, high definition display
program manager for the Defense Advanced Research Projects Agency, in a related
press report. “It’s not good for the Defense Department, for the
U.S. industry, or for the country. However, dpiX offers an alternate source
of supply for military programs.”
Malcolm Thompson, president and chief executive officer of dpiX, is confident
that his company can pick up the slack.
Industry figures estimate that production could be set back 18 months to two
“We are still trying to assess some of our costs negotiating with the
Defense Department,” said Allied Signal’s Bernanden. nd