Lockheed To Boost Missile Interceptor Production in Wake of UAE Sale

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WASHINGTON — Lockheed Martin could double production of Terminal High Altitude Area Defense (THAAD) missile interceptors on the strength of a recently announced $3.48 billion sale to the United Arab Emirates (UAE) and a Pentagon order expected this year, company officials said.

The exact size of the U.S. Missile Defense Agency (MDA) order, anticipated in the next three to six months, is subject to negotiations following a 2012 congressional appropriation for THAAD that was lower than requested, Tom McGrath, Lockheed Martin THAAD vice president and program manager, said. Lockheed Martin Space Systems of Sunnyvale, Calif., the THAAD prime contractor, has given the MDA a range of volume-dependent pricing options, he said, adding that the order likely will include at least 48 interceptors.

The MDA requested $833 million for THAAD procurement and $276 million for terminal missile defense research development in 2012. Congress trimmed $124 million from the procurement request.

The THAAD system is designed to protect deployed U.S. and allied troops and population centers against short- and intermediate-range ballistic missiles. The system, capable of engaging missile threats both inside and outside the atmosphere, has been in development since the 1990s and in production since 2007.

Each THAAD battery includes launchers, interceptors, a radar, a fire-control system and support equipment. Lockheed Martin’s THAAD subcontractors include Aerojet, which produces the interceptor boost motor; BAE Systems, which provides the missile-warhead seeker; Honeywell, which supplies the mission computer; and Pratt & Whitney Rocketdyne, manufacturer of the divert and attitude control system that allows the THAAD kill vehicle to zero in on its target. Raytheon supplies the THAAD radar under contract to the MDA.

The United Arab Emirates deal, representing the first-ever Foreign Military Sale of THAAD, includes two complete batteries equipped with 96 interceptors. Lockheed Martin’s portion of the contract, the final value of which is subject to negotiations, is potentially worth $1.96 billion, McGrath said during a Jan. 3 conference call with reporters. The contract performance period runs through June 2016, the Pentagon said in a Dec. 30 contract announcement.

The Raytheon-supplied radars and training services provided directly to the MDA account for the rest of the sale value. According to a Dec. 30 Pentagon announcement, Raytheon Integrated Defense Systems of Woburn, Mass., received a $582.5 million MDA contract to supply two AN/TPY-2 radars to the United Arab Emirates.

The award follows Lockheed Martin’s loss to incumbent Boeing in the competition to sustain and upgrade the Ground-based Midcourse Defense system, the MDA’s primary U.S. territorial missile shield. That award, valued at nearly $3.5 billion, was announced in late December.

The value of Lockheed Martin’s THAAD-related work awarded since 2006 is now roughly $3.4 billion, according to company spokeswoman Cheryl Amerine. For the U.S. military, the company is supplying four THAAD batteries and 98 interceptors under two contracts valued at $1.4 billion combined.

Dennis Cavin, Lockheed Martin corporate vice president of business development, said the United Arab Emirates deal is one of several potential Foreign Military Sales of the THAAD system. Foreign Military Sales are negotiated with the recipient nation by the U.S. government, which then contracts with the relevant company for production.

“The U.S. government is in discussions with a number of countries that have expressed an interest in THAAD,” Cavin said during the conference call. He declined to be specific.

Foreign Military Sales in general have the potential to reduce the U.S. government’s unit costs for weapon systems, Cavin said.

In a Jan. 2 blog posting on Forbes.com, defense analyst Loren B. Thompson said the administration of U.S. President Barack Obama has embraced Foreign Military Sales as a source of U.S. jobs and international influence, and that the THAAD sale to the United Arab Emirates will help address the growing regional missile threat posed by Iran.

McGrath said Lockheed Martin is manufacturing five THAAD interceptors per month at its facility in Troy, Ala., exceeding its planned production rate by one. The company expects to increase that rate by 50 to 100 percent in the future, with the exact figure depending on the size of the upcoming MDA order, he said.

Fulfilling the United Arab Emirates and upcoming MDA orders would require some new tooling and a THAAD-related employment increase at the plant from 50 to about 100, McGrath said. No physical expansion of the Troy facility will be required, he said, adding that the plant was designed to accommodate even higher production rates.

The first two THAAD batteries, each to be armed with an initial 24 interceptors, were activated in 2008 and 2009, respectively. Lockheed Martin expects to complete delivery of the 48 missiles associated with these batteries by the middle of this year, McGrath said.