MELISSA BLOCK, host:
Two bitter rivals, Lockheed Martin and Boeing, plan to team up for a new rocket-launching business. It's being called the United Launch Alliance. And as NPR's Wendy Kaufman reports, it will have just one customer: Uncle Sam.
WENDY KAUFMAN reporting:
The deal would mean that just a single company would build and launch rockets for the Pentagon and other government agencies. It would also mean the end of bitter rivalry and litigation between the two firms. Historically, the government has wanted two different launch programs, ensuring a backup system in case one didn't work. But in recent years, Congress has begun to grumble about the immense cost of subsidizing two companies in this relatively small market. Pressure has been growing to select a single firm for the launch business, says industry analyst Marco Caceres of the Teal Group.
Mr. MARCO CACERES (Teal Group): It may have been that the companies saw some kind of writing on the wall and decided, `Look, let's join together. Even though we have to split the profits, it's probably better than risking one of us being left out of the business altogether, particularly when the commercial launch services side of the market is so stagnant right now.'
KAUFMAN: The joint venture still requires government approval, but if the deal goes through as expected, the new company would manufacture both Boeing and Lockheed rockets at Boeing's plant in Decatur, Alabama. Engineering and administrative work would be housed at Lockheed's offices in the Denver area. Initially, 3,800 people would be assigned to the new company, but cuts are likely.
While Lockheed and Boeing have been stiff competitors in this market, the companies have a long history of working together on various projects, and neither Caceres nor the companies see big problems in merging operations. Lockheed spokesman Tom Jurkowsky.
Mr. TOM JURKOWSKY (Spokesman, Lockheed Martin): It's time to move forward, it's time to move on and we got to put the country first.
KAUFMAN: The companies say the consolidation will save the government 100 to $150 million a year. But Danielle Brian of the Project on Government Oversight, a watchdog group, says government contractors often promise taxpayers savings that don't materialize. Brian also worries that technological innovation could be stalled because of the lack of competition.
Ms. DANIELLE BRIAN (Project on Government Oversight): The lack of technological edge when you don't have a competitor--when you're not worried that you're going to lose the government's business anymore, you don't feel you got to wake up early and think about, you know, a smarter way of doing something. And I think that is something that really needs to be taken seriously.
KAUFMAN: The companies hope to complete the deal by the end of this year or early in 2006. Wendy Kaufman, NPR News.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.