TRW Inc. won the largest satellite production contract in its history Friday, a $6.5-billion program to build the nation's primary weather-monitoring system for joint military and civil use.
The 15-year contract--jointly awarded by the Defense and Commerce departments and the National Aeronautics and Space Administration--is the latest key win for TRW's burgeoning space and electronics unit, which employs 8,700 in Redondo Beach. The new contract will employ 400 to 600 workers, some of whom will be new hires.
The contract is TRW's third major satellite award in the last 12 months. In April, the Pentagon's Missile Defense Agency selected TRW to oversee a $6-billion satellite system to track enemy missiles, though TRW's portion of the work is less than the value of the weather satellite program. In November, TRW won a $1.3-billion Defense Department contract to build the instruments for a communications satellite system. The company finalized both contracts this week.
"This has been a remarkable week for us," said Tim Hannemann, chief executive of TRW's Space & Electronics unit. "When we exited 2001, we had $4 billion worth of contracts to fulfill. As we head out of 2002, that will roughly double to $8 billion."
The satellites, scheduled for launch in 2008, will gather meteorological data such as soil moisture, sea temperature and wind speed. Such data will help the nation's scientists forecast weather and monitor Earth's environmental changes.
The initial contract would be for $2.9 billion for two satellites and data recovery equipment with a $1.6-billion option for four additional satellites. The entire $6.5-billion program includes launch and administrative costs.
About the size of a school bus, the spacecraft will carry 11 different sensor systems and perform a wider range of missions than previous generations of weather satellites. They would be placed in polar orbits, allowing them to observe the entire globe during their orbits.
"This is a big plus for the Los Angeles area," said Marshall Kaplan, director of space programs for Strategic Insight Ltd., based in Arlington, Va. "This is a big step up for TRW. They've built satellites before, but nothing of this magnitude. So this is a pretty big feather in their cap."
TRW edged out its larger rival, Lockheed Martin Corp., in a bidding process that took four years.
"We're sad this didn't happen," said Lockheed spokesman Buddy Nelson. "It's a competitive business. You go into it expecting to win some, but you know you'll lose some now and then."
TRW shares gained 50 cents, or nearly 1%, to $55.68 on the New York Stock Exchange, while Lockheed lost $2.45, or 4%, to $59.71 on the NYSE, before the deal was announced. Shares of Northrop Grumman Corp., which is buying TRW for $7.8 billion, primarily for the satellite business, rose 77 cents to $115.73 on the NYSE.
Raytheon Co., TRW's primary subcontractor on the bid, will create the system's $1-billion ground-based data processing equipment from its Aurora, Colo., facility.
TRW's Space & Electronics unit reported $2.02 billion in revenue last year, up from $1.88 billion in 2000. The unit contributed 12.3% of the Cleveland company's revenue in 2001, up from 10.9% the year before.
Hannemann said that revenue for 2002 will increase slightly but that the bulk of the payments from these contracts won't begin until 2003, boosting the unit's revenue by more than 10%.
The newest program--called the National Polar-Orbiting Operational Environmental Satellite System--would replace two separate programs independently operated by the military and civilian branches of government.
The new system would ostensibly save the government $1.6 billion in operating and equipment costs, said John Cunningham, program director for the Integrated Programs Office, which administers the contract.