Suppliers React To Lost Biz

As the news of the RAH-66 Comanche attack helicopter cancellation swept the industry, so did the reaction from key suppliers affiliated with the program. On Monday afternoon, Boeing stock was down about 2 percent on the news, with United Technologies off 3 percent. United's Sikorsky division is believed to be impacted harder than Boeing, since the latter currently manufactures the Apache helicopter and as such would gain some of the sales lost due to the cancellation of the Comanche.

Both Boeing and Sikorsky are slated to receive termination fees estimated at $2 billion-$4 billion. The Pentagon generally has unlimited right to eliminate programs that it has contracted with outside manufacturers, under certain terms. So, while the dollar amounts can be enormous for defense contracts, it can be a mistake to assume that a contract signed equals revenues coming in the door. In this case, the actual take for the companies looks to be an order of magnitude lower than originally thought.

Harris Corporation said that all employees associated with the cancelled program, primarily in Palm Bay and Malabar (FL), would be absorbed into other government programs. Harris currently has more than 200 active government programs and over 400 job openings, for which it is actively recruiting. Through its Government Communications Systems business, Harris has been providing avionics equipment for the Comanche program, including cockpit displays, display generator module sets, memory storage units, and fiber optic interface modules. The company's annual revenue run-rate associated with the Comanche program is approximately $20-25 million.

"We were involved on the Comanche program for over 20 years and believe it would have provided an outstanding capability for the U.S. warfighter," said Bob Henry, Corporate Senior Vice President and President of Harris' Government Communications Systems Division. "We are disappointed in the program's cancellation. Long term, we will continue to maintain a diverse portfolio of programs across the DoD, Civil, Homeland Security and Intelligence agencies."

Northrop Grumman Corporation said that the Department of Defense's announced plan to cancel the RAH-66 Comanche helicopter program does not change the company's 2004 financial guidance. As part of the Boeing-United Technologies Comanche helicopter team, Northrop Grumman provided navigation systems, mission computers, fire control radars and integrated avionics systems for the combat helicopter program. With approximately 350 employees on the Comanche program, the company is currently assessing the impact of the government's decision on the workforce.

FMI: www.boeing.com/rotorcraft/military/rah66/rah66tech.htm