If You Can't Build Weapons, Destroy `Em

These are hellish times for once-coddled arms makers, as budget cuts force layoffs and downsizing industrywide. But amid the carnage, a few companies are positioning themselves at ground zero of a booming business--dismantling nuclear and other weapons amassed during the cold war.

It looks to be a megaton market. At least 20,000 nuclear weapons will be destroyed or shelved. As part of that process, storage will have to be arranged for truckloads of deadly plutonium and weapons-grade enriched uranium, with half-lives of up to 500 million years. There also are bulging stockpiles of chemical and conventional munitions to disarm. And atop all that, there's the staggering cost of cleaning up the environmental mess left behind by weapons production. That's estimated at $100 billion in the U.S. alone.

Last May, Mason & Hanger-Silas Mason Co., a big engineering outfit based in Lexington, Ky., won a $1.6 billion contract to oversee disassembly of U.S. nukes and storage of their components. But there's still competition for that job. Lockheed, Olin, and Babcock & Wilcox--all of which bid on the original contract--have challenged the deal in court, citing Mason's spotty safety record. Moreover, the three have launched a joint venture, International Disarmament Corp., to go after foreign business.

Their immediate target is the $400 million set aside by Congress last year to help the Russians destroy chunks of their nuclear arsenal. Right now, Russia is able to retire only about 1,500 warheads a year of the 10,000 to 20,000 that may have to go. It's a delicate process that involves removing a highly explosive chemical blanket from around the plutonium core, incinerating it, and preparing the plutonium for storage. "We don't think they can handle this by themselves," says Troy E. Wade III, IDC's chairman and a former head of the Energy Dept.'s nuclear-weapons program. The money hasn't been allocated yet. But U.S. companies hope it will lead to work for them in helping add to Russia's network of decommissioning plants.

FRIED WEAPONS. The Russians also need help eliminating their massive stockpiles of chemical weapons. Russian President Boris Yeltsin and President Bush recently agreed to dramatic chemical-arms reductions. But Raytheon Co. Senior Vice-President George W. Sarney says that the one plant in the Commonwealth that could destroy such weapons--in the Russian city of Chapayevsk--has been shut down because it couldn't dismantle weapons safely enough. With other methods not readily available, some Russian experts have proposed annihilating chemical weapons through controlled underground nuclear explosions. "Unfortunately," says Yuri E. Pinchukov, an arms-control expert at Moscow's Institute of World Economics & International Relations, "we have people here who think that's a good idea."

U.S. companies think they have a better way. Late last year, Raytheon won a $429 million, five-year contract to manage the U.S. Army's chemical-weapons dismantling plant on Johnston Atoll, 700 miles southwest of Hawaii. That's part of a $6.4 billion Army project to destroy tons of chemical munitions over the next decade. The highly automated facility uses conveyor belts, robotics, electronic sensors, and special incinerators to extract nerve agents and explosive components, then fry them at ultrahigh temperatures. What's left is recyclable scrap metal and fiberglass. The Army plans to build eight other facilities on the U.S. mainland--one of which has landed Morrison Knudsen Corp. a $900 million construction contract. And Raytheon recently won Commerce Dept. approval to export its expertise and technology for such work.

Destroying conventional weapons may not require such an elaborate setup, but it will nonetheless generate an estimated $5 billion in contracts worldwide. In Germany alone, reckons Defense Minister Gerhard Stoltenberg, it will cost some $2.5 billion to break up and recycle old ammunition, mortars, tanks, and other East German army leftovers. All told, says Toby G. Warson, chief executive of Honeywell Inc. spinoff Alliant Techsystems Inc., there's enough weaponry "to fill the World Trade Center in New York about 35 times over." German arms companies Diehl and Kaus & Steinhausen grabbed about 50% of the ammunition disposal work handed out last year. But Alliant says it is close to cinching a $300 million deal to destroy Russian antitank weapons in Germany.

Ultimately, getting rid of weapons won't be nearly as big a task as cleaning up the pollution generated in producing them. Under the U.S. Energy Dept.'s $100 billion plan, all of its nuclear-production facilities will be sanitized by the year 2019. That means disposing of some four decades' worth of industrial solvents, heavy metals, and radioactive wastes that have accumulated at government-owned production facilities, such as the Rocky Flats plant near Denver. Waste Management Inc. set up a subsidiary last year to pursue a $5 billion contract to overhaul a uranium-processing plant in Fernald, Ohio. The feds will award the job, the largest remediation project ever, later this year. Russia, meanwhile, is just beginning to contemplate its own eye-popping environmental cleanup tab.

Of course, the revenue potential of the post-cold-war cleanup is a fraction of the trillions of dollars it cost to make all those weapons in the first place. Still, it will be a good business for those who can master it. After all, peace isn't free.

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