Boeing Loses Satellite Options

In a blow to Boeing Co.’s Seal Beach facility, the Air Force said Thursday that it had decided to end a $1-billion contract with the company for new satellites and to open up the process for bidding.

Rival defense contractor Lockheed Martin Corp. will probably bid later this year on the contract to design and produce 27 global positioning satellites.

The satellites will be designed to send improved signals to U.S. fighters, bombers, reconnaissance aircraft and smart bombs and to override enemy jamming.

The new program, called GPS Block 3, hurts Boeing’s Space & Communications Group in Seal Beach. It was selected in April 1996 to design, develop and produce six satellites and was awarded options for the rest. Boeing said the contract’s potential value was $1.3 billion.

The loss of the contract raised fear of layoffs at the facility.

“I don’t think it’s ever good news to see that the largest employer in Orange County, not just Seal Beach, is losing business,” Seal Beach Councilman Shawn Boyd said.

“We’re always concerned if Boeing considers layoffs,” said Boyd, whose wife is an administrative assistant for the company. “We have a significant number of people in our city that work for Boeing.”

But Boyd said Boeing may find a way to reenter the bidding process.

“If they lost the option on it and the government’s going to go out to rebid, I’m sure Boeing’s going to reposition itself and try to bid more competitively,” he said.

The Air Force said in a statement that Boeing’s performance “has been exceptional and was not a factor in the decision” to rebid the contract.

Boeing is building the first six satellites to Air Force specifications laid out four years ago. The Boeing satellites don’t include a capability to override enemy jamming. The Joint Chiefs of Staff decided in June that new satellites must have this capability.

“We fully support GPS modernization and will continue to work closely with the government,” Boeing spokesman Erik Simonsen said.

The Seattle company’s shares rose 25 cents on the New York Stock Exchange, closing at $37.50.

Lockheed bid on the 1996 job and lost to Rockwell International Corp.’s space unit, which was subsequently bought by Boeing. Lockheed built the Pentagon’s Milstar communications program, the most jam-proof unclassified satellite in the world, said Brett Lambert, a military space analyst with DFI International, a Washington defense consulting firm.

“It does give Lockheed Martin an excellent chance to get back into precision guidance, GPS and anti-jamming, where it excels,” he said.

The competition also will give Lockheed a chance to recover some of the satellite business that its Sunnyvale, Calif., plant lost to Boeing last year in their contest to build the next generation of imaging spy satellites, Lambert said.

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Bloomberg News was used in compiling this report.