Bloomberg April 18, 2002
TRW Wins $665 Million Military Satellite Contract
Cleveland, April 18 (Bloomberg) -- TRW Inc., the target of a
hostile takeover bid, won a $665 million contract from the
Department of Defense to develop a network of satellites to track
the movements of enemy nuclear missiles.
The company also expects to win a multibillion contract to
build the network, known as the Space-Based Infrared System Low
(SBRIS Low) program, TRW spokesman Jack Pritchett said. The U.S.
has budget $3.6 billion for the network between 2003 and 2007.
The satellite work would cement TRW's role in the U.S.
missile-defense program, in which it's already a major
subcontractor. Its success there is partly behind Northrop Grumman
Corp.'s $12.2 billion hostile bid, analysts said. Northrop
competed for the contract also.
``It's not terribly surprising because TRW is tops in
military satellites,'' said Paul Nisbet, an aerospace and defense
analyst at JSA Research Inc. who doesn't rate TRW shares. He rates
Northrop Grumman a ``buy'' and owns those shares.
Cleveland-based TRW hasn't decided if it will build the
network of satellites, which could total as many as 36, or
contract the work, Pritchett said. The contract includes the
satellites and the ground system.
The Pentagon reorganized the program because of cost overruns
and schedule delays. The project was run through a joint venture
of TRW and Raytheon Co. TRW then competed again for the program
against closely held Spectrum Astro Inc. and Northrop.
Cheaper Alternative
Members of the U.S. Congress tried to kill the program last
year after the Pentagon said the work of the satellite network
could be more done less expensively by ground-based radar,
according to Stephen Young, an analyst with the Union of Concerned
Scientists, which is critical of missile defense.
The program calls for the U.S. to launch the first satellite
in 2006. The system would track enemy missiles after launch and
provide their coordinates to U.S. missiles, which would try to
destroy them.
The U.S. Missile Defense Agency has already revamped SBRIS
Low twice already, said John Pike, the head of Global
Security.Org, a defense-research organization.
``SBRIS Low is a technically ambitious program that,
particularly over the past five years, has had persistent problems
in achieving its goals,'' he said. `` There is every reason to
expect that it will be a very difficult undertaking.''
Development of the satellite network has been held up because
of concerns missile defense might violate the 1972 Anti-Ballistic
Missile treaty, which doesn't allow for the use of space-based
radar systems. President George W. Bush last year said the U.S.
would abandon the so-called ABM treaty in June.
``Now that the ABM treaty is gone, I think you see SBRIS Low
developed relatively on schedule within the price range,'' said
Jack Spencer, an analyst with the Heritage Foundation, a
Washington-based research group that has supported the Bush
administration's policies on defense spending.
Shares of TRW, which is also the No. 2 auto parts maker, fell
39 cents to $53.46. The company's Space & Electronics unit is
based in Redondo Beach, California.
--Jonathan Berr in the Princeton newsroom (609) 750-4516 or
jberr@Bloomberg.net/ Editors: Thompson, Liedtka
Copyright 2002 Bloomberg
