Lockheed Wins Bid to Build Cruise Missiles

The Pentagon on Thursday picked Lockheed Martin Corp. over Boeing Co. to build its next generation of stealthy, air-launched cruise missiles in a deal that could be worth up to $3 billion.

The multibillion-dollar contract for the Joint Air-to-Surface Standoff Missile, known as Jassam, was the first time the Pentagon has chosen between the rival companies since they became the dominant forces in the defense industry.

The victory was something of an upset for Lockheed Martin, which currently builds no cruise missiles. Boeing builds a similar weapon for the Navy at a former McDonnell Douglas factory outside St. Louis.

Boeing had more to lose in the competition because production of its Navy missile is winding down.

The contract, the largest of its kind since the late 1980s, is a boost for Lockheed plants in Florida and Alabama as well as the Lockheed Martin Skunk Works in Palmdale, which will complete about half of the missile work, according to Lockheed.

If the program lives up to expectations, it will give the military one of its stealthiest and most versatile missiles, capable of being launched from a variety of Air Force and Navy aircraft.

The Air Force wants to build 2,400 of the satellite-guided missiles between 2002 and 2009. The weapons will have a range of about 115 miles and hug the terrain as they sneak past radar systems to attack enemy air defense systems.

The missiles will cost less than one-third of the $1.2-million price tag for a predecessor missile made by Northrop Grumman Corp. that the Defense Department canceled as too expensive.

Lockheed’s winning proposal was “well below” the Air Force’s $400,000-a-missile cost goal, said acting Air Force Secretary F. Whitten Peters in announcing the selection. Air Force officials declined to give the exact figure. Peters credited “the intense competition” with holding down the cost.

Lockheed was awarded a cost-plus, fixed-fee contract for the next design phase. Lockheed also offered a 15-year total warranty, the Air Force said.

The win for Lockheed’s Electronics & Missiles division in Orlando, Fla., represents a new product for a company that has specialized in laser- and television-guided missiles that require human controllers such as the Hellfire and Javelin anti-armor missiles.

Lockheed shares were unchanged at $109 on the New York Stock Exchange.

Orlando-based facilities will produce the missile’s electronics and avionics. Final assembly will be at Lockheed’s Troy, Ala., facility, where the company assembles the AGM-142 television-guided missile, the Javelin and Hellfire.

In Palmdale, about 100 Skunk Works employees will develop and build much of the first 60 missiles--producing the “stealthy” body, wing and tail as well as mounting the engines. In addition, the Palmdale facility will build parts for another 80 missiles, which will be assembled in Alabama.

Once the program moves into full production, Palmdale will employ about 90 workers on the project, according to Ron Lindeke, a Lockheed spokesman.

The 6,000-employee unit will probably staff the project with existing employees rather than hire new workers for the missile project, Lindeke said.

The Jassam, guided by its own on-board satellite links, is designed to be fired at targets more than 100 miles away. Key to its stealthiness is a minimum of sharp edges and use of special materials that absorb radar signals.

Lockheed and Boeing have competed since 1996 in a preliminary design program for the missile. Boeing beat Lockheed in 1996 for the rights to develop and build another major munitions program, the $3-billion Joint Direct Attack Munition.