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UTC unit sees crisis in U.S. space industrial base

By Andrea Shalal-Esa

WASHINGTON (Reuters) - The U.S. space industrial base is facing a crisis unless NASA soon unveils a plan for developing new spacecraft after its final space shuttle mission in June, a top industry executive said on Monday.

Jim Maser, president of Pratt & Whitney Rocketdyne, said his company already had plans to close half its office and factory space over the next three years, and might have to lay off hundreds of employees unless NASA mapped out a shuttle successor plan within the next four to eight months.

The United Technologies Corp unit also winnowed its list of suppliers from 600 to 200 over the past year, Maser told reporters, underscoring his commitment to cutting costs and making space systems more affordable.

Many analysts are worried about the U.S. space industrial base given expected declines in the defense and NASA budgets.

NASA is ending the shuttle program due to high operating costs and to free up money to develop new spacecraft capable of flying to the moon, asteroids and other destinations in the solar system. But the agency's failure to map out a successor program has left companies uncertain about future prospects.

Maser said he also still had concerns about fixed price development contracts, but would even accept those as long as the U.S. government mapped out some future opportunities -- making a commitment to investment and production that would allow the industry to maintain key facilities and its workforce.

"This is the first time since we've been a spacefaring nation that we're facing a real gap," Maser told reporters after meeting with top NASA officials. "We're out of time."

He predicted that many second and third tier suppliers would soon exit the business given the current uncertainty, and said his company would be happy to compete for future orders -- as long there was something to bid for.

Lack of a shuttle successor program would result in the loss of the highly skilled workforce needed to access and explore space, and it would be expensive and difficult to rebuild those skills in future years, he said.

Maser said the Defense Department had long relied on NASA development projects to help support military space programs, but the absence of new NASA work would drive up prices for rockets to launch military satellites into space.

He said his company purposely submitted a "ridiculous" high bid for new rocket motors last year, added a profit margin of 25 percent to help offset the high risk involved in fixed price contracts. It also decided not to bid for a portion of the work to underscore the difficulty companies faced when there were so few orders to be had, he said.

"We don't want to be greedy bastards, but we don't want to lose money," Maser said, adding that the sole-source proposal succeeded in prompting a dialogue with government officials, although many now saw his company as unreasonable.

Maser said he had the support, for now, of the management of his parent company to continue providing rocket motors for national security satellites, but he said his management was insisting on seeing future plans before year's end.

Part of the problem is that many players in the space business had hoped for growing commercial sales to help offset tighter margins on smaller government orders. But commercial sales never materialized on the scale expected.

At the same time, the tolerance for risk on human spaceflight missions had grown to an unsustainable level, Maser said, arguing that companies could work with the government to lower costs once new future plans were in sight.

(Reporting by Andrea Shalal-Esa; Editing by Gary Hill)

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