Main Engine Cut Off - T+61: Northrop Grumman Acquires Orbital ATK, Lockheed Martin Unveils New Satellite Family

Episode Date: September 25, 2017

Northrop Grumman is acquiring Orbital ATK in a $9.2 billion deal. Lockheed Martin unveiled a new family of satellite busses, positioning themselves for the next era of satellite bus production. This episode of Main Engine Cut Off is brought to you by 20 executive producers—Kris, Mike, Pat, Matt, Jorge, Brad, Ryan, Jamison, Guinevere, Nadim, Peter, Donald, Lee, Jasper, Chris, and five anonymous—and 77 other supporters on Patreon. Northrop Grumman to acquire Orbital ATK - SpaceNews.com Analysts see red flags in Northrop’s acquisition of Orbital ATK - SpaceNews.com Lockheed won’t protest now two-way race to refresh U.S. nuclear arsenal - SpaceNews.com All in the Family: Lockheed Martin Introduces New Satellite Lineup - Sep 19, 2017 Lockheed Martin unveils new satellite bus lineup - SpaceNews.com Email your thoughts and comments to [e-mail] Follow @WeHaveMECO Listen to MECO Headlines Subscribe on Apple Podcasts, Overcast, Google Play, Stitcher, TuneIn or elsewhere Subscribe to the Main Engine Cut Off Newsletter Buy shirts and Rocket Socks from the Main Engine Cut Off Shop Support Main Engine Cut Off on Patreon

Welcome to the Main Engine Cutoff. I am Anthony Colangelo. We've got two topics this week to cover. One, Northrop Grumman has announced that it will acquire Orbital ATK in a pretty big deal, so we'll talk about some of the speculation around that, things that we would be looking for in the future with that partnership, and other interesting points about the Northrop Grumman Orbital ATK partnership there. And also Lockheed Martin unveiled a new line of satellite buses, a new family that uses some common components. So I think it's a really interesting story about how they're going to work on satellite bus production in the future. So I want to cover both of those. Let's start with the big news. Northrop Grumman announced it would acquire Orbital ATK in a $9.2 billion deal.

And as right now, they said that it will operate as a fourth division of Northrop Grumman under the Orbital ATK name. I only believe that because they've got other things to worry about first. And that is how typically acquisitions go. You know, the name sticks around for a couple of years until they figure out what they want to do with whatever business they acquired overall. And then sometimes the name goes away. Sometimes it changes to become sort of a marketing name. I'm not sure. There's not, you know, Oberle TK is a name itself that is a child of a lot of mergers. So I'm not sure if there's a ton of, you know, name loyalty. You know, thinking about other big acquisitions that have happened when Apple bought Beats, for example,

they kept the Beats brand around because there was some recognition with that brand. I don't know that the same thing's true with Orbital ATK in that way. Obviously, ATK has some history there. So I could see the ATK part staying around as the producer of these large solid rocket boosters. And that is honestly what I think this deal is about overall, is its work in solids. Northrop Grumman is one of the two prime contractors that is working with the Air Force to win a contract to replace the decades-old Minuteman III ICBM under the Air Force's Ground-Based

Strategic Deterrent Program. These two contractors are still vying for the overall contract. And this is something that, you know, the lifetime of a contract to replace an ICBM could be $90 billion or something like that over the course of that entire contract. So it's a huge deal for these businesses and the Air Force as a whole. The interesting thing here is that Northrop Grumman, to this point, was expected to work with either Aerojet Rocketdyne or Orbital ATK for the motors of that ICBM. They were going to compete the work between those two. Now it looks like Northrop Grumman is going to have, you know, Orbital ATK as part of it. And they would use that.

They would use motors in-house at that point. So Aerojet Rocketdyne is kind of thrown out to the wind. So there are concerns here. Boeing in the past has been less specific about who they're going to work with for motors, but Aerojet Rocketdyne has said that they're working with Boeing in some capacity, advising on motors and propulsion, things like that. So it could align in a way that it's Northrop Grumman bidding for the entire program, including the motors, and then Boeing and Airjet Rocketdyne could go in on this together.

