The old tech at the bottom of an ICBM control capsule; Northrop no-bid; M&A madness; and a lot more.
I spent Friday night in an intercontinental ballistic missile launch control capsule some 80 feet under the Montana countryside. Unlike my quick visit to Minot Air Force Base last month, last week’s visit to Malmstrom AFB with Gen. David Goldfein, the U.S. Air Force chief of staff, afforded a bit more time to study check out the decades-old technology built to help pass the nuclear codes and launch the ICBMs.
The names of the venerable defense firms inscribed on everything from the launch console to metal electronics boxes underlined just how old this stuff is. The oldest tech predated even floppy disks, which are on the way out within the next few months.
More than one nameplate read: “Radio Corporation of America for The Boeing Company.” RCA — a name you probably recognize — hasn’t used its full name since 1969. Boeing made all of the Minuteman III ICBMs. Rockwell International — which divested much of its defense business in the 1990s before splitting into Rockwell Collins and Rockwell Automation in the early 2000s — is another name that popped up a few times. The launch switches were made by Loral Corporation, which was acquired by Lockheed Martin. Lockheed then spun off Loral units to create what is now L3 Technologies.
One name I saw a lot was DRS Technologies — now Leonardo DRS, the American arm of the Italian defense firm. Among the stuff DRS made for the Minuteman III ICBM: the “Environmental Control Systems for the electronic equipment and personnel [at] launch and missile alert facilities,” according to this January 2007 press release.
Another name that caught my eye was Puregas Equipment. The plate on a metal box mentioned the company’s location in a small town minutes from where I grew up: “Copiague, L.I., N.Y.” — the L.I. denoting Long Island, something once common on everything from equipment to matchbooks.
There’s a lot of older gear in the U.S. arsenal: B-52 bombers, KC-135 tankers, ICBMs. But looking under the hood sometimes helps gain a different perspective.
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New Military-Drone-Spending Report
The report by the Center for the Study of the Drone at Bard College is probably one of the most comprehensive recent accountings of spending on unmanned air, ground and sea vehicles by the Pentagon. Dan Gettinger, the report’s author, writes that “U.S. military’s spending on drones is set to reach a five-year high.” The Trump administration’s fiscal 2018 budget request, which still hasn’t been passed by Congress, includes $6.97 billion to buy drones, develop new systems for them, or build infrastructure to support them. That means the Pentagon “is requesting more in FY 2018 than any year since FY 2013 and $3.3 billion more than previously predicted,” Gettinger writes.
Between fiscal 2013 and 2018, military drone spending is set to total about $34.6 billion, according to the report. The largest drone project in the 2018 budget is purchases and support for the General Atomics MQ-9 Reaper, slated to consume $1.23 billion.
Northrop Grumman Won’t Bid for Navy Drone: It’s a huge surprise and the second time this year after not bidding to build a new pilot training jet for the Air Force — that the firm dropped out of a high-profile competition. Wes Bush, the firm’s chairman, CEO, and president, dropped the latest bombshell that the company wouldn’t bid to build the MQ-25 Stingray — also known as the Carrier Based Aerial Refueling System — during the company’s third-quarter earnings call on Wednesday.
“Our assessment of the final [request for proposals], which required a fixed-price incentive bid for this development work, was that we could not put forward an attractive offering to the Navy that would represent a reasonable business proposition for our company,” Bush said. “We continue to work with the Navy on a variety of important autonomous systems programs, and we look forward to addressing future opportunities to support the Navy in this regard.”
It comes as a surprise because Northrop built the X-47B, a tailless drone that made the “first ever carrier-based launches and recoveries by an autonomous, low-observable relevant unmanned aircraft.”
Also: The Trump administration plans to expand the use of drones in the U.S. From Reuters: “White House adviser Michael Kratsios told reporters the ‘program will open the skies for delivery of life-saving medicines and commercial packages, inspections of critical infrastructure, support for emergency management operations.’ Kratsios said the program would allow companies and governments to operate drones in ways that are currently restricted by the FAA ‘including beyond-visual-line-of-sight flights, nighttime operations, and flights over people.’” Read more about that, here.
