Team Infidel
Forum Spin Doctor
Los Angeles Times
May 10, 2008
Pg. 1
A Navy deal for an unmanned plane is the latest won by a unit of the defense contractor, the region's second-largest private employer.
By Peter Pae, Los Angeles Times Staff Writer
With a bulbous head and plank-like wings, the aircraft resembles a lumbering whale. And its seven-word, 49-letter name -- Broad Area Maritime Surveillance Unmanned Aerial System -- is a whopper.
But the award last month of a Navy contract to build the hulking, robotic patrol plane, nicknamed BAMS, could not have come at a better time for Northrop Grumman Corp. and, in particular, its military aircraft business headquartered in El Segundo.
The contract, potentially worth nearly $4 billion, marked the unit's third big military award since last fall, reversing a dry spell for Northrop. Together, they are expected to create 15,000 new jobs in a Southern California economy hammered by the housing downturn.
The nation's third-largest defense contractor, with headquarters in Century City, has more than 26,000 workers in the region and 120,000 worldwide.
"The news is surprisingly optimistic, and if you put everything together this looks fairly encouraging," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.
Although blue-collar aircraft metal-bending work has dwindled significantly since the days when sprawling factories dotted the region, high-tech military weapons development continues to be a major economic driver for the local economy.
Southern California is still considered the nation's center for advanced electronics research and development. The biggest defense contractors have major research centers in the area, including Lockheed Martin Corp.'s top-secret "Skunk Works" in Palmdale and Boeing Co.'s facilities in Seal Beach, El Segundo and Long Beach.
Northrop also designs spy satellites in Redondo Beach and robotic planes in Rancho Bernardo in San Diego County.
With U.S. defense spending expected to grow at a faster clip this year than last, the local aerospace industry will remain a silver lining in an otherwise gloomy economy, according to a Milken Institute economic forecast released Thursday. With the Pentagon's "need to maintain, refurbish and purchase new equipment," defense purchases are expected to rise 4.3% this year, up from a 2% increase in 2007, the report said.
A key House of Representatives committee Thursday approved spending $3.9 billion to buy 15 more C-17 military cargo planes, a move that would keep Boeing's 5,500-person production line in Long Beach running through 2010.
The latest contract calls for Northrop to design and build as many as 68 of the unmanned surveillance planes, which would patrol the ocean skies looking for enemy ships and aircraft.
The plane, controlled entirely by an onboard computer, would be a modified version of the Global Hawk aircraft that the Air Force has been using for lengthy surveillance flights in Iraq and Afghanistan.
"It's an exciting time for us because we are growing," said Gary W. Ervin, president of Northrop's El Segundo-based Integrated Systems unit. As a result of winning the recent contracts, the unit "will grow significantly over the next four or five years," he said.
Flush with the new contracts, which in addition to developing the robotic patrol plane include building aerial refueling tankers and unmanned fighter jets, the unit now expects to double annual revenue over the next five years, to $10 billion.
The unit is now expected to be one of the key revenue drivers for the defense contractor, which also builds military ships and develops government computer networks and software. Northrop posted revenue of about $32 billion last year.
Joseph Nadol, a JPMorgan Chase & Co. analyst, advised investors Monday that Northrop was his top defense stock pick, citing the contract awards that "provide a solid foundation for growth."
Spearheaded by its El Segundo engineering group, Northrop beat Boeing this year for a $35-billion contract to build tankers that can refuel other aircraft in midair. The KC-45 tankers will be assembled in Mobile, Ala., and replace the Air Force's aging fleet of KC-135 aircraft.
The tanker contract is currently on hold pending a review by the Government Accountability Office after Boeing complained that the Pentagon improperly awarded the contract to Northrop. A decision is expected in late June, but most analysts expect the GAO to uphold the contract award.
Lockheed, meanwhile, is challenging the Navy contract awarded to Northrop for the unmanned planes, saying that its own proposed aircraft was less expensive. The GAO has 100 days to deny or sustain the challenge. Last year, the GAO received more than 1,411 such complaints and determined that 91 were valid.
No one has challenged Northrop's other recent major contract, awarded by the Navy last fall and potentially worth tens of billions of dollars, to develop an unmanned fighter jet that would, using its onboard computer, be able to autonomously take off and land on an aircraft carrier. The plane is being assembled in Palmdale.
As a result, local hiring is expected to be modest initially but grow as the new programs kick into gear. The tanker program alone could create 7,500 jobs in the region, Northrop said.
Those and other pending contracts could also help sustain and extend the current work the unit is doing in El Segundo, Palmdale and Rancho Bernardo, Northrop said.
About 5,000 people work at Northrop's sprawling El Segundo complex, where many assemble the fuselage for the Navy's F/A-18 fighter jet. Under the current contract, the production line would shut down around 2012. But recently the Navy said it was considering ordering more of the jets to fill what it called a "fighter gap" as older F/A-18s retire and the new F-35 jets begin flying. The move could keep the production line running for five additional years.
Northrop also assembles the fuselage section for the F-35 in Palmdale, where about 2,000 people work.
The latest contracts reverse a yearlong slump during which the unit lost several key contract competitions and sales fell nearly 10%.
"They had a dry spell for a while when they lost two or three big contracts," said Paul H. Nisbet, a longtime aerospace analyst for JSA Research Inc. "It must be their turn now."
