GD Launch Failures Lift Rivals : Aerospace: Recent setbacks could hurt the company in the competitive commercial launch business.


General Dynamics is having difficulty keeping its San Diego-based commercial space-launch business airborne.

After the failure of a launch last August, the company put all launches on hold and initiated an extensive investigation that later turned up a faulty valve in the second-stage Centaur booster.

With that corrected, General Dynamics had high hopes for its most recent attempt to launch a military telecommunications satellite. But the first-stage Atlas booster rocket malfunctioned after liftoff Thursday from Cape Canaveral in Florida, leaving the Navy satellite payload about 4,000 miles under the required 9,000-mile-high orbit.

Analysts say the failures will make it more difficult for General Dynamics to attract customers and is bound to fortify the positions of competitors Arianespace, Martin Marietta and McDonnell Douglas.


“Customers require high reliability because of the high cost of the satellites,” said George Podrasky, an investment analyst with Duff & Phelps in Chicago. “Prospective customers would have to take into account the decreased reliability of (General Dynamics) rockets, and Martin Marietta and McDonnell Douglas both have had very good reliability.”

Hughes Space & Communications Co. of El Segundo built the 60-foot, 1 1/2-ton Navy satellite. Although Hughes does not believe that it can reposition the satellite with on-board thrusters, spokesman Emery Wilson said a way may be found to make it usable for some military communications purposes.

The Navy is insured against its loss. But Hughes’ Wilson said the company may attempt to “renegotiate” its contract with General Dynamics in light of the failure. He declined to break down how much of the $138-million contract value was paid to General Dynamics for its first-stage Atlas and second-stage Centaur rocket boosters.

Commercial satellite launches have become a highly competitive business since the Challenger disaster in 1986, when NASA stopped using its space shuttles to carry commercial satellites into orbit. Market leader Arianespace, a European consortium, has launched 55 commercial payloads since 1979.


General Dynamics has specialized in heavy payloads and charges an estimated $50 million per launch.

Along with its military tanks and submarine manufacturing operations, the space division was one of three core businesses that General Dynamics kept after deciding to divest itself of businesses in which it was not the industry leader. Overall, the restructuring has been a financial success, and General Dynamics’ stock has risen dramatically since 1991.

But the commercial rocket business, which is expected to account for about $500 million of General Dynamics’ $3.5 billion in revenue this year, has proved disappointing and unprofitable, Podrasky said.

General Dynamics stock closed down $1.75 at $115 in New York Stock Exchange trading Friday.