This is probably a topic for another show in general, but my point is that for the Northrop Grumman's outlook here, this deal, I think, is all about the ICBM work and only partly about space. Northrop Grumman has a lot of history in space. They obviously are a big contractor for a lot of projects, James Webb Space Telescope being the most notable one right now. Obviously, they have a ton of history overall, you know, all the way back to the Apollo era and things like that. So they are a big space contractor. They don't have a lot of overlap with Orbital ATK. So there's very few programs in the spaceflight arena where Orbital ATK and Northrop

Grumman were going up head to head. So in that way, it is a complementary relationship that they aren't duplicative in that sense. So I'm not worried about decreased competition in that regard because the simple fact is there was not a lot of overlap here between these two companies. So I think some of that, some of the, oh my gosh, there's competition going away. I think some of that is a little overblown because of the lack of overlap that these two companies have. But obviously, as all of these prime contractors merge and merge and merge over the course of time, it does become a concern. But also, that's the way of the world. People merge. Companies get old. They merge once it makes sense. There are big companies. There are small upstarts

that shake things up in a lot of ways. Obviously, that's a topic of this show quite often. So I think a lot of that concern is overblown, quite honestly, on the space side, at least. For the, you know, the Defense Department side, maybe those are valid concerns, but in the space sector, not as much of a thing. So even though I think the deal was struck up because of Northrop Grumman's interest on the ICBM program, that doesn't mean there aren't implications for space flight projects. And specifically, I don't know that Orbital ATK would commit to this without really seeing any future for the things that they care about. And specifically, I'm wondering about there are two projects that are on the horizon here,

the satellite servicing project, the mission extension vehicle, and the new launch vehicle, the STIC, the, you know, solid rocket-based launch vehicle that would be EELV class. And they're working towards, you know, landing an Air Force contract to develop that rocket engine, or the, you know, the launch vehicle as a whole. So there has to be some sort of interplay there with those projects and what the merger with Northrop Grumman brings to the table. Specifically from an article in Space News Jeff Faust wrote, there's this one little sentence that I found a lot of interest in.

The deal will allow Orbital ATK to pursue, quote, new opportunities that require greater technical and financial resources than we currently possess. So that is kind of indicative to me that there were conversations behind the scenes about how supportive Northrop Grumman would be of these new programs. Would they maybe invest money? Because the revenue here between Northrop Grumman and Orbital ATK is a massive difference.

Tens of billions of dollars more on the Northrop Grumman side. So they're in the 20 billion range and know, 20 billion range, and Orbital ATK is down in the single digits of revenue per year. So the company has a lot more resources. And if some of that can be invested in these projects from Orbital ATK, something that maybe Northrop Grumman is interested in getting into, like launch services, there could be a future there for that launch vehicle instead of solely relying on the Air Force contract. Now, that said, I still think that launch vehicle is a bad fit for the market. I don't see a lot of potential for an all-solid rocket-based, I shouldn't say all-solid rocket-based because the main stage would be a solid rocket booster. But in the past, Orbital ATK has been working with Blue Origin for use of the BE-3U as the upper stage engine.

So there is some liquid hydrogen, liquid oxygen stage on there as well. But overall, I don't think it would be a great fit for the market. But if there is this bigger investment, maybe some plans change. Maybe their plans before were predicated on the fact that the only way they were going to produce a larger launch vehicle was to, you know, find a way to get the Air Force to fund it, find a way to hook that in with the work they're doing on SLS for NASA, and find what the lowest common denominator of those two things is, which is a huge solid rocket motor as the first stage. With the extra resources that they might get from Northrop Grumman, do those plans shift at all? These are some of the questions I have. With this announcement, there weren't a lot of answers. I have a lot of questions, and that's my first one. Do plans shift on the EELV class launcher for Orbital ATK

with the extra resources that they may get from Northrop Grumman? ATK with the extra resources that they may get from Northrop Grumman. The other thing that I have question marks here about is the Mission Extension Vehicle. This is the satellite servicing project that Orbital ATK started. It is run under Orbital ATK, but it's actually owned by a subsidiary, Space Logistics. It's a company that was set up, owned wholly by Orbital ATK, that is going to operate Mission Extension Vehicle. Is Northrop Grumman going to take that in and cultivate it as a project, as a product line in the Northrop Grumman lineup? Or does that company roll out on its own and split off? Maybe some of the Orbital ATK leadership heads that direction with space logistics, and it becomes its own freestanding program and company that then can focus solely

on mission extension vehicle and the operations thereof. I could see that happening if there were sufficient interest in making that its own thing and maybe getting some investment to facilitate the advancement of that project. Or, you know, maybe Northrop Grumman does want to get more into that side of things and does see value in that because it is a market that does have potential growth. And like the launcher, they might put some money into it as well. Those two things will be very interesting to see how they're handled within the larger umbrella that is Northrop Grumman. Now, there are a couple of other interesting things that make this deal specifically interesting. Northrop Grumman is the prime contractor on the B-21 bomber for the Air Force, and Orbital ATK is actually a subcontractor

for that program to Northrop Grumman because they do a lot of work with composite structures, and that's what they're supplying there for the B-21. They are overall a big composite structure contractor out there. They do work for even ULA and things like that, building composite structures for different programs. So that's something that Northrop Grumman likes as well to bring in-house and maybe cut down on some of the overhead that was involved there. And then Northrop Grumman also owns Scaled Composites, who built Spaceship 1 and Spaceship 2. And most interestingly here, Strato launches Giant Carrier Airplane. This is the giant plane that's sort of like the White Knight 2, but it has six 747 engines.

