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Boeing-Lockheed deal seen in trouble

A plan to combine the space rocket businesses of Boeing Co. and Lockheed Martin Corp.  has run into unexpected financial and political hurdles, the Wall Street Journal reported on Tuesday.
/ Source: Reuters

A plan to combine the space rocket businesses of Boeing Co. and Lockheed Martin Corp. has run into unexpected financial and political hurdles, the Wall Street Journal reported on Tuesday.

While both military suppliers say they remain committed to the proposed joint venture, and continue to seek government approvals and push ahead with transition plans, new developments appear to have sapped momentum for the concept, the newspaper said, citing Pentagon and industry officials.

Among the developments are wavering support from the Air Force and increasingly sharp disagreements between the rivals about recouping certain development costs, the report said.

“This is far from a done deal,” the Journal quoted one person involved in the details as saying. This person predicted weeks of intense negotiations amid continuing uncertain support from high-ranking Pentagon officials.

A Boeing spokesman told the newspaper “the process is progressing as we expected.” A Lockheed spokesman said the government is conducting a thorough review by “asking good questions, and we are providing data to respond.”

The proposed venture is intended to help money-losing government-rocket operations by merging manufacturing and creating a joint team to blast future U.S. military, spy and civilian-research and exploration satellites into orbit.

For government customers the long-term goal is to reduce launch costs, though commercial launches aren’t supposed to be affected. But even some advocates now acknowledge that obtaining federal approval is turning out to be more difficult and time consuming than anticipated, the Journal said.

Unveiled in May, the combination, the companies promised, would avoid duplication and save the government between $100 million and $150 million annually.

But officials at the Air Force and the Federal Trade Commission, which is in charge of the antitrust review, aren’t satisfied with the level of detail they have received on projected costs, people familiar with the matter told the Journal.

Since the announcement, negotiations between the companies as well as with the Air Force have grown more complicated. Boeing and Lockheed are arguing over Boeing’s bid to recoup $1 billion or more of the total it invested in earlier years to develop the Delta IV family of rockets.

Lockheed spent considerably less than Boeing to develop its rival class of rockets, so it has balked at Boeing’s strategy to try to roll such hefty costs into Air Force contracts under negotiation in anticipation of a final federal decision on the combination, the report said.

Lockheed’s rival program is called Atlas V.