Must-Read Report on Northrop’s Acquisition of Orbital
Acquiring Orbital ATK will help Northrop better position itself to win space and weapons work, according to a new report from data analysis shop Govini.
“Northrop’s acquisition of Orbital ATK provides benefits for delivering such capabilities over the short-term and the long-term. The two short-term plays include missiles and munitions, and the long-term play is space vehicles,” the report says. “All three have high potential for the future and augment Northrop’s existing capabilities in each market.”
One area where this will help Northrop: its competition against Boeing to win an $85 billion deal to replace Minuteman III intercontinental ballistic missiles.
“Northrop’s acquisition of Orbital ATK provides critical components to compete at scale with its integrator peers. In the near-term, Orbital’s booster technology will allow Northrop to better compete against Boeing for replacing the existing land-based intercontinental ballistic missile system,” the report says. “Even if Northrop loses the high-stakes ICBM competition, owning a platform positions Northrop as a full-scale integrator in key markets including space launch and missiles.”
What does Northrop leader Wes Bush think of the planned acquisition? “We believe all of our stakeholders will benefit from expanded capabilities, accelerated innovation, and greater competition in the critical global security domains of space, missiles and missile defense,” he said on the company’s third-quarter earning call on Wednesday. “In addition to these compelling strategic benefits, we expect Orbital ATK will be accretive to our earnings per share and free cash flow per share no later than the first full year after acquisition.”
Boeing Still ‘Skeptical’ of UTC’s Acquisition of Rockwell Collins
It’s been no secret that the plane maker has not been happy that the two aircraft suppliers would become one. “This needs to produce value for our customers, value for the health of our supply chain,” Dennis Muilenburg, the firm’s chairman, CEO, and president, said on Wednesday’s quarterly earnings call. “We're skeptical until proven otherwise.”
Not surprisingly, United Technologies sees things differently. “We're...confident the combination of Aerospace Systems and [Rockwell] Collins will create significant value for our customers as we develop aircraft systems that are more electric, more intelligent, more integrated and more connected,” Gregory Hayes, chairman and CEO of UTC said in his firm’s quarterly earnings call this week.
He also said Boeing would benefit from the acquisition. “[T]hinking about from an innovation standpoint, what can we do together, where can we take cost out, where can we take weight out, where can we add value across the connected airplanes,” Hayes said. “So look, it's too early to say, to point specifically to where the benefits will come from. But it's one of the things that we're going to commit to the airlines and to the airframers is we will provide value to you guys because of this.”
Goldfein Underlines Importance of Tanker Fleet
Traveling last week with Gen. Goldfein to four of his service’s nuclear bases — facilities that host bombers, weapons, ICBMs and command-and-control locations — I did not expect to talk about much tankers. But after stops at a B-52 bomber wing and U.S. Strategic Command headquarters, the general stressed their critical role.
“We tend to talk about the triad in terms of bombers, missiles and submarines,” Goldfein said. “I’m now going to include in my lexicon — as I describe this force — the tanker force because it is as critical as the bomber force to be able to project power and accomplish the STRATCOM commander’s mission.”
Goldfein said he wants to “make sure is we’ve got all the connective tissue that we need between the STRATCOM commander and our tanker force.”
The Air Force’s new KC-46 tanker is critical to that, he said.
“It immediately comes into play because when we set the requirements for that tanker, we set the requirements so that it could be survivable and have the connectivity it needs to be able to stay connected to the nuclear command-and-control enterprise,” he said.
Speaking of that tanker, Boeing disclosed this week that it had to eat $329 million on the new tanker. That brings the total value pre-tax charges to nearly $3 billion. Remember, taxpayers are not paying for the cost overruns because the Air Force signed a fixed-price contract.
Boeing’s Muilenburg called the KC-46 “a challenging development program” during a quarterly earnings call on Wednesday. He said the company is 80 percent through flight testing.
“We've completed more than 2,000 hours of flight testing. We have six aircraft in the flight test program now,” he said. “We have more than 30 aircraft that are flowing through our production system.”
The company expects to deliver the first tanker to the Air Force in 2018 despite company executives insisting they would deliver the first plane before the end of the year.
The news led to the quarter’s best earnings-note headline, by Jason Gursky & team over at Citi: “Tanker continues to leak, but cash pieces still in place”