Commentary: Call It the Wrong Stuff

The space implosion could undermine defense and businesses of the future

By Stan Crock

In the late 1990s, the aerospace industry suffered so many launch failures that Boeing (BA ) once sent up a dummy payload just to show customers it still knew how. Snafus with satellites after they're launched are on the rise. And according to U.S. Air Force Secretary James G. Roche, nearly every space defense program is behind schedule, over budget, or both. The following are just a few glaring examples of what might be called The Wrong Stuff:

* In 1999, a $125 million mission to Mars crashed into the planet's surface. It turned out Lockheed Martin Corp. (LMT ) had made calculations using English instead of metric measurements.

* The same year, one of Lockheed Martin's Titan Centaur rockets put a military communications satellite into a useless low-earth orbit instead of the intended geosynchronous orbit. Workers had failed to run software that would have caught the error.

* Boeing Co. and Lockheed Martin both missed their schedules for launching new booster rockets designed to replace the space shuttle. Boeing's Delta 4, scheduled for use in spring, 2001, is still on the ground.

Many analysts say the problems go beyond the usual challenges of rocket science. Space-related enterprises are under pressure to save on costs by cutting corners. A whole generation of top space scientists is retiring or losing jobs as the industry shrinks, while the smartest science and engineering students are turning to more lucrative professions. Some experts now question whether the space sector will ever duplicate its stellar performance in the post-Sputnik era, when astronauts first soared into orbit. "The American aerospace industry has been running on intellectual fumes," says Roy Danchick, a former chief technologist at TRW Inc.

That has ominous implications for the Pentagon's blueprint for space--and for commercial opportunities in the future. Defense Secretary Donald H. Rumsfeld, who chaired a commission on space and national security before assuming his current post in the Cabinet, wants to fill the heavens with all sorts of new military gadgets: space-based laser weapons, infrared sensors to track enemy missiles, orbiting radar systems, and communications satellites that use laser beams to boost bandwidth. "If you're not in space, you're not in the race," declares General Lance W. Lord, head of the Air Force Space Command. But as one beleaguered Defense Dept. official puts it, "space is one particular area where the industrial base is challenged. We have to figure out what we can do."

Consider the cornerstone of Rumsfeld's vision: assured access to space. This means making sure America can get new gear up there fast and fix it when it breaks. Trouble is, the industry's record is inconsistent. In the 200 launches from 1987 through 1999, American companies averaged one failure a year. But in the 10 months ended in May, 1999, 5 out of 25 launches failed. In some cases, an Air Force study concluded, the computer models of flight-control dynamics were inadequate. Elsewhere, there were straight-out design errors.

Recently, the launch record has improved. None of the past 40 liftoffs by Boeing and Lockheed Martin has gone awry. But who knows how long this batting streak will continue? The inability of both companies to launch rocket boosters on time certainly does not bode well. Meanwhile, a swoon in the commercial launch market is focusing managers' attention on costs, not on technology. "Profit margins are very thin," says Philip R. McAlister, director of Futron Corp., a technology management company in Bethesda, Md. "That puts pressure on [corporations] to take short cuts."

Launches aren't the whole story. There have been growing numbers of problems with satellites once they're in orbit. Futron data show that while the number of birds has doubled since 1998, the number of glitches causing complete or partial loss of operations is up 146%.

The industry's demographic outlook is further cause for concern. As space businesses consolidated, employment in the launch sector has shriveled from 208,000 in 1988 to 82,000 today. Industry and government will have trouble finding qualified replacements. The number of graduate aerospace engineering degrees awarded plummeted from 4,072 in 1991 to 2,175 in 2000 as techies sought work in biotech, computer games, and other more alluring businesses. These sectors are proving "far more interesting than aerospace," says Theodore A. Postol, a Massachusetts Institute of Technology physicist.

For graduates who choose the space sector, the outlook is far bleaker than it was just a few years ago. When demand for use-anywhere satellite phones didn't materialize and companies such as Iridium LLC and Globalstar LP declared bankruptcy, the prospects for the low-earth satellite market vanished. And the geostationary-satellite market already had a glut of capacity. Last year, only 16 birds lifted off worldwide. The upshot: Recruits won't see the large variety of programs and launches that helped educate previous generations. Today's workers "don't have the scar tissue you get from experience," frets a senior industry exec.

The implosion has been particularly hard on high-tech space startups. Many have closed their doors, including Beal Aerospace Technologies Inc. in Frisco, Tex., which aimed to launch big payloads. Even Lockheed Martin has curtailed some space projects, such as a single-stage-to-orbit rocket it developed with NASA at a cost of nearly $1 billion. The company is leaving its money losing communications-satellite business.

Space atrophy is affecting a raft of defense programs. In recent tests, Raytheon Co.'s (RTN ) Patriot Advanced Capability-3--considered one of the most promising battlefield anti-missile weapons--notched just 4 hits out of 7 tries. At Lockheed Martin, designers of a key Star Wars sensor didn't take account of blinding sun rays. A special Air Force panel is trying to figure out how to fix a classified Boeing imaging satellite program. And topping it all, the Air Force gave Congress back $95 million for an extremely high-frequency satellite program because it was so far behind schedule--in part due to Air Force mismanagement. "They don't give money back very often," says a congressional aide.

America's space woes are also hurting the country's balance of high-tech trade. In 2001, the U.S. imported $450 million in spacecraft and parts, while it exported only $282 million, even though the U.S. launch market accounted for less than a third of all launches last year. Prior to 2000, the U.S. ran a surplus.

Congress is concerned--and rightly so. To address the atrophy, it recently set up a panel that recommended tax credits for companies that provide training and apprenticeships in certain fields. And there's a bill to help universities raise enrollment in math and science courses. "If the defense industry can't recruit and retain qualified people, then this industry doesn't have a future," declares Tillie K. Fowler, a former Florida representative who sits on the congressional commission.

Meanwhile, the Pentagon is considering alternatives to exploiting space. Air Force Secretary Roche's solution: use planes. Instead of putting sensors for battlefield surveillance on satellites, for example, he would put them on an unmanned aerial vehicle such as the Global Hawk, which flies high enough to give a full view of the battle theater. That could have certain advantages over space systems. Aircraft can be brought to earth quickly for repairs, and a replacement can be sent up fast, whereas with satellites and rockets, a single glitch is often fatal.

For the Pentagon's grander visions, it's not clear that planes really have the right stuff. In any case, defense is only one potential victim of America's shrinking technical competence. The U.S. developed its space program to address a whole constellation of scientific and commercial dreams. If this expertise is lost, it's hard even to imagine all the ideas that will never get off the ground.

Crock covers aerospace and defense from Washington.

    Before it's here, it's on the Bloomberg Terminal.