Defense conglomerate United Technologies Corp. is considering selling off part of its Pratt & Whitney Rocketdyne division, the Wall Street Journal reported on Monday, "highlighting increased fragility of the U.S. space industrial base," wrote reporter Andy Pasztor.
The process appears to be at a very early stage, and a sale is only one of the potential options under consideration. But as you'll recall from our conversation with Rocketdyne's executives in Paris, they warned us about this: NASA needs to make a decision yesterday about what it's going to do about future big-rocket operations, said Rocketdyne president Jim Maser, because if it doesn't get its ducks in a row, the space industry is going to start crumbling.
Given that a potential Rocketdyne spinoff is just one of several options apparently under consideration, things may not be as bad as all that -- yet. But as Pasztor writes, they could be getting there:
After a 25% reduction in payroll since 2008, Rocketdyne officials are mulling closing more factories and laying off hundreds of additional workers. Without major federal help, the Canoga Park, Calif., unit can't afford to commit the roughly $1 billion development a new booster engine is slated to cost.
Boeing Co. and Lockheed Martin Corp. are among the companies affected by erosion of government space programs. But Rocketdyne has been hit particularly hard because such a large portion of its business—roughly 80% in previous years—was tied to NASA. That share was closer to 60% before retirement of the space shuttles, and Rocketdyne eventually hopes to diversify its customers to shrink that percentage to around 40%.
United Technologies acquired Rocketdyne from Boeing in 2005, and at this point UTC officials don't appear ready to throw in the towel. Without elaborating, a Pratt spokesman said: "There are currently no plans for us to divest Rocketdyne."
Still, industry officials for weeks have discussed possible divestitures of part of Rocketdyne. Many of these officials, however, question whether any prospective bidders would be willing to pay the likely asking price. Several officials said they recalled United Technologies putting out feelers years ago seeking potential bids for Rocketdyne. But the response, they said, appeared to be tepid.
Other space assets previously put on the auction block haven't sparked high prices. Loral Space & Communications Inc., for instance, has failed to receive the price it seeks to sell its majority stake in Canadian satellite-operator Telesat Holdings Inc., according to industry officials.
By contrast, until the past two years manufacturing rocket engines was considered a reliably profitable, government-backed business featuring cost-plus contracts. Yet when it comes to a long-term federal strategy to nurture rocket technology, according to Mr. Maser, "we just don't know what we're doing."