Aerojet Rocketdyne Struggling to Deliver Rocket Motors, Raytheon CEO Says
The charge comes after the Aerojet CEO questioned whether Raytheon has problems of its own.
Updated at 4:10 p.m. to add a statement from Aerojet Rocketdyne.
Aerojet Rocketdyne is struggling to deliver quality rocket motors and has become “the weak link” in Raytheon Technologies’ supply chain, the latter company’s CEO said.
Raytheon has between 35 and 50 people working with Aerojet with scheduling and “working through…some of the quality issues that they're seeing,” Greg Hayes said in an interview.
The “supply chain has at least stabilized with the exception of our rocket-motor supplier,” he said. “In fact, that is the only supplier that's getting worse…from a performance standpoint, as opposed to better.”
The charge comes as Aerojet officials are reportedly evaluating bids to sell their firm after federal antitrust regulators blocked Lockheed Martin from acquiring the rocket engine maker earlier this year.
“They are, and they are distracted,” Hayes said. “We need some adult supervision there to actually help these guys.”
In an emailed statement, an Aerojet spokesman said the company “has been in close contact” with the Pentagon and the large defense firms it supplies “to ensure we continue to deliver the innovative, reliable propulsion systems that support and protect today’s warfighters.”
“We have had disruption to our supplies of certain materials and components, and, like many other companies in our industry, we have been impacted by a highly competitive labor market, which is affecting our rate of hiring for skilled workers, however our attrition rate is back down to more normal rates,” the statement said. “We have expanded our facilities, implemented more efficient manufacturing processes, and continue our efforts to grow our workforce. These investments position our company to deliver both on our current contracts and the next-generation systems to support defense needs of tomorrow.”
In a November SEC filing, Aerojet mentioned “cost growth from supply chain disruptions and necessary technical and manufacturing changes” on Raytheon’s Standard missile programs.
On November’s quarterly earnings call, Aerojet CEO Eileen Drake blamed the Standard missile delays on a fire at one of its suppliers, and suggested Raytheon might be having its own problems. “We have some catch-up, but that's our piece of the Raytheon supply-chain issue,” Drake said. “I'm not sure of the other issues that they might be having.”
After the Lockheed deal collapsed, Aerojet became embroiled in a public boardroom spat between Drake and then-Chairman Warren Lichtenstein. Drake prevailed in early summer and began trying to sell the company again in late October, Reuters reported.
Raytheon was a vocal opponent of the proposed Lockheed deal; company officials argued that it would have given one of their chief competitors a corner on the market.
Aerojet is a key supplier for numerous Raytheon weapons, including the Standard Missile-3, Standard Missile-6, and Stinger. About 21 percent of Aerojet’s sales over the first nine months of this year have been to Raytheon, according to the rocket-maker’s latest SEC filing.
But, Hayes said, the company has not properly prepared for increased orders and is short workers and raw material.
“They've got a high-quality product,” he said. “They see demand doubling in the next couple of years and they just have not facilitized for it.
“You can build the best missile in the world, but if there's no rocket motor for it, that's a problem,” Hayes added.
In the months after Lockheed announced its proposed acquisition in December 2020, its execs began hinting about problems at Aerojet. At a June 2021 Bernstein investor conference, Lockheed Martin CEO Jim Taiclet questioned whether Aerojet’s private-equity owners had “the will or the financial capacity” to invest in the company.
“We want and need…a healthier Aerojet Rocketdyne,” Taiclet said at the time. “It's a great asset, but we can make it greater based on our ability to invest, our engineering expertise that we can deliver to it, [and] our production system that we can work with and our digital transformation, which we can apply to Aerojet Rocketdyne.”
Hayes said Pentagon officials “at the highest level” were aware of Aerojet’s problems.
In June, shortly before Aerojet’s boardroom battle ended, Andrew Hunter, the U.S. Air Force’s top acquisition official, said Pentagon officials were eager to hear the company’s future plans.
“The question is, what do they do now…What is the path ahead?” Hunter said on June 24. “We do need that path to become clearer and them to figure it out.”