Northrop Grumman Corp.'s Baltimore division could soon abandon the business of building airport radar systems, putting 340 local employees out of work and quitting a craft at which it has succeeded for decades.
Northrop Grumman officials say the U.S. government is to blame.
Company executives and local congressmen are lobbying to preserve Northrop Grumman's role in the air traffic control business. They have taken the unusual step of petitioning the Pentagon and the Federal Aviation Administration to reopen a $620 million contract awarded four years ago to the company's main competitor in the radar industry, Raytheon Corp.
Northrop Grumman officials say the effects of leaving the business could be profound. Northrop Grumman is the last company to manufacture air traffic control radar in the United States, and chipping away at its employee base could hurt its ability to design and build radar for military aircraft and weapons systems, they say.
The dispute also could be a symptom of a larger malady for the nation's fifth-largest defense contractor as it searches for a footing in the shrinking defense industry.
Two years after rejecting Northrop Grumman's proposed merger with Lockheed Martin Corp. to preserve competition, the Pentagon is denying it a chance to remain competitive, company officials say. As a result, Northrop Grumman could soon be forced to leave not just the air traffic control radar trade but also several other core businesses as the Pentagon promotes the very monopolies it wanted to avoid.
"People don't realize how badly the defense industry has collapsed," said James G. Roche, a Northrop Grumman vice president and head of its Linthicum-based Electronic Sensors and Systems Sector, which builds radar systems.
"We're not asking for handouts, we just want to be allowed to compete. And they're not letting us do it."
Northrop Grumman had just purchased Westinghouse Electric Corp.'s electronics plant in Linthicum when, in 1996, it lost a competition with Raytheon to build as many as 213 air traffic control radar systems for military and civilian airports.
The contract was the first step in a plan to upgrade the air traffic control network around the nation with modern, digital surveillance technology. The new systems, which cost between $2 million and $3 million each, will replace vacuum-tube systems that have been in use for 25 years or more.
Despite losing the competition, Northrop Grumman officials said they were confident that their proposed radar system would work, so they spent about $30 million designing and building it anyway. The system, called ASR-12, is in operation in several countries, including Mexico, El Salvador and Egypt.
Raytheon's winning design, called ASR-11, is just entering its production phase and has not been tested in live operation. Its development was stalled by legal challenges from Northrop Grumman in 1996 and 1997, and it is several months behind schedule.
Raytheon's system is to be built at plants in Canada and the United Kingdom. Northrop Grumman's radar is manufactured in Baltimore and assembled in Puerto Rico. The Federal Aviation Administration has said it will buy the ASR-11 from Raytheon and won't certify the ASR-12 for sale in the United States because it certifies only those systems it uses. Officials at Northrop Grumman say that decision will force them to leave the business -- locking them out of the U.S. market and denying them a chance to show foreign buyers that their radar meets U.S. standards.
"We did it the old-fashioned American way -- we believed in our product, we built it ourselves, we paid for it ourselves, we tested it and it worked," said Roche. "We find it bizarre that the FAA is so myopic as to take a position that effectively puts us out of the business and makes the taxpayers totally dependent on foreign manufacturers."
Northrop Grumman hired a team of independent attorneys to see if the Raytheon contract could be challenged. They determined it could -- that it called for construction of just three test models, and that the remaining 210 systems are up for grabs.
Kent Kresa, Northrop Grumman's chairman and chief executive officer, flew to Washington this month to meet with both of Maryland's U.S. senators to discuss the issue. And all eight of the state's U.S. House members have lobbied the FAA and Congress on the company's behalf.
The FAA's administrator, Jane F. Garvey, has denied the company's request to reopen the contract. "At this point we have a contract that was the result of a fair and open competition, and we're moving forward with it," said FAA spokeswoman Kathryn Creedy.
Northrop Grumman also has asked the FAA to certify its ASR-12 radar for sale, letting it tap into the small market for U.S. cargo airports operated by companies such as Airborne Express. In a letter to the company, Garvey said such certification would cost as much as $21 million and take several months. Company officials say it would take weeks and cost almost nothing.