[FPSPACE] Launch alliance to save money

Tue May 3 12:52:41 EDT 2005

Ah to day the United States decides to follow the Soviets and form The
Ministry of General Machine Building MOM or like all business strives to
eliminate all competition so we have gone full circle. Grin...and bear
it or so goes ISS so goes the industry..

-----Original Message-----
From: fpspace-bounces at friends-partners.org
[mailto:fpspace-bounces at friends-partners.org] On Behalf Of DwayneDay
Sent: Tuesday, May 03, 2005 12:18 PM
To: fpspace at friends-partners.org
Subject: [FPSPACE] Launch alliance to save money

Several years ago Aviation Week produced a great two-page graphic that
showed the merger of all the airplane/aerospace companies over the
decades.  On the left side were hundreds of small companies in the early
days of aviation, they then merged into fewer and fewer companies until
the right side of the page, where they had been reduced to Boeing and
Lockheed-Martin.  I put this up on my office door and on the right side
I penciled in the merger of these two companies to form a new entity:
"God."

(Alternatively, they could merge to form Skynet, then destroy the
world.)

This launch alliance presents a lot of questions.  I'm no industry
analyst, or even a launch analyst, just a geek, but off the top of my
head, here are a few questions:

-does consolidating the production at a single facility limit any future
surge capability?  Will this prevent either of these companies from
ramping up production to produce a lot of rockets for the VSE?  (Note
that there are people who claim that an HLLV is not needed because there
is substantial capacity to build a lot more MLVs.  That capacity might
disappear if the Delta and Atlas lines are merged.)

-what does DoD think of this?  They have to approve it, right?  Will
they?

-this article says that the merger will save the US government $100-150
million a year.  Is that taken off the top of the $340 million subsidy
that the USAF is paying this year?  In other words, will the USAF still
have to subsidize them to the tune of $200 million per year?

-how can they cooperate on their government contracts, and still
"compete" for commercial launches?  One of the rules of that kind of
work is that partners don't get to see the cost data from the other
side.  How can that work?

-the article mentions a lawsuit and a "countersuit."  Was Boeing
actually counter-suing Lockheed-Martin?  It was Boeing that stole the
Lockheed-Martin documents, so how could they counter-sue?  This is like
a crook suing the homeowner that conked him on the head with a vase as
he was sneaking out the window with the stolen loot...

http://www.washingtonpost.com/wp-dyn/content/article/2005/05/02/AR200505
0201445.html

Boeing, Lockheed Join Rocket Divisions
After Bitter Rivalry, The Two Will Share Government Work
By Renae Merle
Washington Post Staff Writer
Tuesday, May 3, 2005; E01

Lockheed Martin Corp. and Boeing Co. said yesterday that they will merge
their struggling government rocket businesses, an acknowledgment that
tight federal budgets and growing costs made it difficult to operate
independently.

The joint venture -- to be known as the United Launch Alliance -- will
end a bitter two-year legal battle between the Pentagon's largest
contractors in which Lockheed accused Boeing of cheating to win rocket
launch work. It also eliminates competition in a market that includes
launching weather satellites for the National Oceanic and Atmospheric
Administration, science satellites for NASA, spy satellites for the
National Security Agency and communications satellites for the Air
Force.

The companies said they expect the joint venture to generate $1.5
billion to $2 billion in revenue per year from the government and save
it $100 million to $150 million a year. The firms have a similar joint
venture to manage the day-to-day operations of NASA's space shuttle
program.

The combination is an acknowledgment that "it's too expensive to do it
on your own, and there isn't going to be enough government money to
support separate programs," said James A. Lewis, director for technology
and public policy at the Center for Strategic and International Studies,
a nonprofit think tank. "We may be in a situation where we can't afford
competition without some heroic measures."

The announcement follows nearly 15 months of off-and-on negotiations. In
December, James F. Albaugh, the head of Boeing's defense unit, flatly
rejected the idea. "We don't have any interest in forming any kind of
joint venture with Lockheed Martin," Albaugh said in an interview.

In the end, the companies said they needed to find a way to make the
business profitable. "By joining together we are convinced that we can
provide the customer with assured access to space at the lowest possible
cost," James A. Bell, Boeing's chief executive, said in a statement.

Both of the company's rockets will still be produced -- Boeing's Delta
and Lockheed's Atlas. But production will be consolidated at Boeing's
Decatur, Ala., facility, while Lockheed's Denver office will serve as
the headquarters and house the engineering and administrative functions.
The combination will require some layoffs, both companies said.

"The venture will maintain two separate hardware families; that's really
at the crux of the appeal to the government," said Jeffrey D.
MacLauchlan, Lockheed's vice president of financial strategies. "Should
there be a problem with either, the other is available as a backup
resource."

The deal must be approved by the Pentagon and U.S. and international
regulatory agencies and is expected to close by the end of the year.

Lockheed and Boeing have agreed to drop countersuits over a 1990s rocket
launch competition once the deal is finalized. In 2003, Boeing admitted
that some of its employees had proprietary Lockheed information during
the competition. That prompted a lawsuit from Lockheed and a 20-month
launch suspension from the Air Force.

In addition to the suspension -- lifted in March -- the Air Force
transferred seven rocket launches, worth about $1 billion, to Lockheed.
The stolen documents also spurred a criminal investigation by the U.S.
attorney in Los Angeles, which led the indictment of two former Boeing
employees and is ongoing.

The Air Force has been struggling to keep Lockheed and Boeing in the
business since the commercial space market collapsed as the
telecommunications boom ended. The companies began to complain that
without commercial customers to shoulder some of the overhead costs,
their government launches were not profitable.

Despite pressure from some in Congress to push one of the companies out
of the market, the Air Force argued it needed two types of rockets just
in case one didn't work. The Pentagon's 2006 budget proposal includes
$340 million to keep both companies in the business.

"This could be a preemptive strike against Congress moving to go to one
company," said Marco A. Caceres, senior analyst and director of space
studies at the Teal Group.

The companies will continue to compete in the commercial market.
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