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Boeing expected to announce satellite contract

The deal to build communications satellites for Intelsat could be worth $1 billion and provide a major boost to the aerospace giant's unit in El Segundo.

July 16, 2009|W.J. Hennigan

In a major boost to its satellite-making operation in El Segundo, Boeing Co. is expected to announce today that it has won a contract potentially worth nearly $1 billion to build satellites for telecommunications giant Intelsat Ltd.

The contract to build four communication satellites would throw a lifeline to the troubled business and could help stem the region's mounting unemployment rate. The order would preserve high-paying engineering jobs in Southern California and bolster prospects for hundreds of smaller firms in the region that supply parts for the satellites, analysts said.

"This is huge for Boeing," said Marco A. Caceres, senior space analyst for aerospace research firm Teal Group Corp. "Even if they fail to get another contract for the remainder of the year, they are set."

Each school-bus-size satellite is estimated to cost about $200 million and take three years to build. They would provide high-definition television and radio broadcasts as well as telephone and data services.

Although the new order is seen as helping the satellite business get back on its feet, the jubilation from the contract award could be somewhat tempered by a recent disclosure that Boeing may begin slashing 1,000 jobs across its defense business. It was not immediately clear where most of the cuts would come from. Boeing's defense unit has about 70,000 workers, with about 25,000 in Southern California.

In a memo to employees this week, James Albaugh, president of Integrated Defense Systems, Boeing's military business, said the firm would have to make the cuts in response to a slowdown in Pentagon spending and setbacks with several defense contracts.

"In recent weeks, customers have directed us to stop work or reduce the level of effort on some specific programs, requiring us to take immediate steps to reduce employment," Albaugh wrote. The reductions are expected to affect employees at several Boeing facilities across the country, including those in Huntington Beach, Anaheim and Long Beach.

Boeing satellite officials said that the Intelsat deal would help preserve jobs in El Segundo that could have been at risk because of the Pentagon cutbacks. About 5,500 people work at the sprawling complex near Los Angeles International Airport, down from nearly 10,000 in its heyday a decade ago.

The Intelsat contract comes at a time when the El Segundo facility was in the midst of a business drought and recovering from development problems with its new generation of commercial satellites. It's been almost two years since the company obtained a multisatellite deal.

Caceres estimates the satellites themselves could be worth more than $800 million, with additional revenue from maintenance work. He said the contract would breathe new life into Boeing, which has been losing ground to foreign competitors. The deal could also provide Boeing with a possible long-term business partner, he said.

Intelsat looked at five satellite manufacturers -- two in Europe and three in the U.S. -- before striking a deal with Boeing, said Ken Lee, Intelsat's senior vice president for space systems. "We've been in this business for a long time," he said. "We know each vendor's strengths and weaknesses."

Boeing said more than 200 suppliers -- most of them in Southern California -- would be involved in the satellite program.

Craig Cooning, vice president and general manager of the company's Space and Intelligence Systems, which oversees the satellite unit, said the deal would give Boeing the opportunity "to serve a large customer and the potential to have a long and enduring relationship."

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william.hennigan@latimes.com

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