Lockheed Martin confident about winning GPS 3 competition

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WASHINGTON — Lockheed Martin executives said April 24 they are confident they will win an Air Force competition for the next set of GPS 3 navigation satellites as questions swirl about what other companies, if any, submitted proposals.

“We feel very confident about our proposal for the GPS 3 follow-on,” Lockheed Martin President and Chief Executive Marillyn Hewson said during a conference call with analysts after the company released its financial results for the first quarter of 2018.

The company confirmed April 17 that it submitted a proposal for what it called the GPS 3F program, which covers up to 22 additional GPS 3 satellites. Lockheed Martin has an ongoing contract for the first 10 such satellites, bring assembled at the company’s facilities near Denver. The first GPS 3 satellite is in storage awaiting launch, currently scheduled for no earlier than September.

“We invested a lot in design, with a flexible, modular architecture that allows us to bring down costs, but moreover, is also a low-risk approach to continuing the GPS 3F solution,” Hewson said. “We think we’re performing well on the ones that we’re producing today and for this follow-on I think we’re well positioned to compete.”

Among the updates featured in Lockheed’s GPS 3F design, the company said in an April 17 release, ia a Regional Military Protection capability that increases the spacecraft’s anti-jamming capabilities. The new satellites also include a fully digital navigation payload and the addition of a laser retro-reflector to allow ground systems to accurately locate the position of the satellites and thus refine the accuracy of their signals.

Hewson didn’t directly address a question raised by an analyst in the call about the competitive landscape for the GPS 3 follow-on. A Boeing executive said April 17 that the company declined to bid on the follow-on competition, concluding it wasn’t a “good fit” for the company. Northrop Grumman, the third company to receive GPS 3 pre-production study contracts from the Air Force in 2016, declined to comment on whether it had submitted a proposal.

Another Lockheed executive acknowledged that the new competition was triggered at least in part because of problems it had during early production of the first set of GPS 3 satellites. “The reason for the competition in the first place is we didn’t perform as well as we otherwise could have on the first few satellites,” said Bruce Tanner, Lockheed’s chief financial officer. “Those, we think, have been cleaned up. We feel really, really good about the performance of the satellites that we’re producing now.”

He added that he didn’t see a difference in potential profitability with the new GPS 3 satellites versus the original set. “We see it as essentially the same opportunity as what we’ve had in the past,” he said.

The discussion of the GPS 3 competition was one of the few mentions of space during the hour-long earnings call. “We had an outstanding quarter,” Hewson said, citing an increase in net sales for the company by more than $400 million over the first quarter of 2017 to $11.6 billion. Overall net earnings also rose by more than $350 million to $1.16 billion.

That improvement came in spite of a decrease in sales and operating profit for its space division. That unit reported an operating profit of $264 million in the quarter on net sales of $2.34 billion, down from an operating profit of $290 million on net sales of $2.42 billion in the first quarter of 2017.

Lockheed Martin said lower volume on both government and commercial satellite programs accounted for the lower sales. The company took a $25 million charge to its operating profit due to a “performance matter” on an unspecified commercial satellite program, although it had a similar charge in the first quarter of last year as well.

The company also reported $85 million in equity earnings for its space division in the quarter, which primarily comes from its stake in United Launch Alliance. The company reported $80 million in such earnings in the first quarter of 2017.