12/04/03

From staff and wire reports
Huntsville Times

Northrop Grumman Corp. and Raytheon Co. have won an eight-year contract worth as much as $4.5 billion to design and build a rocket that can intercept a ballistic missile less than five minutes after launch, the Pentagon said Wednesday.

The project could bring as many as 500 jobs to Huntsville, said U.S. Sen. Jeff Sessions, R-Mobile.

"The world's best companies, when they win these contracts, choose to do their work here," the senator said during a visit to Huntsville.

Northrop Grumman spokeswoman Marynoele Benson said the program will roughly 500 jobs in Huntsville during the next seven years. Those positions will be with Northrop Grumman and local subcontractors, including Davidson Technologies, 3D Research Corp. and Schafer Corp. Raytheon's portion of the work will be done in Tucson, Ariz. and Massachusetts, a Raytheon spokeswoman said.

Northrop Grumman currently has 1,300 employees in Huntsville.

The Northrop-Raytheon team beat a team of Lockheed Martin Corp. and Boeing Co. Boeing is the incumbent prime contractor on the Pentagon's ground-based missile defense system.

The Kinetic Energy Interceptor is part of President Bush's plan to protect the United States from ballistic missile attacks with rockets launched from land and sea.

Northrop, the prime contractor, will use sites here, as well as in Goleta, Calif., northern Virginia, Clearwater, Fla., and Chandler, Ariz.

The contract is Northrop's first as the leader of a major ballistic-missile defense program and is a victory for its strategy of expanding in space and missile defense through the $12.5 billion acquisition of satellite-sensor maker TRW Inc. last year.

The Interceptor would add a layer of defense to Boeing's ground-based system by destroying missiles at altitudes of less than 120 miles. Pentagon officials have said they envision one scenario in which U.S. vessels would sail close to North Korea to intercept missiles bound for Japan or North America.

The contract, which reimburses costs and provides for potential bonuses, is the first involving a major anti-missile interceptor that's been awarded since the Bush administration last year pulled out of the 1972 Anti-Ballistic Missile treaty.

"This is an impressive win," said Cai Von Rumohr, an analyst at SG Cowen Securities in Boston who owns Northrup shares. "This is Northrop's first time out of the box competing for a missile defense project of this stature as a prime (contractor). They haven't been a big player in missile defense."

The contract would add little to sales next year as the program gets started, and would add about $400 million in sales annually from 2005 on, if the program stays on schedule, Von Rumohr said.

The Pentagon's announcement came in a letter to congressional defense committees from Lt. Gen. Ronald Kadish, director of the U.S. Missile Defense Agency. "The initial capability will be ground-based with a planned evolution to sea-basing," he wrote.

Northrop is the prime contractor and responsible for systems integration, testing, command, control and communications.

Raytheon will build the missile interceptor and warhead based in part on technology from its Navy Standard Missile-3 and the warhead used on its ground-based system. It will build the warhead primarily at its Tucson facility.

Raytheon said the work could be worth $2 billion to it through the life of the contract.

Lockheed Martin makes the Aegis electronic combat system for naval vessels that's being redesigned for missile defense. Lockheed Martin's Missiles & Fire Control unit in Dallas also is the prime manufacturer of the Patriot-3 interceptor used successfully in the war with Iraq.