WSJ Northrop, Loral Hook Up To Get U.S. Satellite Work
Northrop, Loral Hook Up
To Get U.S. Satellite Work
By ANDY PASZTOR
February 28, 2008
Seeking to create a potentially powerful new competitor for building future U.S. government satellites, Northrop Grumman Corp. and Loral Space & Communications Inc. announced a strategic partnership to share certain technology and production assets.
The venture aims to shake up the satellite industry by combining Northrop's history providing advanced sensors and spy-satellite systems to military, intelligence and other federal customers with Loral's track record of manufacturing lower-cost commercial satellites.
If successful, the arrangement announced yesterday could cut production costs and make Northrop a more-effective rival against Boeing Co. and Lockheed Martin Corp., the perennial top U.S. government satellite suppliers.
Northrop's management has been frustrated at being unable to break into that top tier as a prime contractor. For Loral, which faces severe production constraints at a time of rising orders for commercial satellites, the arrangement provides needed additional testing and integration facilities.
Without the help, Loral may have been forced to delay some projects and avoid bidding on others, said Pat DeWitt, chief executive of Loral's satellite-making unit. At the same time, by leveraging Northrop's close ties to national security programs and civilian research organizations, Loral hopes to realize its long-term goal of snaring U.S. government work.
But underscoring the extent of the challenge, Mr. DeWitt said "it remains to be seen whether the collaboration" can gain enough orders to "put us on a par with" the industry leaders. Capping roughly about six months of closely held discussions, the concept already has prompted the two companies to discuss submitting a joint bid for the next version of U.S. Earth-observation satellites.
Eventually, the aim is to also find a way to market dual commercial and military satellites, featuring capacity for military communications as well as corporate customers on the same orbiting platform. With defense spending on space under escalating pressure, such novel projects are coming into favor. The agreement in principle envisions cooperative efforts through much of the next decade. It also comes at a time of increasing international consolidation among second-tier satellite makers and space component manufacturers.
Taking advantage of that trend, Northrop previously announced efforts to launch cooperative programs with Israel Aerospace Industries Ltd. And according to Northrop officials, it is pursuing innovative space technology from various other sources.
The strategy, according to Alexis Livanos, president of Northrop's Space Technology unit, is creating "a diverse soup of the best companies" boasting cutting-edge technologies, "working together with Northrop Grumman as the catalyst."
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