In another blow to Boeing Co.'s battered defense business, the U.S. Air Force on Thursday tapped rival Lockheed Martin Corp. for a contract potentially worth more than $3.5 billion to build a new generation of global positioning satellites.
Chicago-based Boeing, which has a huge workforce in Southern California, would have made the satellites in El Segundo.
The loss of the contract, known as Global Positioning System IIIA, was Boeing's third high-profile defeat in as many months.
The company lost a $35-billion contest to build aerial refueling tankers for the Air Force in February and a $3.74-billion award to build unmanned spy planes for the Navy in April.
Boeing's satellite operations facility in El Segundo seemed to be on the road to recovery after a production debacle several years ago cost the company $1 billion and led to the loss of 3,000 jobs. With manufacturing and technical problems behind it, Boeing in recent months had begun to beef up its satellite workforce, which had been cut to about 5,000.
Now Boeing "may have to re-size" in El Segundo, said Peter Arment, an aerospace analyst for American Technology Research. "If they won, it would have provided a growth opportunity."
The company has 31,000 workers in Southern California, where it is the largest private employer.
A Boeing spokesman said the company was "disappointed by this loss" but could not comment further until it met with Air Force officials and received a detailed briefing.
A spokesman for Bethesda, Md.-based Lockheed said the satellites would be built in Denver, with design and engineering work in Newtown, Pa.
In addition to the value of the contract, developing and building the GPS satellites will give Lockheed prestige and a higher public profile, analysts said.
The new generation of satellites will advance "one of the most important navigation innovations in the last five decades," said Loren Thompson, a defense policy analyst for the Lexington Institute in Arlington, Va. The technology "permeates almost every aspect of our lives."
Initially developed to help the military guide bombs and missiles to their targets, GPS is becoming nearly as ubiquitous as the cellphone.
Rockwell International, which was acquired by Boeing in 1996, built the first GPS satellite in 1978 and eventually built 40 at its facilities in Seal Beach. The Air Force then split up the building of replacement and upgrade satellites between Boeing and Lockheed. Boeing currently has a contract to build 15 replacement satellites.
GPS IIIA satellites will be far more accurate, powerful and resistant to jamming than the earlier generation, Air Force officials said.
In a teleconference Thursday, Col. Mark Crews, chief engineer for the GPS Wing at the U.S. Space Missile Command in Los Angeles, said that once the bulk of the new satellites were in orbit, perhaps by 2019, GPS users would be able to pinpoint their location within 9 inches, compared with about 9 feet today.
"You'll have significantly better accuracy," he said.
The initial contract is worth $1.5 billion and calls for Lockheed to design and build two satellites, the first of which is scheduled for launch in 2014. The Air Force will have the option to purchase 10 more satellites, raising the potential value of the contract to more than $3.5 billion.
The Air Force plans to eventually have 32 satellites built and will acquire them in batches. That could mean another round of competition if the first set of Lockheed-built satellites doesn't perform well.