Lockheed Martin Space Systems builds the full range of government and commercial satellites in Denver and Sunnyvale, California. On the defense side of its business, Lockheed is the prime contractor for the U.S. Air Force’s GPS, missile warning, and protected communications satellites. As a heavily invested incumbent on military space programs worth about $45 billion, Lockheed Martin Space Systems is taking a keen interest as the Defense Department plans its future satellite architectures over the next few years.
Companies large and small are looking to break off pieces of Lockheed Martin’s business at a time when the DoD is searching out new technologies and new companies.
Since taking the helm of Lockheed Martin Space Systems in 2013, executive vice president Rick Ambrose has worked to position the company to win its share of government and commercial business, leading the company through a major reorganization in 2014 that included the closing of the Newtown, Pennsylvania factory that specialized in commercial satellites. In January, the company announced that its space systems division brought in $9.1 billion in sales and $1.17 billion in operating profit for 2015.
“We get called a lot of things,” he said. “When you’re one of the largest space companies a lot is said. But I have a real simple view on that: people innovate, not organizations.”
Ambrose spoke recently with SpaceNews military space reporter Mike Gruss.
Is anyone within the Defense Department still fighting for aggregated satellite architectures, or has disaggregation won the day?
There are multiple Analyses of Alternatives and discussions around multiple architectures. If you think about the 1990s, it was kind of the decade of aggregation. The Space Based Infrared System and the Advanced Extremely High Frequency satellite program are two Lockheed Martin examples. There are other programs that competitors have. I wouldn’t use the word “disaggregation,” which is kind of like, “I’m going to take the same thing I got, and just split it.” I don’t think that meets the needs of the government’s future capability and/or ability to operate in space. I think they’re looking for additional new capabilities, proliferated capabilities.
What do you talk about instead?
We talk about convergence: commercial and defense systems are coming together at some level. We’re driving innovation in high-throughput satellites and flexible payloads. It’s the same as some of the attributes that the government’s looking for in the future. Is that going to be a 10-percent convergence, or 50 percent? We don’t know. The beauty is, by thinking about it that way, it tells us what we’ve got to be investing in. At first you saw us invest in our modernized A2100 satellite bus because I had to get down to more common buses. We also stood up two payload centers, that I put in almost equal money, both electro-optical and radio-frequency payloads. In the future we can be extremely smart buyers of payloads and capacities, and pick out the real talented attributes. This is where I hope I can pull from Silicon Valley.
As the head of an established aerospace contractor, what do you make of Defense Secretary Ash Carter in Silicon Valley saying the Pentagon needs to embrace new companies and new capabilities?
We would claim we were in Silicon Valley in the early days. I like the entrepreneurialism brought in at this stage, because you bring the ideas out, you test, fail fast, find out what’s going to work and what’s not going to work and move forward. We belong to the Silicon Valley Alliance. At any given time I’ve got two or three open projects with companies in Silicon Valley, or some private equity [investors] trying to bring ideas in. A lot of times they don’t play out. The beauty is, I incorporate the learning into our own capabilities.
Lockheed Martin Space Systems underwent significant reorganization in 2014. What can you do now that you couldn’t do then?
There are a lot of capabilities in that area. If we go back to 2013 everyone was talking about sequestration, continuing resolutions, budget reductions, and it was very de-focusing to the people. So we took a position, we banned that language.
Literally. We banned that language. We told our employees this is just a fact of life. Budgets are coming down. We have critical programs to the country. Treat it like hyper competition. How do we get the recurring cost down? That’s why we went in, number one, and started replanning the programs, and then invested in a technology refresh of the A2100 bus. We’ve taken $2.6 billion out of the cost of major programs spread out over the program life cycle. Then with SBIRS, we’re putting SBIRS 5 and 6 on our modernized A2100 platform. We think we can get it at least another 25 percent out of the SBIRS 7 and 8.
Has the reorganization led to reduced costs?
On a satellite level, 35 percent cost reduction was the target, and that’s what drove the investment in the modernized A2100, and 25 percent cycle time reduction. Now, we’re not all the way there yet, but for instance, against the 25 percent we’re probably 15 to 18 percent. On the cost side maybe 20 to 25 percent, that’s what we’re bidding forward now. The other thing I’m after is a 40 percent first article cycle time reduction, because that’s kind of the Holy Grail. If a customer needs a new capability, new mission, you don’t want to take 10 years to get it in the hands of a warfighter or one of our commercial customers to provide service to their clients. That’s the one I’m most excited about.
Part of that cost reduction is based on additive manufacturing and 3-D printing. Are you pushing that on your suppliers?
We’re not pushing it; we’re encouraging it. We don’t want to be overbearing on the other businesses’ methods, but we subcontract to big companies, so we’ve got to respect their systems, but this is going to enable some exciting things in the industry. This year we should have our 26-inch propulsion tanks that are additively produced, and we’re starting to work on more complicated features, such as some limited printing of circuits, RF components, and those things. On a propulsion tank, you go from a 24-month cycle down probably to three months or lower.
You established two Payload Centers of Excellence in recent years. What kind of fruits should come from that investment?
One of the reasons we stood up the RF payload center is when we ran into problems with the GPS-3 payload, and we actually found there was kind of a shortage of RF high data rate engineers. We did a search, and we found nationally they’re in short supply, even when I tried to surge people in. A lot of the schools weren’t graduating these type of engineers, because they’re all wanting to go do Internet and digital. One of the reasons we stood up this RF payload center was to compensate for that, retain knowledge, generate the next generation of engineers, but also help us with all of our communications. On electro-optical, we’re heavily focused on lower-cost missile warning or futuristic missile warning capabilities. We’re starting to support a sponsorship program up at University of Colorado Boulder to help train some new engineers coming out that we can plug into this payload center and work with our senior engineers. We’ve hired 30 engineers outside of Lockheed Martin to help populate this.