May 10, 2008
Pg. 1
A Navy deal for an unmanned plane is the latest won by a unit of the defense contractor, the region's second-largest private employer.
By Peter Pae, Los Angeles Times Staff Writer
With a bulbous head and plank-like wings, the aircraft resembles a lumbering whale. And its seven-word, 49-letter name -- Broad Area Maritime Surveillance Unmanned Aerial System -- is a whopper.
But the award last month of a Navy contract to build the hulking, robotic patrol plane, nicknamed BAMS, could not have come at a better time for Northrop Grumman Corp. and, in particular, its military aircraft business headquartered in El Segundo.
The contract, potentially worth nearly $4 billion, marked the unit's third big military award since last fall, reversing a dry spell for Northrop. Together, they are expected to create 15,000 new jobs in a Southern California economy hammered by the housing downturn.
The nation's third-largest defense contractor, with headquarters in Century City, has more than 26,000 workers in the region and 120,000 worldwide.
"The news is surprisingly optimistic, and if you put everything together this looks fairly encouraging," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.
Although blue-collar aircraft metal-bending work has dwindled significantly since the days when sprawling factories dotted the region, high-tech military weapons development continues to be a major economic driver for the local economy.
Southern California is still considered the nation's center for advanced electronics research and development. The biggest defense contractors have major research centers in the area, including Lockheed Martin Corp.'s top-secret "Skunk Works" in Palmdale and Boeing Co.'s facilities in Seal Beach, El Segundo and Long Beach.
Northrop also designs spy satellites in Redondo Beach and robotic planes in Rancho Bernardo in San Diego County.
With U.S. defense spending expected to grow at a faster clip this year than last, the local aerospace industry will remain a silver lining in an otherwise gloomy economy, according to a Milken Institute economic forecast released Thursday. With the Pentagon's "need to maintain, refurbish and purchase new equipment," defense purchases are expected to rise 4.3% this year, up from a 2% increase in 2007, the report said.
A key House of Representatives committee Thursday approved spending $3.9 billion to buy 15 more C-17 military cargo planes, a move that would keep Boeing's 5,500-person production line in Long Beach running through 2010.
The latest contract calls for Northrop to design and build as many as 68 of the unmanned surveillance planes, which would patrol the ocean skies looking for enemy ships and aircraft.
The plane, controlled entirely by an onboard computer, would be a modified version of the Global Hawk aircraft that the Air Force has been using for lengthy surveillance flights in Iraq and Afghanistan.
"It's an exciting time for us because we are growing," said Gary W. Ervin, president of Northrop's El Segundo-based Integrated Systems unit. As a result of winning the recent contracts, the unit "will grow significantly over the next four or five years," he said.
Flush with the new contracts, which in addition to developing the robotic patrol plane include building aerial refueling tankers and unmanned fighter jets, the unit now expects to double annual revenue over the next five years, to $10 billion.
The unit is now expected to be one of the key revenue drivers for the defense contractor, which also builds military ships and develops government computer networks and software. Northrop posted revenue of about $32 billion last year.
Joseph Nadol, a JPMorgan Chase & Co. analyst, advised investors Monday that Northrop was his top defense stock pick, citing the contract awards that "provide a solid foundation for growth."
Spearheaded by its El Segundo engineering group, Northrop beat Boeing this year for a $35-billion contract to build tankers that can refuel other aircraft in midair. The KC-45 tankers will be assembled in Mobile, Ala., and replace the Air Force's aging fleet of KC-135 aircraft.
The tanker contract is currently on hold pending a review by the Government Accountability Office after Boeing complained that the Pentagon improperly awarded the contract to Northrop. A decision is expected in late June, but most analysts expect the GAO to uphold the contract award.
Lockheed, meanwhile, is challenging the Navy contract awarded to Northrop for the unmanned planes, saying that its own proposed aircraft was less expensive. The GAO has 100 days to deny or sustain the challenge. Last year, the GAO received more than 1,411 such complaints and determined that 91 were valid.
No one has challenged Northrop's other recent major contract, awarded by the Navy last fall and potentially worth tens of billions of dollars, to develop an unmanned fighter jet that would, using its onboard computer, be able to autonomously take off and land on an aircraft carrier. The plane is being assembled in Palmdale.
As a result, local hiring is expected to be modest initially but grow as the new programs kick into gear. The tanker program alone could create 7,500 jobs in the region, Northrop said.
Those and other pending contracts could also help sustain and extend the current work the unit is doing in El Segundo, Palmdale and Rancho Bernardo, Northrop said.
About 5,000 people work at Northrop's sprawling El Segundo complex, where many assemble the fuselage for the Navy's F/A-18 fighter jet. Under the current contract, the production line would shut down around 2012. But recently the Navy said it was considering ordering more of the jets to fill what it called a "fighter gap" as older F/A-18s retire and the new F-35 jets begin flying. The move could keep the production line running for five additional years.
Northrop also assembles the fuselage section for the F-35 in Palmdale, where about 2,000 people work.
The latest contracts reverse a yearlong slump during which the unit lost several key contract competitions and sales fell nearly 10%.
"They had a dry spell for a while when they lost two or three big contracts," said Paul H. Nisbet, a longtime aerospace analyst for JSA Research Inc. "It must be their turn now."