Military
What Happens If Boeing-Lockheed Win Their Protest of New Bomber Contract?
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The now-disputed contract for the U.S. Air Force’s Long Range Strike-Bomber (LRS-B) affects more than the lead contractors. Both Northrop Grumman Corp. (NYSE: NOC), the disputed winner, and the combination of Boeing Co. (NYSE: BA) and Lockheed Martin Corp. (NYSE: LMT), the disputant losers, have long lists of subcontractors that could benefit (or not), depending on how the disputed bomber contract is settled.
Probably the most interesting decision will be related to the engine maker for the new LRS-B. According to a report at Defense News, General Electric Co.’s (NYSE: GE) aviation division will manufacture the power distribution systems for the new bomber, but not the plane’s engines, if Northrop is ultimately declared the winner. GE chose to partner with the Boeing-Lockheed team and Northrop is believed to have turned to the Pratt & Whitney division of United Technologies Corp. (NYSE: UTX) for the F135 engines that will power the new bomber.
But as Defense News points out, even if Boeing and Lockheed lose their protest, GE Aviation remains in good shape, according to a source who said that a Northrop win means GE “gained a valuable foothold in everything else aside from the fuselage.” For example, GE supplies components for Lockheed Martin’s F-35 joint strike fighter that could be used in the LRS-B if Northrop beats back the protest.
Because Northrop is believed to be solidly vertically integrated at the subsystems level, a Northrop win would be little help to Raytheon Inc. (NYSE: RTN), which is believed to have been part of the Boeing-Lockheed team.
Much of this report is speculative, but those who did the speculating have been close watchers of the defense industry for many years. What seems pretty certain is that GE is well-positioned no matter which prime contractor wins.
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