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Lockheed, Boeing for US JV nod

Lockheed and Boeing believe they were moving toward US approval of a nearly year-old plan to merge their money.

india Updated: Mar 31, 2006 12:49 IST
Reuters
Reuters
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Lockheed Martin Corp and Boeing Co said on Thursday they believed they were moving toward US approval of a nearly year-old plan to merge their money-losing government rocket-launching businesses in a drive to cut costs.

The Pentagon's No 1 and 2 suppliers, respectively, said they were sticking to the so-called United Launch Alliance and would not exercise options to back out if the deal failed to pass federal muster by Friday.

Final federal clearance must come from the Federal Trade Commission, which declined to comment on its review. At issue are, among other things, protections for satellite makers such as Northrop Grumman Corp., which has voiced concern about being put at a disadvantage.

Thomas Jurkowsky, a spokesman for Bethesda, Maryland-based Lockheed, said: "We remain committed to the joint venture -- and in view of the progress being made and our hope that approval by the government will be received in the near future -- Lockheed Martin and Boeing will continue to work toward closure."

Daniel Beck, a spokesman for Chicago-based Boeing, said: "We feel that progress has been made and we remain hopeful that the government will allow the transaction to close in the near future."

The proposed joint venture is designed to let the companies, long fierce rivals in space, launch US government weather, communications and military satellites -- saving a combined $150 million annually on redundant overhead.

In announcing the plan in May, the companies said they would set aside a long legal battle over Boeing's use of improperly obtained Lockheed rocket secrets if the deal went through.

But Los Angeles-based Northrop Grumman -- which builds satellites but does not launch them -- said it continued to be concerned "about the unintended consequences on competition for satellites and space vehicles that may result from the formation of a launch monopoly."

"We are expressing our concerns to the Defense Department and the FTC and request that fundamental protections be put in place to avoid these consequences," said Randy Belote, a Northrop spokesman in Washington.

Northrop wants to make sure that it faces no potential costly delays in fitting its satellites to the rockets of Lockheed and Boeing, which build space vehicles as well as launch them.

The Pentagon will not send a formal recommendation until the FTC "nears its final decision," Defense Department spokeswoman Cheryl Irwin said.

"It is our understanding that the FTC is negotiating with the parties on risk mitigations," she said, apparently referring to guards against any anti-competitive behaviour.

Also concerned is privately owned Space Exploration Technologies Corp, an El Segundo, California, startup developing rockets designed to lower launch costs by as much as a factor of 10. The company has gone to court to block the merger.

Jay DeFrank, research chief of the Space Foundation, a Colorado Springs-based non-profit group that promotes civil, commercial and military uses of space, said he expected federal approval within two months.

"The overall impression I'm getting from conversations in the Pentagon is that this will probably happen and probably, within in the next eight weeks," once the competitive issues are ironed out, he said.

First Published: Mar 31, 2006 12:49 IST