And famously, they never actually found a launch vehicle that was going to actually use that plane to its fullest capability. So right now, they're only planning to use that plane to launch up to three Pegasus XL launch vehicles at a time, which are built by Orbital ATK. So all of a sudden, this oddball company, Stratolaunch, has both of its components built and manufactured and produced and operated by two wings of the same company. Scale to Composites is building and operating the plane, and Orbital ATK is operating the launch vehicle. Could that become something that Northrop Grumman is interested in as part of its launch services? Is it something, you know, I certainly don't see the value yet in air launch in this regard for something like Virgin Galactic's Virgin Orbit's

Launcher One, smaller scale. I get it. But this giant strata launch carrier plane that's meant to carry up, you know, not just a small set launch vehicle, but a bigger launch vehicle. I don't really see the value there. But if this is a project that is already so overrun with North of Grumman properties, it could be something that piques their interest and they could look at building a larger launch vehicle that fits on that Stratolaunch carrier airplane. They know both sides of this so well at this point, the skeleton composite side and the launch vehicle side for Orbital ATK, that I could see that becoming into the realm of possibility.

So overall, I've got a lot of questions about this and it sounds like it's going to take until early next year to really sort out all of the details of this acquisition. And we'll see where the pieces fall, because alongside that, the EELV Phase 2 program is probably going to be landing around the same time. We'll start to hear who's going to win those contracts from the Air Force. We talked about that on a past show, if you're curious about my projections for who's going to enter and win those contracts from the Air Force. We talked about that on a past show if you're curious about my projections for who's going to enter and win those contracts. But that could very likely play into the future of these two companies, of this now merged company. So the next couple of months are going to be very telling for Orbital ATK's future, for Northrop Grumman's future in space. I'm excited to see where all these pieces fall. Now I want to get into the Lockheed

Martin satellite bus family thing, but before I do, I want to say a very, very big thank you to all of the supporters of Main Engine Cutoff over on Patreon. There are 97 of you there now. We're three away from triple digits. This is crazy. These numbers are always amazing to me when I look at them. And this episode of Main Engine Cutoff was brought to you by 20 executive producers. Chris, Mike, Pat, Matt, George, Brad, Ryan, Jameson, Guinevere, Nadim, Peter, Donald, Lee, Jasper, Chris, and five anonymous executive producers. They made this episode possible. They produced this episode. And I could not do it without their support, and everyone else over at patreon.com slash miko. And a quick reminder, we are doing the headlines show over on Patreon now, so if you

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and you will get that right in your podcast feed every single week. I've been having a lot of fun with it. People seem to be enjoying it so far. So head over there and check it out. All right, this Lockheed story. I'm really excited about this announcement from Lockheed because I just find it so interesting to see how they're playing into this space overall. So for a little context, last week we

talked a bit about OneWeb, who is going to keep their satellite factory open after their initial run of satellites to offer up to other customers. This past week, there was an announcement between Thales Alenia and Black Sky that Thales Alenia was going to be opening up a manufacturing facility here in the U.S. to produce small satellites. So there's this big shift in satellite production going towards these larger number of smaller satellite production runs. And it seems to be, you know, a time where this whole industry is changing over. The whole satellite manufacturing industry is changing over, changing the way things work. And it's really interesting to hear this Lockheed announcement amongst all of that. So the

basics of this announcement are that there are now four different satellite sizes within this family. The LM50 series, which is a nanosat bus, and this would weigh between 10 and 100 kilograms overall. And this is, you know, obviously targeted at that smaller satellite nanosat satellite size. And then there's the LM400 series, which is probably somewhere between 140 and 800 kilograms. So this is a more traditionally small sat sized bus. And, you know, this bus can get some propulsion and get some, it could be used in low earth orbit, geostationary orbit. And they also, you know, advertise this one as being useful for interplanetary missions. The next size up is the LM-1000 series, which is mid-size missions, they say.

