General Dynamics Sells Atlas Rocket Unit : Aerospace: Martin Marietta agrees to pay $209 million to broaden its line of commercial and military launch vehicles.


General Dynamics Corp. agreed to sell its San Diego-based Atlas rocket business to rival Martin Marietta Corp. for nearly $209 million, the companies said Wednesday, in what is another sign of the aerospace industry’s post-Cold War consolidation.

The deal had been expected, although the price was less than some analysts thought General Dynamics might fetch. Industry sources disclosed in October that the companies were negotiating the sale, which is expected to broaden Martin Marietta’s line of launch vehicles for commercial and military satellites.

If the sale goes through, it would end General Dynamics’ major role in the U.S. space program dating back to 1957. One of its rockets lifted U.S. astronaut John Glenn into orbit in 1962, and over the years more than 500 of its rockets have climbed into space.

The companies said their directors approved the deal, adding that it remains subject to government review but is expected to be completed by April 30.


Martin Marietta, based in Bethesda, Md., builds the heavy Titan family of rockets. General Dynamics’ Space Systems unit produces the intermediate-size Atlas booster and Centaur upper-stage rockets, and employs about 3,750 people, including more than 2,400 in San Diego.

The fate of those workers was left unclear Wednesday. Martin Marietta Chairman Norman R. Augustine said at a news conference in San Diego that it will be “some months” before the company decides how many employees, if any, it will lay off or move to other sites.

But Augustine pointed out that the workers stand a better chance of keeping their jobs by merging with Martin Marietta than by “standing alone” as a competitor in a difficult market.

An ominous sign, though, is that Martin Marietta plans to lease, not buy, the San Diego facilities it is taking over from General Dynamics, said Virginia Cobb, business representative for Dist. Lodge 50 of the International Assn. of Machinists and Aerospace Workers. The union has about 600 members on the Space Systems payroll.


“The question is will they move the work, and it appears that the work could be moved,” she said.

Martin Marietta has made several acquisitions in recent years, led by its purchase of General Electric Co.'s aerospace group last year for $3 billion. Those deals have been followed by massive layoffs as the company streamlined the combined operations.

In October, Martin Marietta said that besides the 9,000 jobs it eliminated this year, it planned to cut another 2,000 positions and close 10 U.S. plants by the end of 1994.

Another major U.S. rocket builder is McDonnell Douglas Corp.'s Huntington Beach-based space group, whose Delta rockets are among the industry’s lightest.


The three American companies also face fierce competition from overseas rocket builders, led by Europe’s Arianespace, which holds an estimated 60% of the global market for commercial satellite launches. Russia, China and Japan also offer rival rockets and services for launches from their countries.

“There’s excess capacity worldwide,” said Jack Modzelewski, aerospace analyst for PaineWebber.

In the face of that problem and military budget cuts, General Dynamics and Martin Marietta are pursuing vastly different strategies, with General Dynamics selling assets and Martin Marietta buying them.

General Dynamics President James Mellor said at the news conference that there had been other bidders for the rocket group, but he declined to identify them except to say none were foreign entities. The group had an operating loss of $41 million in 1992 on sales of $490 million, which amounted to 14% of General Dynamics’ total sales that year.


Mellor conceded that the sale price reflected the industry’s stiff competition and three failed launches of General Dynamics rockets in the last two years. But several recent launches have been successful.

Earlier this month, for instance, General Dynamics’ newest Atlas-Centaur rocket launched a satellite that will relay transmissions of such television programs as “Wheel of Fortune.”

That satellite, in fact, was built by Martin Marietta, and the company’s ability to market satellites and rockets in one package could be a competitive boost, said Jerry Cantwell, an analyst with Lionheart Research in New York.

With the space sale, General Dynamics, based in Falls Church, Va., will be left as primarily a builder of nuclear submarines and armored vehicles.


Anticipating another payoff from the rocket sale, investors lifted General Dynamics’ stock $4.125 a share, to $97, in New York Stock Exchange composite trading Wednesday, while Martin Marietta’s stock rose 50 cents to $44.75.