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Three-fourths of launches are for federal government
United Launch Alliance escapes the forces of foreign competition with almost as much consistency as its rockets escape Earth’s gravitational pull.
Foreign manufacturers operate in different, and usually less expensive, environments than their U.S. competition. In many cases they enjoy comparatively lax environmental and labor regulations, governmental subsidies and low wages.
Avoiding foreign competition
U.S. companies that manage to avoid the brunt of foreign competition often fall into one of two categories. Either they produce complex, high-technology products, or they rely on government contracts.
ULA, which employs 630 at its Decatur plant, has the good fortune of being in both categories.
Three-fourths of its launches are for federal governmental customers. While ULA and its parent companies — Boeing Co. and Lockheed Martin Corp. — are trying to increase their commercial market, the emphasis remains on federal contracts.
The most recent Atlas V launch, on Nov. 23, was of a commercial communications satellite, the ninth commercial launch of an Atlas V and its 35th launch.
ULA’s federal payloads include missile-warning systems, GPS satellites and NASA scientific and planetary missions.
The Decatur plant is the main assembly point for all three ULA rockets, the heavy-lift Delta IV and Atlas V and the medium-lift Delta II.
Federal laws and regulations prevent foreign companies from launching the security-sensitive satellites involved in many federal contracts.
Even the commercial space-launch business has barriers to entry that discourage foreign competitors. One involves the cost of payloads, usually satellites.
Payloads
“Typically a payload ranges from six to 10 times the cost of the launch,” said ULA’s Phil Marshall, vice president of production and recurring operations.
Marshall and his family live in Decatur, but a recent promotion has him spending much of his time at ULA headquarters in Denver.
An unsuccessful launch means a satellite has landed in the ocean, exploded or ended up in the wrong orbit. Regardless, it means the customer wasted tens of millions of dollars and has lost the benefits it sought from the satellite.
Launch reliability trumps other concerns, but ULA continues to look for ways to attract commercial customers.
Taking advantage of its heavy-lift capability, ULA has launched multiple commercial satellites from a single rocket. That splits the cost among launch customers, while maintaining the benefit of ULA reliability.
Marshall acknowledges the importance of reliability, but also its limits.
“You want to have your success rate, but we don’t really look in the rearview mirror,” Marshall said. “We are only as good as our next launch.”
Research and development is central to everything ULA does; every launch is an opportunity to learn more. Both to improve service to its government customers and to increase its slice of the commercial sector, it also spends millions anticipating future improvements and customer requirements.
Among these efforts is an ongoing study of producing common upper stages in its product lines, Marshall said, creating more cost efficiencies in its Decatur-assembled Atlas V and Delta IV.
“Another aspect of R&D that I think our Air Force customer finds exciting is the possibility of flying secondary payloads on primary missions,” Marshall said.
“Then you start seeing some of the economics kick in. You’re almost getting two flights for the price of one.”
R&D costs
R&D costs for a rocket producer are high, though, and Marshall said ULA is careful in its expenditures.
“There really has to be a demand out there. One of the business profiles we try to follow is, ‘Don’t go in and invent the widget and hope someone buys it. Define what your customer community is looking for and then provide a solution,’ ” Marshall said.
The high cost of payloads means price competition on commercial launch vehicles is less significant than demonstrated reliability.
The emphasis on reliability gives ULA a tremendous advantage over competitors. That’s in part because their rockets have excellent records, but also because reliability is a function of repeat launches.
Put bluntly, prospective competitors cannot buy reliability. Reliability requires multiple successful launches, and multiple launches require customers.
While the value placed on reliability helps ULA’s established products overcome foreign competition, other factors have the opposite effect.
“Being a space-faring nation is a sign of maturity, of your science and capabilities, so it’s something countries seek to have bragging rights to,” Marshall said. “They are willing to make an investment without a financial return.”
An effective space program — the ability to launch satellites — is seen as a status symbol for nations around the world. Increasingly, it also is seen as a military defense requirement.
That status-motivated investment makes it tough for ULA as it seeks to limit its investments to those that pass a financial cost-benefit test.
Foreign investments in launch capability also help explain the protectiveness the U.S. government demonstrates in trying to assure domestic rocket companies remain healthy.
Sixty nations have space agencies, and 13 of those have active space programs. Eight can launch satellites into orbit, including China, Russia and even Iran.
Europe’s Arianespace and Russia-controlled International Launch Service launch most commercial satellites globally, far surpassing their U.S. competitors.
Wage competition
One benefit of the increased global interest in satellite-launch vehicles is that it places upward pressure on professional wages, narrowing the gap between U.S. wages for skilled workers and that of foreign competitors.
“There is now enough competition in both China and India that they are driving the wages up not only of the scientists, but of the people who can manage a research effort or a high-tech industry,” explained Kent Hughes, director of the Wilson Center and of its Program on America and the Global Economy.
“China’s done a lot to attract Chinese who have come to the U.S. and gotten a U.S. education and worked in the U.S. They call them the ‘sea turtles,’ the turtles that are coming home. To get them to come home they have to offer them both the research challenge and the financial rewards,” continued the former Associate Deputy Secretary of Commerce.
Placing U.S. governmental satellites on foreign rockets creates all sorts of concerns, which benefits ULA.
“Foreign competition is going to be very limited within our government payloads. You don’t want to have a foreign country launch that because of the sensitivity,” Marshall said.
But NASA, especially in its efforts to service the International Space Station and other multinational ventures, is considering using foreign launch systems.
“NASA is still going to be in the situation where to fly one of their payloads, you have to have proven success,” Marshall said. “It will be interesting to see how many NASA payloads go on a brand new launch vehicle. It’s a chain of launch successes that establishes credibility.”
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