Suppliers React To Lost Biz
As the news of the RAH-66 Comanche attack helicopter
cancellation swept the industry, so did the reaction from key
suppliers affiliated with the program. On Monday afternoon, Boeing
stock was down about 2 percent on the news, with United
Technologies off 3 percent. United's Sikorsky division is believed
to be impacted harder than Boeing, since the latter currently
manufactures the Apache helicopter and as such would gain some of
the sales lost due to the cancellation of the Comanche.
Both Boeing and Sikorsky are slated to receive termination fees
estimated at $2 billion-$4 billion. The Pentagon generally has
unlimited right to eliminate programs that it has contracted with
outside manufacturers, under certain terms. So, while the dollar
amounts can be enormous for defense contracts, it can be a mistake
to assume that a contract signed equals revenues coming in the
door. In this case, the actual take for the companies looks to be
an order of magnitude lower than originally thought.
Harris Corporation said that all employees associated with the
cancelled program, primarily in Palm Bay and Malabar (FL), would be
absorbed into other government programs. Harris currently has more
than 200 active government programs and over 400 job openings, for
which it is actively recruiting. Through its Government
Communications Systems business, Harris has been providing avionics
equipment for the Comanche program, including cockpit displays,
display generator module sets, memory storage units, and fiber
optic interface modules. The company's annual revenue run-rate
associated with the Comanche program is approximately $20-25
million.
"We were involved on the Comanche program for over 20 years and
believe it would have provided an outstanding capability for the
U.S. warfighter," said Bob Henry, Corporate Senior Vice President
and President of Harris' Government Communications Systems
Division. "We are disappointed in the program's cancellation. Long
term, we will continue to maintain a diverse portfolio of programs
across the DoD, Civil, Homeland Security and Intelligence
agencies."
Northrop Grumman Corporation said that the Department of
Defense's announced plan to cancel the RAH-66 Comanche helicopter
program does not change the company's 2004 financial guidance. As
part of the Boeing-United Technologies Comanche helicopter team,
Northrop Grumman provided navigation systems, mission computers,
fire control radars and integrated avionics systems for the combat
helicopter program. With approximately 350 employees on the
Comanche program, the company is currently assessing the impact of
the government's decision on the workforce.