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NASA tragedy hurts some contractors Most did not suffer big Wall St. losses By Ross Kerber, Globe Staff, 2/4/2003
Although the National Aeronautics and Space Administration has begun to reevaluate its plans for the shuttle program, few expect a significant impact on its largest contractors such as Boeing and Lockheed Martin Corp. at least in the short run, They receive just a small fraction of their revenue from manned space-flight programs. Radical changes to the country's approach to manned space flight could still have a large impact in coming years. But at the same time, a push to privatize the commercial satellite industry begun after the 1986 explosion of the space shuttle Challenger has made the shuttle program peripheral to much of America's space industry. Almost all private-sector customers now rely on commercial rockets to put aloft payloads for satellites-radio and telephone networks such as Iridium, or for photography services. The commercial space industry faces its own problems such as a steep decline in commercial orders, while rising military spending on surveillance and targeting satellites hadn't helped many of the large contractors' commercial divisions.
But the total space industry is now worth around $150 billion, or about 10 times NASA's budget. In that context, few were looking for manned space programs to drive much growth in the space industry -- partly explaining the lack of a dramatic stock market reaction to Saturday's news. ''In the short term there's not a huge business impact from this event,'' said John Higginbotham, chief executive of SpaceVest, a Reston, Va., venture capital group. Optimistically, he and others said the accident could cause NASA to accelerate development of a new manned space vehicle, which could actually increase revenue for some of the contractors. ''Boeing and Lockheed Martin could benefit long-term if a next generation launch vehicle is accelerated, after having been shifted to the back burner in recent years,'' wrote Deutsche Bank analyst Christopher Mecray in a note to investors yesterday. A more basic question is exactly when NASA might allow its remaining fleet of shuttles to fly again -- which specialists handicapped at anywhere from three months to a year or more. Hard-to-evaluate possibilities could include big legal claims filed by survivors of crew members, or sanctions if government investigators find wrongdoing, analysts said. The ''orbiter'' portions of the space shuttle were originally built by Rockwell International Corp.'s defense business, bought by Boeing in 1996. The Chicago-based company is now NASA's largest contractor, taking in $2 billion in revenue from the agency, though that accounts for just 4 percent of its $54 billion in revenue last year. Shares in Boeing fell 48 cents to $31.11 in trading yesterday. Shares also declined in Maryland-based Lockheed Martin, another major shuttle contractor, which fell $1.50 to $49.55. It produces the craft's large external fuel tank. Also, Boeing and Lockheed Martin together operate a joint venture known as ''United Space Alliance,'' which was created in 1996 to oversee operations and maintenance of the space shuttle and the International Space Station and given a three-year contract extension in 2001.A bigger decline was recorded by Alliant Techsystems Inc. of Edina, Minn., which fell $6.34 to close at $48.02. The company's Thiokol division builds the two booster rockets that drive the shuttles aloft, and provides 17 percent of the company's $2.1 billion in revenue. A predecessor company, Morton Thiokol, produced the O-ring seals that failed in the spectacular explosion of the Challenger in 1986. A spokesman said the company hadn't been told to change any of its production work being performed under a contract that runs through 2007, and said the company currently stands by its revenue projections for this year and next. In New England, space shuttle contractors include Lexington-based Raytheon Co., whose technical services division helps train astronauts in Houston, and Hartford-based United Technologies, whose Pratt & Whitney engine division in Florida and California produces high-pressure turbopumps for the space shuttle's main engine, on board the orbiter, which mix liquid hydrogen and liquid oxygen for combustion. Another part of United Technologies, its Hamilton Sundstrand unit in Windsor Locks, Conn., is the largest producer of life support systems for NASA's craft including air pumps for the space shuttle and the space station, and space suits allowing astronauts to walk in space.Larry McNamara, general manager for the ''Human Space Systems'' unit, wouldn't discuss the value of its NASA contracts but said NASA officials have told the company to continue production. One crew was scheduled to fly to Florida for regular maintenance on another orbiter on Sunday, and waited only until yesterday before flying down. Ross Kerber can be reached at kerber@globe.com.
This story ran on page D1 of the Boston Globe on 2/4/2003.
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oncerns about the future of America's manned space programs pushed down shares of some industry contractors yesterday, the first day of trading after the disintegration of the space shuttle Columbia over Texas on Saturday. But only one major player, Alliant Techsystems, suffered a significant decline, reflecting the diminished economic importance of manned space flights.
