Not Just the B-2 Company Anymore

Stunned by the unexpected disapproval of its merger with Lockheed Martin by the U.S. government earlier this year, Northrop Grumman has regrouped and is on the growth path again.

"We're not only going to survive, we're going to thrive," said Kent Kresa, chairman, president and CEO of the Los Angeles-based company. "We've bounced back completely" from the merger that didn't occur, he said.

Northrop Grumman reported sales of $9.2 billion in 1997.

A new growth strategy is in place and the company is regaining momentum, Kresa said. A streamlining deferred by the merger is being executed and will soon produce results.

Simply put, Northrop Grumman sees the spectrum of war through the next century spanning peacekeeping, anti-terrorism, and regional conflicts. Hence, real-time intelligence and surveillance information will be at a premium. It's "an area we're really concentrating on," Kresa said. The company is also interested in developing markets for unmanned aerial vehicles, whole battlefield management technology, and information warfare.

Recent acquisitions of Logicon and Inter-National Research Institute, Inc. are in-line with this philosophy. Nor will Kresa rule out future merger and acquisition activity, "Past history indicates we've been an important player in the restructuring of the industry," he said.

The company also plans to continue its diversification. In past years it has moved into aerostructures with the acquisition of Vought, and integrated some elements of Grumman to become the world's largest manufacturer of aircraft substructures. It has a long, strong relationship with Boeing Commercial and supplies parts for the F/A-18 fighter and C-17 transport as well. Vought makes parts for the Gulfstream V business jet, too.

That said, Kresa acknowledges that the latest restructuring will cut another 2,100 jobs in addition to 8,400 already disclosed, many in the aerostructures area. The job losses are a result of the wind-down of the B-2 bomber program and planned Boeing airliner production cutbacks. Overall, Northrop hopes to lower operating costs by about $300 million from 2001.

Although painful, the cuts were "clearly needed to do our business more efficiently and effectively at lower cost," Kresa said.

The restructuring targets company infrastructure as well. By consolidating five or more organizations into three sectors, Northrop Grumman can significantly shrink its infrastructure investment and cost, Kresa said. The three business units are: the Integrated Systems & Aerostructures Sector, based in Dallas, Texas; the Electronic Sensors & Systems Sector, headquartered in Baltimore, Maryland; and Logicon, a wholly owned subsidiary based in Herndon, Virginia.

Major defense programs at Northrop Grumman include its role as prime contractor for the Joint Surveillance Target Attack Radar System (JSTARS). Thirteen of these aircraft have been ordered and budget authority for long lead time procurement for two more is being discussed in Congress. The military continues to press for a fleet of 21, Kresa said. A JSTARS upgrade contract also is possible.

Although B-2 work is running down, there is "still a lot to do through the year 2000," Kresa said. The work includes the retrofit of all 21 aircraft to Block 30 status. That will be followed by years of depot and support work, plus possible upgrades.

The E-2C Hawkeye airborne early warning (AEW) aircraft "absolutely" continues to be in demand, Kesa said. Serial production continues for the U.S. Navy and Northrop Grumman is looking for award of a multi-year U.S. government contract later this year. A "Hawkeye 2000" upgrade is in development. It represents a "dramatic improvement" in capability, Kresa said, with mode control, multiple engagement capability and a direct link to shipboard command and control.

First delivery of an order of two E-3Cs by France is scheduled for this year and the company expects an order for a third. The aircraft and/or its radar also is in competition for upcoming AEW requirements by Greece, Turkey and Australia.

Northrop Grumman also is a player in the Lockheed Martin Joint Strike Fighter bid. Another partner is British Aerospace. As envisioned now, Northrop Grumman will build the aircraft's electronic "front end," or radar, Kresa said. The Los Angeles-based company also expects to win a portion of JSF aerostructure work, should the Lockheed Martin-led team win the downselect against Boeing.

By Paul Proctor