Missile Makers Prepare Bids on Project Worth Up to $20 Billion

The nation’s major missile producers, including two Southern California contractors, are preparing to bid on a Navy program that industry officials predict will eventually grow into one of the largest tactical missile projects in history.

The weapon is called the advanced air-to-air missile (more commonly known as the Triple AM), which the Navy would launch from jet fighters to defend its battle groups at sea from enemy aircraft carrying their own long-range weapons.

Estimates of the AAAM program’s lifetime value range from $6 billion to $20 billion, depending on whether all of the potential uses for the missile actually develop. At $20 billion, the missile would begin to rival the size of some aircraft and ship programs, which are historically among the largest sources of defense business.

Over the last decade, the Pentagon has had a growing love affair with missiles. Annual missile procurement has leaped to an estimated $12.6 billion in fiscal 1987, up from only $2.7 billion in 1977.

The Navy has asked defense contractors to form teams and submit bids next month in the AAAM program. So far, General Dynamics’ Pomona division and Westinghouse have formed one team, and Hughes Aircraft and Raytheon have formed another.

“It is our No. 1 priority here at General Dynamics,” said Joseph Muse, General Dynamics vice president and AAAM program director. “We see it as our future.”

Muse expects that development of the missile will cost about $1 billion, making it among the most costly development programs ever for a tactical missile. The contractors will have to develop the missile at a financial loss, on the assumption that the deficits can be recouped during production.

“It is well known that the amount of money the Navy is going to spend is not adequate for the job,” Muse said.

Hughes got into a similar, albeit much more serious, situation with its AMRAAM missile for the Air Force, in which development costs soared way over contract ceilings.

“On AMRAAM, Hughes got stuck as the single contractor absorbing all the losses,” Muse said. “We won’t plan to lose $300 million, or whatever they are up to.”

Executives at Hughes Missile Systems Group in Canoga Park declined requests for interviews, which they have seldom granted since the unit experienced quality-control problems in missile production at a Tucson factory a few years ago.

In asking for contractors to form teams, the Navy plans to split up the winning team at the time of production, and the two contractors will compete against each other for annual production contracts.

“The teams fall in love, get married, tell each other all our secrets and then we get a divorce, hopefully a friendly one,” Muse quipped. “Then, we compete.”

Westinghouse conducts its missile business in Baltimore and General Dynamics in Pomona. Hughes and Raytheon have formed a joint venture company, called H&R; Co., which is expected to be based in Washington. McDonnell Douglas will also participate in the Hughes-Raytheon team.

Production of AAAM will not begin until the mid-1990s. Potentially, thousands of jobs would be created by the program, but they would be divided between the two winning contractors.

Westinghouse and General Dynamics should teach each other new skills, Muse said. Westinghouse is a major producer of airborne radar but lacks a missile business. General Dynamics, meanwhile, is one of the largest missile contractors but is not a major player in airborne radar technology.

The strategy behind the combination of Raytheon and Hughes is quite different, because both Raytheon and Hughes are leading producers of radar-guided missiles.

In fact, Raytheon has enjoyed considerable success in recent years at Hughes’ expense. The Air Force and Navy have awarded Raytheon large production contracts on missiles that Hughes designed but recently had some trouble building profitably. By concentrating on a strategy of lowering manufacturing costs, Raytheon won large production contracts without taking on large development risks.

That history is likely to be a challenge that Hughes and Raytheon will have to overcome, Muse said. “If you try to divide among equals, engineers fight that,” he said. “I know if we had a program with Raytheon, we would have a tough time getting our engineers to sit down with them. There would be a tendency to not give away the store.”

If AAAM is going to be successful, however, all of the companies involved will have to operate to their highest standards.

The AAAM will break new ground in speed and range, two critical areas of improvement that the Navy is seeking over the existing missile that AAAM will replace, the Hughes Phoenix.

At the same, the Navy wants the AAAM to weigh no more than 650 pounds, compared to more than 1,000 pounds for the Phoenix. That would enable the Navy’s F-14 fighter to carry up to eight AAAMs versus the four Phoenix units.

The Hughes-Raytheon design will feature a high-performance ramjet engine, which would power the missile to three times the speed of sound.

McDonnell Douglas is in charge of the ramjet system.

A ramjet theoretically could permit speeds of Mach 5, which would take a missile to a target 100 miles away in just over two minutes, Tom Amlie, a missile expert and former technical director of the China Lake Naval Weapons Center, said.

“One of the problems with the Phoenix is that it is so slow,” Amlie said. “The F-14 reaches the target at about the same time the missile does.”

General Dynamics and Westinghouse say their missile will weigh only 400 pounds. They are planning to achieve that with a new technology in solid rocket propulsion called pulsed thrust, which provides two separate sources of rocket thrust.

The two teams will use different guidance systems. Hughes and Raytheon will employ both infrared and radar systems. General Dynamics and Westinghouse will use a so-called semi-active radar guidance, which relies on radar on the aircraft for homing signals.

“We believe we have the lower-cost approach,” Muse said.

But Hughes and Raytheon say the same thing.

“H&R; Co. will provide the most cost-effective approach and the maximum degree of competition,” a statement said.

Contract awards by the Navy are expected next fall.