Lockheed looks to diversify its satellite business; Why Europe won’t buy American tanks; Iraq wants more firepower from the sky; and more.

Stepping off the Air Force VIP jet at Moffett Field – the old military airship base – I paused to take in the crazy mix of signs by the tarmac.

It was August 2015, and Deputy Defense Secretary Bob Work was paying a visit to the U.S. military’s outpost in Silicon Valley. For six months, all of the talk out of Washington had been about how the Pentagon leaders wanted tech firms large and small to bring their ideas to the military. These officials were also calling for defense firms to embrace that Silicon Valley culture by investing more money in research and development.

So there was the old Lockheed Martin sign, next to Yahoo, next to Amazon, next to Microsoft and next to HP. The defense giant is neighbors with some of the tech world’s best-known firms, and it, too, has a history in Silicon Valley dating back decades. This week, I returned to Lockheed’s Valley operation. Behind the chainlink fence, where satellites are built, some business trends are taking shape.

First off, there’s actual manufacturing. While many of Lockheed’s neighbors might design electronics nearby, the products are largely made in China. Not here. Some of the most advanced satellites for military and intelligence community are being assembled inside rooms where employees and visitors must wear hairnets, lab coats and protective booties on their shoes. We’re talking the satellites that the president would use in a nuclear war.

But it’s not all defense. The massive solar arrays — the thin, glossy panels that power satellites — for Hubble Telescope and International Space Station were built here. And commercial business is growing.

Defense Secretary Ash Carter has been searching for commercial technology that could be adapted for the military. That’s actually happening here with these satellite solar panels. Lockheed engineers have leveraged their work on commercial solar arrays to create beefed up panels for the military. That means the Pentagon — and the taxpayer — has not had to pony up all the money to create them.

“It’s very, very attractive for the military customers,” Vivienne Jordan, manufacturing senior manager, said during a tour of the solar array factory on Wednesday.

The factory itself has evolved over the years since the eight 100-foot arrays for the Space Station were built here in the 1990s. Now, Lockheed is expanding the use of robots and automated manufacturing. This week employees were calibrating three new robotic yellow arms that will do soldering. A special automated welding machine is already being used as well to link up the electronics.

“Everything about this place has changed,” said Chris Joseph, manager of solar array manufacturing. “It felt more like a garage shop than a spacecraft factory. We’ve poured millions of dollars into this building over the years to set ourselves up with a state-of-the-art factory that really allows us to produce solar arrays for a very, very minimal cost when you look at the overall cost of the array. The manufacturing is under 10 percent of the array cost.”

Right now, the solar array factory’s workload is split about 60 percent military and 40 percent commercial. But they’re looking to boost that commercial work. That’s because Lockheed is looking to become a solar array supplier for other satellite makers, not just for its own spacecraft.

With more and more tech firms looking to build their own internet providing satellites, Lockheed wants to become a supplier. Lockheed was approached by an undisclosed firm that wants to build 900 small satellites. They wanted to hear how Lockheed could building solar arrays and a mini assembly line. In one week, Lockheed built a full-scale mock-up of a satellite and the arrays. (FYI: That’s warp speed for a defense firm.)

Instead of using high-grade military solar cells, engineers designed a fabricated silicon cells, similar to the ones commonly used to power homes. The result: a much cheaper panel. In the end, the firm did not select Lockheed, electing to keep the work in house, employees say, but creating the proposal was no waste of time.

For one, Lockheed — which has been diversifying its portfolio with more commercial work — bucked the stereotype that large firms cannot be agile and flexible. And it could still pay off as they are in talks with additional companies about being a solar array supplier for other private satellite projets, Jordan said.

“Based on the interactions we’ve had, it seems to be an upcoming market,” she said.

Asked how much potential business there might be for Lockheed’s solar arrays, Joseph noted that companies like Google and Facebook are planning to deploy constellations of their own satellites.

“I think that there’s going to be a lot of business there,” he said.

Welcome!

You’ve reached the Defense One Global Business Brief. This week, we’re coming to you from the West Coast, where we’re checking out satellite manufacturing in Silicon Valley. Send your tips, comments, and random thoughts to mweisgerber@defenseone.com, or hit me up on Twitter: @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!


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Europe Won’t Buy American Tanks

European militaries tend to have a mix of American and continental arms. But when it comes to tanks and heavy armored vehicles, European countries tend to look inside their own borders, for all of the reasons you’d expect: jobs, cost and long-term relationships. Here’s another reason these country don’t typically buy American: pollution.

“Try to imagine [if you had] to sell lorries to California,” Maj. Gen. Hans Christian Mathiasen, chief of Denmark’s army staff, told me on the sidelines of the Association of the U.S. Army conference last week. “It’s just as difficult to do it in Europe.”

Denmark is modernizing its armor divisions, which are largely made up of German-made tanks and lorries. And guess what, only European companies are bidding.

“It has to do with differences in approach in the North American market and the European market when it comes to environmental,” Mathiasen said.

That’s not to say Denmark is completely eschewing American equipment. Earlier this year, it purchased 309 Piranha 5 armored personnel carriers from General Dynamics Land Systems for $600 million. It also plans to buy armored vehicles similar to the U.S. Army’s Joint Light Tactical Vehicle. Oshkosh, which won the JLTV contract last year, is bidding for the Danish contract, Mathiasen said.

Denmark has a small army of 8,400 troops, so technology plays a big role in the equipment it buys. Like the U.S., Denmark is looking to adapt new commercial tech for its military.

“This co-creation, co-design [method] is very interesting because it will definitely be part of the next leapfrog in technologies,” Mathiasen said. “We’ve been looking for that in the land domain for a while now.”

He said composite materials could become game-changers.

“In many ways, we are seeing the merge of something new, where the equipment we use is real light, but still retains the protection capabilities,” he said.

Lockheed to Keep Sikorsky in Connecticut

When Lockheed Martin purchased Sikorsky from United Technologies last year, employees at the helicopter-maker’s Connecticut plant worried about their futures. Some defense observers speculated that Lockheed could move some work to a factory of its own in upstate New York or a Sikorsky plant in Florida. But it turns out workers will continue building Black Hawks and other helicopters in Stratford, Conn., for at least 16 years. That’s because the union of more than 2,000 Teamsters OKed a deal between Lockheed and Connecticut Gov. Dannel Malloy. But it was not without a price. Beginning in 2017, newly hired workers will earn 25 percent less money.

Sikorsky note: Poland plans to buy Black Hawks for its special forces after a deal for Airbus helicopters fell apart.

DigitalGlobe Buys Interesting Intel Company

The U.S. intelligence community has been trying to automate the sorting, filing, and analyzing of massive amounts of videos and pictures collected by satellites, drones, and planes. This week, satellite imaging firm DigitalGlobe acquired The Radiant Group, a Virginia-based contractor that does work for the IC, from private equity firm Aston Capital. Here’s the key quote in the press release: “The acquisition will expand DigitalGlobe’s customer base across the Intelligence Community, and simultaneously accelerate the pace of innovation in big data analytics and machine learning at the company,” said Bobby Basil, a partner at Aston Capital.

Iraq to Get Armed Cessnas

As the Iraqi military digs in for the long fight against Islamic State militants, it wants to add to its small fleet of armed Cessna aircraft. The State Department approved the $63 million sale of two AC-208s, propeller-driven Cessna Caravans that carry Hellfire missiles. Iraq already has three armed versions and three transport versions of the plane. “The purchase of two additional aircraft enables the Iraqi Air Force to continue its fight against ISIL,” the Pentagon said in a statement.

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