Partnership With Boeing In Doubt
Lockheed Martin CFO Chris Kubasik dropped a bombshell Tuesday,
when he revealed that the company's board would review the business
case for the United Launch Alliance -- the proposed partnership
with aerospace rival Boeing for satellite launch contracts -- and
what's more, they may decide to spike the entire deal.
Reuters reports Kubasik's announcement hinges on Lockheed's
mounting frustration with an antitrust review of the proposed joint
venture, as well as concessions required for the deal to move
forward -- such as limits on profit margins and investment levels
that lawyers for the Federal Trade Commission are trying to impose
on both sides of the deal.
"I think there is a possibility that Lockheed could decide not
to go forward with the venture," said Loren Thompson of the
Arlington, VA-based military research group The Lexington
Institute. "They're sending a signal that they're running out of
patience."
A source familiar with
the situation at ULA told Reuters that "very recently," government
lawyers told Boeing and Lockheed they wanted the two companies to
invest a large amount of money to fund the venture into the next
decade -- just as it appeared the FTC was within
weeks of approving the deal.
Industry insiders believe that Lockheed's frustrations are
echoed by higher-ups at Boeing, as well officials inside the
Pentagon -- which had earlier given its conditional
approval to the deal, based on its interest to have
two launch vehicles available to.
Kubasik's counterpart at Boeing, chief financial officer James
Bell, said in a Wednesday conference call that while the deal was
taking longer than expected... it should be completed by the end of
June, at the latest.
Boeing arguably has a lot more at stake with ULA pressing
forward than Lockheed does. Crippled by a machinists strike last
year and still struggling on its commercial aerospace side as well,
Boeing has yet to launch a government satellite this year... and if
ULA falls apart, is more likely to cede government launch business
to Lockheed, than the other way around.
That would seem to put the FTC -- which is concerned with claims
by smaller rocket companies that any joint venture between the two
largest aerospace companies, even a limited one, represents a
monopoly -- in a hard spot. Approve the deal, and risk just such a
monopoly... and if the deal falls through, run the risk of Lockheed
having all but a lock on government satellite launches.
Analysts believe it is still in both company's best interests to
see ULA become reality.
"Lockheed is trying to close the deal," said defense consultant
Jim McAleese, adding the promise of a stable revenue source still
made too much sense for both companies to risk losing the deal.
"They're warning that it's time to reach closure, approve ULA and
get back to the business of launching rockets."
In comments made after Kubasik's announcement, Lockheed
spokesman Tom Jurkowsky said it was appropriate for the board to
review the business case for the venture -- although Lockheed still
believed it would be in everyone's best interest.
"We feel it's appropriate for the board to review and discuss
matters such as the impact of the delay on safety, workforce
morale, the status of the business case for the joint venture, and
the process for closure," he said.