Martin Marietta to buy unit of General Dynamics

December 23, 1993|By Ted Shelsby | Ted Shelsby,Staff Writer

WASHINGTON -- Martin Marietta Corp. announced yesterday that it will acquire the Space Systems division of General Dynamics Corp. for $208.5 million.

The acquisition -- Martin Marietta's second major purchase in the past 13 months -- would probably make the Bethesda-based aerospace company the world's leader in the highly competitive space launch market, and leave it and McDonnell Douglas Corp. the country's only rocket makers.

In November last year, Martin Marietta agreed to purchase General Electric Co.'s aerospace division in a transaction valued at more than $3 billion.

General Dynamics' Space Systems division, based in San Diego, is best known for its production of the Atlas rocket, the nation's first intercontinental ballistic missile and the craft that powered astronaut John Glenn into orbit.

Martin Marietta makes Titans -- which have double the Atlas' lifting capacity -- and McDonnell Douglas manufactures the Delta, the lighter of the three rocket families.

"This acquisition allows us to enter the intermediate launch vehicle market with General Dynamics' Atlas booster," Norman R. Augustine, chairman and chief executive of Martin Marietta, said in a closed-circuit television news conference from San Diego.

"Combining General Dynamics Space Systems -- which has military, civil government and commercial customers -- with Martin Marietta advances our strategy to benefit from industry -- consolidation and further develop our current strengths."

The merger is likely to result in the elimination of some division jobs, Mr. Augustine said. "These are challenging times for our industry," he said. "But I would hope that both of us together would preserve more jobs in the long term then either one of us would do alone."

General Dynamics' space division lost $41 million last year on sales of about $500 million. James R. Mellor, the company's chief executive, said the division probably will lose money again this year, but begin "turning the corner" in 1994.

Paul H. Nisbet, president of JSA Research in Newport, R.I., which concentrates on the aerospace industry, said he "was not wild about" the acquisition. "I'm not quite sure why they are doing it. Maybe it's because of General Dynamics' Centaur upper-stage rocket that is used to put satellites into high orbit."

Martin Marietta has 94,000 workers in 37 states, including 780 at its Bethesda corporate headquarters. The company said in October that it expects to cut about 40 percent of that staff.

In addition, it operates two plants in Maryland. In Middle River, where it employs 1,400 workers, the company produces a rocket launching system used on military ships and thrust reversers for commercial jetliners. It employs 480 workers at a plant in Glen Burnie, where submarine warfare equipment is made. That plant is scheduled to be closed early next year.

Martin Marietta officials said the General Dynamics acquisition is not expected to have a major impact on its Maryland operations.

Last year, Martin earned $345.4 million, equal to $7.21 a share, on sales of $5.95 billion.

The proposed sale already has been approved by the boards of directors of both companies.

General Dynamics has gone through a difficult period marked by failures of its Atlas rockets. Between April 1991 and this past March the company experienced three failures in a dozen launch attempts, and flights were suspended until July.

Paul A. Hesse, a General Dynamics spokesman, said the company has had five successful flights since its last Atlas failure.

Martin Marietta has suffered its own misfortunes. In August a giant Titan IV blew up two minutes into its flight with the loss of a billion-dollar-plus Air Force spy satellite.

Seven days later, the launch of the company's $63 million weather satellite ended in failure. And before the month was over, ground controllers lost contact with the Mars Observer space probe only days before it was to zoom into orbit around the Red Planet.

In October, a $220 million observation satellite that was built by Martin Marietta and launched on a company-made Titan II failed to achieve orbit.

Referring to past problems with the Atlas, Mr. Nisbet said, "One or two more failures and this program might be aborted."

When asked why Martin Marietta wanted to be an industry leader in the international space launch market, Mr. Augustine said he anticipates that the U.S. government will take action to make domestic space companies more competitive with foreign subsidized operations.

"We're betting that the U.S. government will stand up for competitive rules of free trade" that will "level the playing field" between U.S. and foreign launch companies as it did with the semiconductor industry a few years ago.

General Dynamics' space division has about 3,700 workers, the bulk of them at plants in San Diego and in Harlingen, Texas. The company is headquartered in Falls Church, Va.

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