Under the Umbrella

When financially grounded Douglas Aircraft Co. chose St. Louis' soaring McDonnell Co. over half a dozen other would-be saviors (TIME, Jan. 20), one big question remained in the guessing game that had fascinated the industry for weeks: What would happen to Founder-Chairman Donald W. Douglas Sr., 74, and his son, President Donald Jr., 49, who had been widely blamed for the company's perils in the midst of prosperity? An answer of sorts came last week, when McDonnell brass flew to Santa Monica, Calif., to agree on terms for the merger.

Meeting in Douglas headquarters, both sides signed a "letter of intent" to keep the two companies as separate divisions under a new corporate umbrella to be known as McDonnell Douglas Corp. Not surprisingly, "Mr. Mac" will hold the umbrella. At 67, he will be chairman and chief executive officer of McDonnell Douglas, while current McDonnell President David S. Lewis, 49, will be his No. 2 man as well as Douglas' new chairman. Donald Douglas Sr., who had rebuffed McDonnell takeover moves in the past, will be "honorary chairman" of the merged company, keep an office as "founder-consultant" at Douglas. Donald Jr. will stay on as Douglas' president--but Lewis will become chief executive officer.

Donald Sr. may have been disappointed, but the old warrior gave no sign of it at the meeting, in which he said he was "gratified" by the deal. What may have helped was a check for $69 million that McDonnell brought with him to pay for 1,500,000 shares of Douglas stock. That was the main reason the Douglases had finally come to terms: McDonnell was the only suitable merger prospect that could supply cold cash immediately. Even before the stock-swap merger, which still needs shareholder approval, is completed, the prospect of the deal may defrost lenders who have been cold about extending Douglas some $400 million in credit.

McDonnell is betting that new money and his own management will not only help unsnarl Douglas' production lines, choked with a $3.2 billion backlog in jet-airliner orders, but build a team able "to compete successfully for any future aerospace program." Lewis, a Georgia Tech-educated aeronautical engineer who will move into Douglas as soon as the merger is final, last week got an idea of the size of his job. The company did not even match Donald Jr.'s dismal prediction last July that fiscal 1966 "earnings, if any, would be nominal." It announced a $27 million loss.

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