WASHINGTON
-- The U.S. Federal Trade Commission (FTC) voted 5-0 Oct. 3 to approve the
proposed merger of the government launch services businesses of Boeing and
Lockheed Martin. In its consent decree, the commission imposed three conditions
on the deal.
Boeing
sells the Delta launch vehicle, and Lockheed Martin, the Atlas. Once the deal
is finalized after the two companies comply with the consent decree, they will
finalize a 50-50 joint venture that will consolidate the production,
engineering, test and launch operations associated with U.S. government launches
of both rockets.
The FTC
said in a press release that its consent decree directs the new United Launch
Alliance (ULA) company to:
- Cooperate
on equivalent terms with all providers of government space vehicles;
- Provide
equal consideration and support to all launch services providers when seeking
any U.S. government delivery in orbit contract; and
- Safeguard
competitively sensitive information obtained from other space vehicle and
launch services providers.
Industry
and government sources said those conditions appeared to be designed to satisfy
the concerns of companies that had filed complaints with the FTC about the
deal. Northrop Grumman, which manufactures satellites for military and civil
government customers had sought assurances that it
would not be put at a disadvantage by ULA when it was bidding against the
satellite manufacturing units of Lockheed Martin and Boeing, which both sell
satellites to government users. Satellite contracts are frequently sold as
delivery-on-orbit contracts, which means the
manufacturer has to negotiate a launch price with the launch service provider.
Northrop Grumman had sought assurances that it would get the same kind of
pricing from ULA as Boeing and Lockheed Martin.
"As we have
stated in the past, Northrop Grumman is not fundamentally opposed to the
proposed United Launch Alliance joint venture," Northrop Grumman said in a
statement Oct. 3. "We have, from the beginning, been concerned about the
anticompetitive effect that ULA could have on the satellite and space vehicle
businesses. The FTC has just published
its proposed Consent Order in this matter and while we anticipate that it will
adequately address our concerns, we are still in the process of reviewing it."
Space
Exploration Technologies (SpaceX) of El Segundo, Calif., had asked the FTC in
October 2005 to reject the merger or, failing that, at least require Boeing and
Lockheed Martin to accept a consent decree relinquishing their virtual lock on
Air Force launch business.
"While it obviously
protects big satellite makers like Northrop, it appears to do very little to
ensure free and fair competition in the launch vehicle market," said Elon Musk,
president and chief executive officer of SpaceX.
SpaceX is
developing a launch vehicle dubbed the Falcon 9 that it intends to use to
compete for business launching satellites built for the U.S. government.
Lockheed
Martin and Boeing have insisted that by combining their Atlas and Delta
businesses they will be able to reduce the cost of meeting the national
security and civil expendable launch vehicle needs of the U.S. government.
The FTC
press release made clear the commission's concerns about competition, saying
the joint venture would violate antitrust laws and "is likely to cause significant
anticompetitive harm." But the FTC said the Pentagon concluded that "the unique
national security benefits from the joint venture would exceed any
anticompetitive harm."
The FTC
release also said the Pentagon believed that "ULA will improve launch vehicle
reliability through a single work force that will benefit from an increased
launch tempo and because ULA will integrate Boeing's and Lockheed Martin's
complementary technologies."
The
Pentagon made clear its support for the deal in spite of any reduction in
competition. "The merger between Lockheed Martin and Boeing presents very unique national security benefits that, in the department's
analysis, clearly outweighs the loss of competition. For that reason, we
have concluded that the joint venture offers advantages over the status quo,"
Pentagon spokeswoman Cheryl Irwin said Oct. 3.
Boeing
spokesman Dan Beck said the company "expects that the remaining requirements
will be successfully resolved to enable the transaction to be completed and ULA
operations to begin."
A number of
hurdles remain to be overcome, Beck said. Boeing and Lockheed still have to go
about creating the business, setting up accounting systems and all else that
goes with creation of a large company.
"There are
some details relating to Buy 3 of EELV [Evolved Expendable Launch Vehicle] that
we need to work out with the Air Force, and we are in continual discussions
with them on those," Beck said. He declined to elaborate on what those issues
were. He added that Boeing hoped to "get this going as quickly as possible."
Maj. Regina
Winchester, a spokeswoman for the Air Force, said Oct. 3 that EELV Buy 3 was
set up to function independently of ULA.
The FTC
decision is subject to public comment for 30 days.
The value
of each company's investment in the ULA is valued at "more than $530.7
million," the FTC said in its press release.
Once the
deal is formally closed Michael Gass, vice president and general manager of
Lockheed Martin Space Transportation, will become ULA's president and chief
executive officer. Dan Collins, vice president of Boeing Expendable Launch
Systems, will serve as chief operating officer. Each company will be able to
appoint three directors to a six-member board of directors.
ULA
headquarters will be in Denver with most engineering and administrative
activities consolidated at Lockheed Martin's Space Systems Company facilities.
Major assembly and integration operations will be located primarily at Boeing's
manufacturing and assembly facility in Decatur, Ala. As part of the joint
venture, the companies' launch facilities at Cape Canaveral Air Force Station
in Florida and Vandenberg Air Force Base in California will provide flexibility
for meeting launch requirements on East and West coasts.
ULA is
expected to have about 3,800 employees at sites in Colorado, Alabama, Florida,
California and Texas, according to a Lockheed Martin press release.
Following
the closing of ULA, Boeing and Lockheed Martin have agreed to dismiss all civil
litigation against each other related to a previous competition for launches
under the Air Force EELV program.
Jeremy Singer contributed to this
report from Boston.