Lockheed Martin is perhaps better positioned than its competitors to weather the downturn in U.S. government space spending by virtue of having won nearly all of the major space-system development contracts awarded in recent years.
Since Joanne Maguire took over Lockheed Martin’s space business nearly six years ago, the company has solidified its top position with contracts to develop NASA’s Orion crew capsule along with next-generation navigation and weather satellite systems. As such, the company still has a fair amount of development work to complement its production programs, which include constellations for missile warning and communications.
But like her contemporaries, Maguire worries about the dearth of new development programs on the horizon. Although there are some opportunities in missile defense and strategic missiles, she expects her business to remain flat over the next several years.
Maguire spoke recently with Space News Editor Warren Ferster.
What is your reaction to the 2013 U.S. federal budget request?
I would first acknowledge that I don’t envy our customers. They are at every turn confronted with Hobson’s choices. We’re very gratified to hear the secretary of defense explicitly talk about space as a priority as they look to position our national security apparatus for the future that confronts us. I think the specific numbers are about what we expected for our national security space portfolio, and reflect, I think, the secretary’s commitment to space as a priority. On the civil side, we’re frankly a little surprised to see the Orion budget request of just $1 billion. We’re working with NASA to understand the consequences of that, but still keenly focused on advancing that platform and getting to a first flight test in 2014.
Shouldn’t NASA’s near-term priority be restoring U.S. access to the international space station via the Commercial Crew Program?
I think there are alternatives that NASA should be exploring and I know that they are exploring diligently. They’re looking at extending their agreement with the Russians, they’re looking at whether they can really sustain multiple commercial crew developers and they’ve been directed by Congress to preserve Orion as a backup for that mission.
What are your thoughts about NASA’s science budget?
It’s gratifying to see it was not savaged at the topline but disappointing to see the 20 percent cut the planetary missions took.
Do you worry about an erosion of U.S. planetary exploration capabilities?
I worry about a lot of things. That’s in the queue. I worry more about the general fragility of the supplier base. I think that our customers are mindful of that and are trying to work with us to construct acquisition approaches that will provide that demand signal to the supplier base and hopefully keep them with the lights on.
Do you have any specific concerns there?
There are critical skills in places like Northrop Grumman in protected communications that need to be preserved; there are unique mom-and-pop shops that do coatings and build mechanisms that we have become really reliant on over time. It’s very difficult to predict exactly where you’re going to see the first fracture, if you will, in this super structure.
Have suppliers begun to disappear?
They’ve been consolidated, and that carries its own set of challenges. When changes of ownership take place, you’ve got to re-examine the supplier, not just presume that because it’s the same sales rep that you’ve dealt with before that everything behind it is intact.
Have you run into any issues there?
The big one was a couple years back with Microsemi diodes where Microsemi was aggregating a lot of smaller suppliers and rationalizing them into a single factory and lost the recipe. It happens. And against that backdrop frankly we are increasingly anxious about sequestration and what kind of privations that’s going to bring.
Do you think sequestration will actually happen?
I think the intent of Congress is to develop some kind of accommodation for that. It is an election year, though, and there are a lot of dynamics that could derail those good intentions.
Money to upgrade the Advanced Extremely High Frequency satellites was slashed in the 2013 budget request. What are the consequences?
One is missing the opportunity to sustain the product line and have engineers on call to deal with manufacturing issues or supply chain issues that might come up during the production phases of these satellites.
Strategically more worrisome is the very best engineers, even if we can sustain them on the production contract at a price that’s less efficient for our customers, don’t want to sustain an existing product. They want to be doing new product design. If you look across industry from primes down through the supply chain, the gradual diminution of value-added engineering work is not a good omen for this nation.
What does it mean?
I think you could predict that we’re going to have nonrecurring development activities that are not going to go well because we will have flushed all that experience out of the system.
Do you envision a wave of industrial consolidation given the budget outlook?
You hear from some government leaders that they don’t wish to see consolidation in the upper tier of the industrial base but at some point the laws of economics take over and the demands of the shareholders have to be met. And that can either be done in an orderly fashion or a disorderly fashion. I think some consolidation across the tiers is inevitable.
One of the paradoxes of the space community is that when we come under this kind of pressure, there’s inevitably a series of next-tier players that think this is an optimum time to enter the market space. So I don’t know if we’ll end up sustaining three primes or devolving back into six or eight smaller players.
How are you viewing the commercial market these days?
The commercial satcom market is interesting because it’s at this pivot point where it may be moving away from C- and Ku-band repeater solutions to more Ka-band or broadband kinds of solutions that play to the more capable primes. So we’re looking hard at that market space and whether we’re optimally positioned to go into that.
Is Lockheed Martin interested in buying?
Is Space Systems/Loral for sale?
Rumor has it.
They have been a very forceful competitor in that market space and we would be remiss if we didn’t evaluate fully our strategic options.
Despite appearing vulnerable, Boeing fended off your challenge for the prime contract on the Missile Defense Agency’s Ground-based Midcourse Defense system. What happened?
We’re in the midst of going through our lessons learned. It was very clear that price was a key determinant for this customer at this point in time.
Lockheed recently won an order from the United Arab Emirates for the Terminal High Altitude Area Defense (THAAD) system. Do you now expect more overseas sales of THAAD?
Now that we’ve broken the code on how to do foreign military sales of THAAD, we’ve had many expressions of interest from all corners of the world. We’re anxious also to address the Phased Adaptive Approach interceptor of the future, the Standard Missile 3 Block 2B. It’s the one Congress de-funded last year, but if you look at the budget request it’s in at a pretty healthy number. So it’s clear that the Missile Defense Agency hasn’t given up on it.
Have the Pentagon’s plans to discontinue some of its small satellite activities dampened your enthusiasm for returning to the small-launch market with Athena rockets?
Isn’t it ironic that we have aspiring space architects that say we should go to smaller and more disaggregated platforms and yet it’s very hard to make an argument for why we should have a small-lift capability?
There’s a lot of chatter about smaller platforms, disaggregated platforms, resilient architectures and a lot of pent up interest to jump to the next shiny object, I would say more in some corners of industry than in government circles. You see this also in the enthusiasm for hosted payloads. I don’t think it’s realistic to assume they can carry the full weight of the kinds of missions that we more classically serve.
Why so skeptical of these alternative architectures?
I think folks that have an end in mind tend to want to keep you focused on how great the end state is going to be and not tell you you’re going to have to sustain the existing constellation while you roll out this completely different vision.
Then why pursue the small-launcher market?
We’re looking at it because we want to make sure we’re not drinking our own bathwater. I personally think aside from transition, another big fly in the ointment is the availability of a really reliable small-lift capability at the price point that’s required for these disaggregated solutions to be economical.