By Doug Cameron
Boeing Co. and Lockheed Martin Corp. face the potential loss of
hundreds of millions of dollars if U.S. lawmakers succeed in a push
to ban future purchases of Russian-made rocket engines used by the
companies to launch Pentagon satellites.
The compromise defense bill published late Tuesday would block
the use of the rocket engines by the companies' United Launch
Alliance joint venture unless they were bought before Russia's
annexation of Crimea this year.
The bill could also delay the keenly awaited award of a contract
for a new Navy drone and blocks several efforts by the military to
retire older equipment, though approved total spending on weapons
buying and development close to the level sought by the Pentagon
for fiscal 2015.
While many of the compromises agreed by the House and Senate had
been telegraphed in advance, the provisions affecting ULA were
tougher than many observers expected. The Pentagon has already
accelerated efforts to develop a homegrown rocket engine to reduce
its reliance on the Russian motor, and boost competition in a
segment where ULA has enjoyed a near monopoly for almost a
decade.
ULA has said it has a two-year stockpile of the engines, but has
been in talks to boost purchases of the Russian-made RD-180 rocket
engine for its Atlas rockets to eight a year from five, and
intended to use them for several years while it develops a new
motor, which isn't expected to be ready before 2019.
The company said in a statement that "any effort to cut off the
RD-180 before a new, reliable engine is available would result in
billions of increased costs to the U.S. taxpayer and will leave the
nation with a huge gap in national security capabilities."
Boeing earned $545 million over the past three years from its
50% stake in ULA, according to regulatory filings. ULA also
launches satellites with a Delta rocket powered by U.S.-made
engines. Lockheed earned almost $300 million from its share in
2013, but doesn't break out a direct contribution in earlier
years.
Boeing and Lockheed executives are due to speak at an investor
conference in New York on Wednesday.
Both companies are competing separately for the next development
stage of the Navy's proposed UCLASS drone, alongside Northrop
Grumman Corp. and General Atomics. An award had been expected as
early as next year, but amid an intense debate over what the drone
should do, the bill called for a report from the Navy on its
options in fiscal 2017.
The bill did provide a boost for Boeing in providing funds for
additional E/A-18 jets for the Navy, and called for the service to
retain 11 aircraft carriers, including the refueling rather than
retirement of the USS George Washington, work that would be
undertaken by Huntington Ingalls Industries Inc.
Total procurement funding was pegged at $91.4 billion for fiscal
2015, above the $89.5 billion requested by the Pentagon.
The bill also overturns efforts by the Air Force to start
retiring its A-10 combat jets, though included a provision for some
to be shifted from front-line operations to free up maintenance
staff to work on Lockheed's F-35 fighter. The Air Force had said
personnel shortages could threaten efforts for the Air Force to
have the F-35 combat ready in 2016.
The Air Force is also eager to advance efforts to replace its
aging fleet of jet trainers, but the bill also called for the
service to examine using privately-owned light jets under a lease
arrangement for training purposes.
Lawmakers aim for a House vote on the bill the week. If it
passes, the Senate is expected to vote on it next week and it will
go to President Barack Obama for his signature.
Write to Doug Cameron at doug.cameron@wsj.com
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