Pratt & Whitney Poised to Become Dominant Liquid-Propulsion House


  Space News Business

Pratt & Whitney Poised to Become Dominant Liquid-Propulsion House

Space News Staff Writer
posted: 02 March 2005
11:22 am ET

WASHINGTON – Pratt & Whitney Space Propulsion is poised to be�come the dominant U.S. maker of liquid-fueled rocket en�gines following the agreement by parent company United Tech�nologies Corp. to purchase Boe�ing’s Rocketdyne unit. The $700 million deal could be the final step in the consolidation of the U.S. rocket propulsion industry, which for years has suffered from overcapacity.

Assuming the acquisition goes through, Pratt & Whitney would have just one competitor in liq�uid-rocket propulsion, GenCorp Aerojet of Sacramento, Calif. But with just one major production program in its portfolio, Aerojet’s liquid-propulsion business pales in comparison to that of a Pratt & Whitney-Rocketdyne combo.

Aerojet also is one of the two remaining U.S. suppliers of solid-rocket motors, but there too it faces a dominant competitor in ATK of Edina, Minn.

“It appears this is probably the last of these moves,” said Paul Nis�bet, an analyst with JSA Research of Newport, R.I. “This certainly makes Pratt & Whitney the 1,000-pound gorilla of the industry.”

Boeing Co. of Chicago agreed to sell its Rocketdyne Propulsion & Power unit to United Tech�nologies of Hartford, Conn., for about $700 million in cash, the companies announced Feb. 22. That figure is equivalent to Rock�etdyne’s annual revenue, the companies said.

With the addition of Rocket�dyne, Pratt & Whitney Space Propulsion of West Palm Beach, Fla., will have roughly $1 billion per year in revenue, Nisbet said. Aerojet reported $492 million in sales last year, but Nisbet said most of that came from solid-rocket propulsion work.

“The imbalance would be huge, so that could become a con�cern in the [Department of De�fense], but probably not,” Nisbet said. “Because the industry is so depressed, it probably will save the government money to have consolidation.”

Rocketdyne, headquartered in Canoga Park, Calif., also has fa�cilities in Alabama, Mississippi and Florida and employs about 3,000 workers, Boeing said. There are no immediate plans to make changes in Rocketdyne’s opera�tions, but long-term consolida�tion opportunities will be ex�plored, said Patrick Louden, a spokesman for Pratt & Whitney Space Propulsion.

Rocketdyne also has space power programs that will be fold�ed into United Technologies’ Hamilton Sundstrand unit, which designs and manufactures life support, electric power and other systems for the space shuttle and international space station.

Rocketdyne’s major propul�sion programs include the space shuttle main engine and the first-stage engines for Boeing’s Delta 4 and Delta 2 rockets. Pratt & Whit�ney supplies the RL10 upper stage engine used on the Delta 4 and Lockheed Martin’s Atlas 5 rocket, turbopumps for the space shuttle main engine and is a part�ner in RD Amross, the joint ven�ture with NPO Energomash of Russia that supplies the Atlas 5 main engine. Both companies have assorted other work in mis�sile defense and hypersonic vehi�cle research.

“We have a lot more product we can of�fer, not only for domestic customers but in�ternationally,” Louden said. “For launch�ing capability, we have to think about the next big phase, which would be [NASA’s] vision for space exploration. We see some real advantages by using Rocketdyne’s em�ployees and their experience and the tech�nology Rocketdyne would bring to the table.”

While large-scale engine development programs are few and far between , the new Pratt & Whitney will be well positioned to take advantage of emerging opportunities in cutting-edge technology work, said Brett Lambert, vice president for corporate serv�ice at DFI International, a consulting firm here . “When you talk about the size of the business, there are some attractive oppor�tunities for research and development that could lead to new products,” he said.

The transaction is subject to U.S. regu�latory approval, but analysts do not see any potential show-stoppers . “There are other levers the government can use to ensure competition across the range of products Pratt has to offer,” Lambert said. “There will still be enough leverage on the part of customers to ensure some level of compe�tition.”

Aerojet’s main liquid-propulsion pro�duction program is the second-stage en�gine for the Delta 2, but the company also supplies spacecraft maneuvering thrusters, is refurbishing Russian-made engines for Kistler Aerospace’s K1 rocket program and is developing a liquid-fueled missile-de�fense target vehicle for the U.S. Army. Aerojet and Pratt & Whitney began explor�ing a joint venture in 1999, but were never able to come to terms and abandoned the effort.

Last year, Aerojet and ATK picked up some additional solid-rocket propulsion work when Pratt & Whitney closed its San Jose, Calif., Chemical Systems Division.

Although its growth opportunities in propulsion are now severely limited, Aero�jet remains an important player, according to Lambert. “Small is relative in the defense industry,” he said. “They still have consid�erable leverage with the client. They are a valued provider and everyone on the buy�ing and selling side will be cognizant of the desire initially to maintain two providers.”

Aerojet spokeswoman Susan Bassett de�clined a request for comment.

Boeing acquired Rocketdyne as part of its purchase of Rockwell International’s de�fense and aerospace business in 1996, but Boeing has since decided to focus less on hardware manufacturing and more on large-scale system integration.

“We just felt that Rocketdyne had a bet�ter future with Pratt & Whitney,” Boeing spokesman Fernando Vivanco said. “There will be better growth opportunities for the combined company.”

Because it is a propulsion shop, Pratt & Whitney will have opportunities unavail�able to Boeing to squeeze more profit out of Rocketdyne, analysts said.

“By combining the two, you probably end up with a higher margin than what Boe�ing was getting, so both parties benefit,” Nisbet said. “It didn’t look like it was some�thing that was going to grow for Boeing but it can for United Technologies. I think there are opportunities for them with this beyond what was available to Boeing.”

About one-third of Rocketdyne’s annu�al sales are to other units of Boeing, and that contracting relationship will continue , Vivanco said.