The winds of change blew favorably for Raytheon Missile Systems last fall when the administration of U.S. President Barack Obama announced it would change course on a plan to deploy a missile defense shield for Europe.
Under the original plan, the United States would have placed 10 ground-based interceptor missiles in Poland and a radar site in the Czech Republic. It was intended to protect most of Europe and parts of the United States from ballistic missile attacks from Iran.
The new plan, called the Phased Adaptive Approach, was announced Sept. 17 by U.S. Secretary of Defense Robert Gates and based on revised intelligence assessments that found the Iranian ICBM threat had developed less quickly, leaving the Persian state more likely to harass the United States and its allies with swarms of short- and medium-range ballistic missiles. The cornerstone of the Obama administration’s plan for guarding against this threat is the Standard Missile (SM)-3 interceptor, built by Tucson, Ariz.-based Raytheon Missile Systems.
By the end of 2010, U.S. Navy ships outfitted with the current SM-3 variant, called Block 1A, will be deployed to European waters. By 2015, according to the plan, the next-generation Block 1B missile will be deployed at land-based sites in Europe, followed several years later by a larger Block 2A missile that the United States is developing with Japan.
All of this stands to benefit Raytheon Missile Systems, which by its own description already is the world’s top missile producer.
The SM-3, which has been in production since 2004, is part of a broad portfolio of missile and missile defense systems Raytheon builds for the United States and its allies. The company reported sales of $5.6 billion in 2009, up 3 percent from the previous year, and maintains a double-digit profit margin.
Some of the credit goes to Deputy General Manager Ed Miyashiro, a mechanical engineer who has spent his entire 35-year career with Raytheon Missile Systems and its predecessor companies. He directed the first program that attempted to shoot down a ballistic missile target from a ship in 1995. Though the program’s two intercept tests were not successful, it paved the way for the SM-3 program, which over the years has racked up 20 successful intercepts in 24 attempts.
Miyashiro spoke recently with Space News staff writer Turner Brinton.
U.S. Marine Corps Gen. James Cartwright, vice chairman of the Joint Chiefs of Staff, said last year the nature of the ballistic missile threat is evolving. How do you see the threat changing?
You’re talking about an area that’s hard to talk about, because a lot of what we know and worry about relative to threat is classified. But I think that it’s pretty clear and evident that ballistic threats are there.
They’re in countries where you don’t necessarily know how they will respond.
They span a wide range of capabilities and are not trivial or easy to counter. Ballistic attacks will always be a threat for the foreseeable future because they are a way to impose a significant amount of visible damage if they are successful. By the knowledge we have of how many there are, who has them and what their capabilities are, it’s a serious concern. I think Gen. Cartwright sees it that way as well.
What does the new Phased Adaptive Approach mean to Raytheon?
We’re very excited because SM-3 is central to all four phases. I think it’s a tribute to the great success the system has had over the years both in flight tests and its proven ability to evolve to counter more sophisticated and longer-range threats. I think it’s now understood that SM-3 can span all the necessary threat scenarios that the U.S. is worried about, not only for theater defense but for defense of the territorial United States as well. We’re delivering the current missiles ahead of schedule and below cost, so I think the confidence the agency has in the system is well founded.
How much additional revenue does Raytheon stand to gain under the new plan?
It’s hard to speculate on that. We know that some of the inventory objectives for SM-3 range between 300 and 400 missiles, so that’s a nice business projection. But that’s spread over quite a number of years through the latter part of this decade. We have often been asked about our ability to produce that quantity of missiles, and to tell the truth, it’s well within our capability.
Where are you in development of the SM-3 Block 1B missile, and how will it compare in cost with the Block 1A missile?
The 1B is well along now in development and recently completed its critical design review on its way toward a first flight test late this year or early 2011.
I wouldn’t want to get into the unit cost. We have consistently delivered 1A missiles under cost, and they continue to go down in cost as we deliver more, even though the quantity isn’t that robust. 1B will be a new configuration, so it’s likely that at first they will cost slightly more because we’ll be back up on the learning curve, and early quantities are extremely low. But the projections are that when we get into higher quantities, the 1B will cost less than 1A. I think we’re on track to meet those goals.
At what stage of development is the Block 2A missile?
We went through a recent joint system design review with the Missile Defense Agency (MDA) and Japanese Ministry of Defense. The missile right now is going through the core of its development process. There is ongoing design work for all of the key components in the missile by both ourselves and our industrial teammates in Japan. We’re seeing some ground testing going on for some different components as well. We’re hoping we will see the Block 2A configuration enter flight testing as early as 2012.
is your only firm international customer for the SM-3 so far. What is your assessment of the international market for SM-3?
I’d like to believe it’s pretty robust. There are a lot of countries out there knowledgeable about what the United States is doing with SM-3, and there is a lot of familiarity with the Standard Missile family for naval fleet defense. So I think it’s a matter of national priorities and whether they want to take on the missile defense mission. It’s not necessarily an inexpensive mission to get into, but in the case of SM-3, they don’t have to pay for development, they just have to pay for the missiles and infrastructure on their ships. We’re looking at countries that have the ships and the mission need, and they include the Netherlands, Spain, Germany, Australia, and possibly South Korea and the United Kingdom. These countries have expressed interest.
Is ship-based defense the biggest potential growth area for Raytheon Missile Systems?
I’d like to think this is a significant growth opportunity, but it certainly isn’t the only one. We have a number of areas. We’re the largest missile supplier in the world, and we have a number of programs that we look at for growth. We have an expanding international customer base, so I wouldn’t want to point out any one program that looks most attractive.
What specific growth areas are you pursuing?
We’re trying to expand our capabilities in different directions from what you might consider to be our core business. If you look at Raytheon Missile Systems, we provide air-to-ground, air-to-air, ship defense and land combat systems. We’re trying to branch out into other areas that are homeland security-related. We’re dabbling in directed energy capabilities. And we’re looking at some unmanned vehicles. We’ll see how the market responds where the needs shift.
Some of the
most technologically challenging programs have been canceled in recent years, including Raytheon’s Multiple Kill Vehicle program. Are you concerned about the level of
investment in the missile defense technologies of the future?
I think MDA is trying to focus on the current administration’s priorities, recognizing a lot of investment has gone into research and development and there is a strong desire to deploy mature capabilities. I am concerned a little bit about the lack of development in certain areas, but I think that spans across the entire Defense Department portfolio.