Air Force picks Northrop Grumman to build next big bomber.
In a big blow to Boeing, the Pentagon has picked Northrop Grumman to design and build the new top-secret Long Range Strike Bomber for the Air Force. The aerospace giant beat Boeing and Lockheed Martin after an intense four-year competition. “Building this bomber is a strategic investment in the next 50 years, and represents our aggressive commitment to a strong and balanced force,” Defense Secretary Ashton Carter said during a Pentagon briefing announcing the contract. Defense Department has awarded Northrop Grumman a $55 billion contract to develop the Air Force’s next stealth bomber in what is likely to be the last major combat aircraft program awarded for a decade.
Wes Bush, chairman and chief executive of Falls Church, Virginia-based Northrop Grumman, said in a brief statement that his company will deliver on its promise to build a highly capable, affordable aircraft. Since the contract was announced, deal analysts estimated its value at between $60 billion to $80 billion if the US Air Force buys all 100 stealth bombers as planned. The announcement marks an important step in the Pentagon’s broader plan to modernize the entire nuclear force — missile-toting submarines, land-based intercontinental ballistic missiles and long-range bombers. Air Force, beating out a team led by Boeing for the most significant military-aircraft contract since Boeing lost the Joint Strike Fighter contract in 2001.
For Northrop Grumman, the world’s sixth-largest defense contractor, the aircraft deal locks in decades of revenue as well as ownership of one of the Pentagon’s more prestigious aircraft programs. Details of Northrop’s bomber design remain classified, but experts agree on what is required. “Stealth, a payload capacity of approximately 20,000 pounds and a range of 4,000 to 5,000 nautical miles,” according to Mark Gunzinger, an analyst at the Center for Strategic and Budgetary Assessments in Washington, DC.
The contract announced Tuesday is worth about $80 billion in today’s dollars — about $23.5 billion for the development phase and $56.4 billion more for the production of 100 aircraft. Russia and China have long-range bomber capabilities, but neither can match the reach and sophistication of the US program, which can reliably hit targets anywhere in the world. Daryl Kimball, executive director of the Arms Control Association, said the administration is overreaching by investing so heavily in all three elements of the nuclear force. “We believe the administration’s redundant, all-of-the-above approach to rebuilding all of the major U.S. nuclear weapons delivery systems at levels beyond realistic deterrence requirements is unsustainable and will deplete resources from higher national security priorities,” Kimball said. On Tuesday, the Pentagon said that the contract is composed of two parts: One part is for the engineering and manufacturing development (EMD), and the second part would cover the delivery of 21 jets.
While Air Force officials declined to go into detail about their selection criteria or what put Northrop Grumman’s design over the top, cost has been a huge factor in the bomber competition. Northrop Chief Executive Wes Bush welcomed the news, saying that his team “has the resources in place to execute this important program, and we’re ready to get to work.” “We believe this is a reasonable and achievable estimate.
By using existing technologies and an open architecture, military officials hope that any future modifications will be less costly. “Why are we more confident about this program than many others?” Lt. Louis, and whether Boeing will stay robust in future military aircraft development.” RBC Capital Markets analyst Rob Stallard in a note to clients Tuesday wrote that Boeing “now faces the difficult task of working out what to do with the military aircraft business that it bought with McDonnell Douglas.
There is no large platform in the backlog to replace the C-17, F-15 and F-18.” Defense analyst Loren Thompson of the Lexington Institute said that “slowly but surely the walls are closing in on Boeing’s military aircraft operations in St. Louis.” The contract award ends a storied Boeing bomber history that included building in Seattle almost 7,000 B-17 Flying Fortresses for World War II and supplying the B-52s that are still part of the country’s aging bomber fleet today. Industry news reports say that while the new plane’s specific capabilities are highly secret, it likely will be equipped with high-tech communications gear and other electronics that would allow it to perform a variety of missions, not just dropping bombs.
While revenue at Boeing’s defense division is essentially the same as 10 years ago, at an expected $30 billion in 2015, the military side’s share of total revenue has fallen from 56 percent to a projected 25 percent. If the company had lost its replacement, it may have been forced out of making combat aircraft entirely—and even break up its business, according to some analysts. “They’re now a very different company,” Richard Aboulafia, vice president for analysis at defense and aerospace consultancy Teal Group, said of Northrop’s win. “They lacked a central focus and were becoming a collection of separate operating units, but now they’ve got a strong core.” Instead it’s now Boeing’s combat jet business that faces an uncertain future.
Protests by losing bidders have become the norm in big defense contracts; that’s how Boeing in 2011 grabbed the KC-46 air-refueling tanker award from Airbus. Some analysts have speculated that a Boeing loss could spur management to seek a major defense acquisition — with Boeing perhaps even buying Northrop to preserve its business.
Much of the plane’s assembly could occur in the Southern California desert community of Palmdale, home of Air Force Plant 42, a military industrial park leased to aerospace contractors where the B-1 and B-2 bombers were built. At Boeing’s investor conference in May, an analyst asked company Chairman Jim McNerney to contemplate the implications of losing the bomber contract and also a pending trainer-jet contract. Loren Thompson, a vocal advocate of the new bomber program, says it is a key part of modernizing the military at a time of increased U.S. focus on China’s growing might. “The simple truth is that if the United States does not revitalize its dwindling fleet of heavy bombers, it probably cannot prevail in a war against China,” Thompson wrote earlier this month, citing what he called China’s increasingly dense and agile air defenses. Northrop is a leader in unmanned systems and has developed large unmanned surveillance aircraft such as the RQ-4 Global Hawk and the secret, stealthy RQ-180.
In January, shortly before he left office, then-Defense Secretary Chuck Hagel visited a bomber base in Missouri to underscore his argument that a new bomber would help deter war and preserve the U.S. military’s global reach. Because both Northrop and the Boeing/Lockheed team have worked on their competing concepts for three years, work on the LRS is already well advanced, said LaPlante. A first flight is “not necessarily that long from now.” During production, when the Pentagon says it plans to build seven or eight bombers per year, Northrop will be paid on a fixed-price basis, with an added incentive margin for meeting targets. The LRS bomber — able to evade the newest defenses through advances in stealth technology, and capable of striking both highly mobile and deeply buried targets — will provide anew “the option to strike any target, any time,” he said.
Today, it’s vital to innovate and reinvest … (to) allow America’s military to be dominant in the second aerospace century.” To keep production costs down to $564 million per airplane, the contending defense contractors were directed to use existing, mature technologies for communications and sensor systems, stealth and weapons on the new plane.