The Atlanta Journal-Constitution June 10, 2004
Lockheed, Boeing in a naval battle
By Elyse Ashburn
Years of million-dollar design work will culminate next week in a billion-dollar payoff for either Lockheed Martin or Boeing.
The other will be left with a costly design and no buyer.
The aerospace titans have been locked in a quiet but fierce competition for a Navy contract to develop and produce a new fleet of maritime patrol aircraft. The Navy has said a victor could be announced as early as Monday.
If Lockheed wins, the plane would be developed at the company's Marietta plant, generating 300 to 500 engineering, design and testing jobs. However, the plane would be built at Lockheed's plant in Palmdale, Calif.
The development contract is valued at $3 billion to $4 billion but would grow far beyond that during production.
Analysts usually eager to handicap a contest say the winner is anybody's guess.
Both companies have made impressive bids, but both are fielding aircraft with drawbacks, they say. The new planes will fly maritime reconnaissance and intelligence missions and, if necessary, combat missions against submarines or surface ships.
Lockheed proposes a new-generation version of its venerable P-3C Orion patrol craft - the airplane the Navy currently uses. The Orion21, as the update is called, is a state-of-the-art version of a plane with which Navy pilots are already familiar.
"The Lockheed P-3 has been a very dependable and useful aircraft for a long time," said Loren Thompson, a defense analyst at the Lexington Institute. "It's a fairly versatile aircraft."
But, analysts say, the Lockheed design might not be ambitious enough to warrant a major cash outlay.
Boeing would retool a 737 jetliner, providing space, speed and a worldwide support network since the model is widely used.
Experts said rigging a jet airliner for marine patrol work would be difficult, potentially leading to cost overruns.
Both companies have plenty of backers in Congress.
"It could possibly mean 400 or 500 more jobs in Marietta," said Rep. Phil Gingrey (R-Ga.). "It's just hugely important, and of course, we've worked very closely with ... Lockheed." Sen. Saxby Chambliss (R-Ga.), a member of the Armed Services Committee, also has worked on Lockheed's behalf.
Boeing boasts a broad swath of supporters in both chambers.
But politically, Boeing might be a tougher sell than its competitor. The company and its backers in Congress are still smarting from the delay of a $23 billion aerial tanker deal following allegations that Boeing officials acted improperly in winning the bid and the Air Force overstated the need for new tankers.
"I think Boeing has a lot going against them in terms of current reputation," said John Pike, aerospace analyst and director of GlobalSecurity. "There's an extra burden of proof that they didn't steal the award and that it's a cost estimate that you really can take to the bank."
While neither company has a clear edge, analysts say, Boeing could better sustain a loss. Lockheed relies more heavily on military contracts and has more vested in the bid, they say.
"This is not a franchise Boeing has a grip on. It's a Lockheed Martin franchise," said Richard Aboulafia, vice president of analysis for the Teal Group.
But, experts caution, the program might not produce the steady stream of revenue either firm imagines. Analysts say estimates that 150 of the planes would be built may be high, especially as the military shifts its intelligence-gathering focus from submarines to terrorists.
"This is one of those programs that is potentially worth a lot of money but is a question mark because of other priorities," said Thompson.
© Copyright 2004, The Atlanta Journal-Constitution
