Musk Plays Russia Card in Fight to End Launch Monopoly

Photographer: Pete Marovich/Bloomberg

Elon Musk, co-founder and chief executive officer of Tesla Motors Inc. and Space Exploration Technologies Corp., left, speaks to members of the media following a Senate Appropriations subcommittee hearing in Washington, D.C., on March 5, 2014. Close

Elon Musk, co-founder and chief executive officer of Tesla Motors Inc. and Space... Read More

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Photographer: Pete Marovich/Bloomberg

Elon Musk, co-founder and chief executive officer of Tesla Motors Inc. and Space Exploration Technologies Corp., left, speaks to members of the media following a Senate Appropriations subcommittee hearing in Washington, D.C., on March 5, 2014.

Elon Musk, chief executive officer of Tesla Motors Inc. (TSLA), said U.S. military-satellite launches may be at risk because a joint venture of the government’s two biggest contractors relies on Russian engines.

The billionaire was in Washington today to back his space company’s push into the Pentagon launch market. Space Exploration Technologies Corp. is trying to break the Lockheed Martin Corp.-Boeing Co. (BA) team’s monopoly on the work, which has an estimated value of $70 billion through 2030.

Executives on both sides have traded jabs, with Musk criticizing the joint venture’s costs. He told U.S. lawmakers today that his rival’s Atlas V rocket uses engines from Russia, posing a supply risk if the country is sanctioned over its intervention in Ukraine.

“In light of Russia’s recent actions, it does not make sense to reward Russia with a huge contract for rocket engines,” Musk told reporters after a Senate Appropriations subcommittee hearing. “Sounds crazy to me.”

Michael Gass, chief executive officer of joint venture United Launch Alliance LLC, rejected Musk’s claims.

“We are not at any risk,” Gass testified. The company has stockpiled enough Russian engines for at least two years of launches and has blueprints to build them, he said.

To help hold down costs, military officials in December committed to buying 35 rocket cores over five years -- and the capability to launch them -- from the Centennial, Colorado-based alliance.

Space Station

Gass said all the venture’s 68 launches were successful. Its Atlas V and Delta IV “are the only rockets that fully meet the unique needs of the national security community,” he said.

Musk’s company, known as SpaceX, showed it could deliver cargo to the International Space Station. It now ferries supplies under a $1.6 billion contract with the National Aeronautics and Space Administration. The company is also working to transport crew.

Musk says competition in the military satellite-launch program may save taxpayers more than $1 billion a year.

In December 2012, Robert Stevens, then-chairman and chief executive officer of Bethesda, Maryland-based Lockheed, was dismissive of SpaceX.

“Cost doesn’t matter at all if you don’t put the ball into orbit,” Stevens said at the time. “You can thrift on cost. You can take cost out of a rocket. But I will guarantee you, in my experience, when you start pulling a lot of costs out of a rocket, your quality and your probability of success in delivering a payload to orbit diminishes.”

Launch Monopoly

The Pentagon in 2012 directed the Air Force to end the launch monopoly. It plans to invite other companies to compete for as many 14 launches starting in the year that begins Oct. 1.

SpaceX has completed at least one of three flights needed before it can compete for work in the Evolved Expendable Launch Vehicle program, the Air Force said last month.

Certifying SpaceX will depend on more than three successful launches, Air Force Space Command spokeswoman Captain Connie Dillon said in an e-mail statement last month. Technical reviews and audits of the proposed rockets, ground systems and manufacturing process also are needed, she said.

“Currently, there are still considerable data” requirements and a “significant number of evaluations” to be completed, she said.

To contact the reporters on this story: Kathleen Miller in Washington at kmiller01@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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