After years of cutbacks and shrinking orders, Boeing Co.'s sprawling satellite-making operation in El Segundo got a major lift Monday with a $1-billion contract for three satellites for the Mexican government.
The deal, which also includes supplying ground-based communications equipment, was the second big satellite contract for Boeing this year and should help keep the production line humming at a time when the state is facing a 12.4% unemployment rate. The large order could help preserve high-paying engineering jobs in Southern California and throws a lifeline to hundreds of smaller firms that supply parts for the massive satellites.
Each satellite will be about the size of a school bus, take three years to make and cost about $250 million. The Mexican government declined to say exactly how they would be used but said that they would provide its police and military personnel with communications coverage throughout the country — a crucial capability as it continues to wage a bloody battle against local drug cartels.
The contract also puts Boeing's total satellite order at six for the year, placing the company atop the large commercial satellite market for the year — a position it hasn't held for more than a decade, according to Futron Corp., a Bethesda, Md., firm that tracks the space and telecommunications industry.
"This clearly reestablishes Boeing in a leadership position in the commercial market," said Andrea Maleter, a senior technical director at Futron. "They have come back with a vengeance."
At its peak in the 1990s, the Chicago-based company had been the world's largest satellite maker, employing more than 10,000 at the 1-million-square-foot facility near Los Angeles International Airport. Its workforce now stands at around 5,500.
Industry analysts said the Mexican government deal would help preserve specialized engineering and manufacturing positions in El Segundo that could have been at risk because of pending cutbacks in Pentagon spending.
The company said more than 200 suppliers — most of them in Southern California — would be involved in the satellite program.
The contract puts Boeing's backlog of orders at 27. Although that is a far cry from the 50 or so that were typical during Boeing's heyday, it is about double the number just five years ago.
"They haven't done this well in years," said Marco Caceres, senior space analyst for research firm Teal Group Corp. "It takes a lot of work to put these satellites together because they're so big. It'll keep the company busy for a while."
Boeing said it would build two satellites in El Segundo and purchase a smaller satellite from Orbital Sciences Corp. of Dulles, Va., which is scheduled to be the first to enter service in late 2012.
Aside from manufacturing the satellites, Boeing will build out a ground-based network that's designed to provide voice and data communications for all of Mexico. Government airplanes, helicopters and Humvees will be outfitted with Boeing technology linking Mexican government officials together in a network designed to work in the most remote regions.
"Mexico has a huge need for communications networks right now," Caceres said. "Their No. 1 issue is security."
The company hopes the recent contracts will help it wean itself from reliance on the U.S. government for its satellite business, which currently makes up about 90% of its revenue, company officials said.
The satellite announcement came as the aerospace giant announced plans to boost production of its wide-body 777 jetliner, a move the company hopes will offset the revenue loss stemming from another reported delay in its 787 Dreamliner, which is in flight tests.
The delay — the company's seventh — stems from an electrical fire that grounded the 787 test fleet last month.