This would weigh between 275 and 2,200 kilograms. And this, again, would be used for low Earth orbit, geostationary orbit, or even interplanetary missions. And then there's the LM-2100 series, which is their largest bus. That would weigh up to 2,300 kilograms. And this is basically a modernized version of the bus they were building previously, the A2100. So overall, the deal is here that this is a scalable family of satellite buses, all the way from 10 kilograms to 2,300, which I'll mention in a second. And the idea here is that they can use these common elements. They're finding the common components between all these sizes, whether it's solar panels, batteries, reaction wheels,

all these different components that go into these satellites. They're trying to find the commonalities, produce common components, and put these differently sized buses together to produce production efficiencies and to be able to really change the way that they're manufacturing things overall and go away from the one-off, very custom-designed satellite approach to something a little more akin to mass production. Obviously not, you know, car-like mass production, but they want to move in that direction overall and and Common Components really, really helps in that regard. They didn't really release a lot of specifics yet on how these things are put together, so, you know, specifically, some of these mass ranges are crazy for these different sizes. You know, the LM1000 series, they say, goes from 275 to like 2200 kilograms.

That is a huge range. So I would love to know some more about how they're putting these things together and what that mass range is coming from. I'm wondering, my projection here is that that would be like the satellite bus configured with and without the propulsion system. So maybe, you know, if you just had one that was gonna have no propulsion you would focus more on like the payloads and things. If you had one that needed propulsion you're obviously putting in a bunch of fuel weight and propulsion weight and things like that. Maybe that's where that massive range comes from, but I would really love to hear more about the different configurations that they would be targeting here rather than these kind of generics. Another interesting note is that they would be targeting here rather than these kind of generics. Another interesting note is that they are talking up these two mid-size ranges,

the LM400 and the LM1000, as interplanetary targets so that they could be used in Mars orbit or Venus orbit or something like that or even farther out. But with those two things becoming a push, they are obviously marketing these are used for interplanetary. And with the need for Mars communications orbiters could be this coming, you know, contract to send out a communications orbiter to Mars that we talked about a couple of weeks back with Jake from WeMartians. I could see them doing a pretty big marketing push to say we should be the contractor for that because we've got these two sizes that are perfect, that are configurable, that are proven, etc., etc. It'd be very interesting to see how they play that role specifically.

But overall, the reason that I'm intrigued by this announcement from them is that it seems to be a very forward-looking announcement from a company that typically gets the old spacey kind of rap. We have this changeover in the industry, like I was talking about with OneWeb and Taliesin Alenia is opening up this new small sat manufacturing facility. I could very easily see a case where this whole trend happens, where they're focusing, you know, the industry at large is focusing more on mass producing smaller satellites and, you know, Lockheed or Boeing, some of these ships that are bigger and slower to turn, take too long to adjust. And I could see this announcement being their way to address that

trend. You know, I could see them doing this announcement years down the line rather than today and us all looking at it and saying, too little, too late. You know, you should have done this five years ago. You should have done this six years ago. But it seems to me that they are getting out in front of this trend in an interestingly timed and positioned way. Obviously, some of these buses are targeted towards the larger market, so they still have the flexibility to go all the way up to those big geo-satellites, but it does seem to be kind of focused on that small to mid-range satellite size that is becoming all the rage these days. So I just think it's interesting

to see that they noticed this trend early on, that they addressed it in a way that is still flexible enough for their old needs and flexible enough for their new needs. And it's just overall encouraging move from Lockheed Martin, who we tend all to think of as a slow ship to turn. It's good to see them, you know, recognize a trend like this early enough to get the project in motion to launch at a time that we're still seeing this ramp up of small satellite production. We're still seeing the very early days of this trend. We don't know yet how it's going to turn out, but they do seem to be positioning themselves well to not be totally swept and left behind by a trend that comes through the industry in the same way. There are still a couple outstanding wild cards in this

segment of the market. You know, we haven't heard a lot about SpaceX's Constellation yet. We don't know if they're just going to produce everything in-house and not let anyone else use their satellite buses, or if they're going to produce these satellites that could be bought in the same way that people buy launch services from them. Could they buy satellite services from SpaceX? That could be a pretty big force in the industry overall. There are still some wild cards like that, but the stage is set for this next era of satellite production, and Lockheed does seem to be positioning themselves surprisingly well for it, for a company that we tend to think of driven by, you know, government contracts and not much else, you know, with a, you know, not too much of a worry for these younger trends in the industry.

So encouraging sign, I think, for one of the older, more established companies in the industry. So that is it for this week. Thank you so much for listening. As always, thank you to all of you supporting Managing Cutoff on Patreon. older, more established companies in the industry. So that is it for this week. Thank you so much for listening. As always, thank you to all of you supporting Managing Cutoff on Patreon. The support over there has just been blowing me away recently, and I'm absolutely very, very thankful for it. And don't forget to check out the headline show.

If you're liking this show, if you're liking the things I'm covering here, I think you'll really enjoy the headline show. So head over to Patreon, patreon.com slash Miko. $3 and up a month gets you that headline show every single week. I think you should really check it out because I think you would really enjoy it. I've been enjoying it. I hope you will as well. Thank you.