Boeing Says It Won Contract On Proven Aircraft Design
June 14, 2004: 18:57 p.m. EST
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CHICAGO (Dow Jones)--Boeing Co. (BA) said late Monday it was able to beat out Lockheed Martin Corp. (LMT) to win a $3.89 billion contract from the U.S. Navy to develop a fleet of Multi-mission Maritime Aircraft, or MMA, on the strength of its proven aircraft.
The contract calls for Boeing to build 109 airplanes that can seek and destroy submarines, replacing the aging Orion P-3s now in use.
Lockheed, which held the P-3 contract for the past 40 years, proposed to update the propellor craft.
Boeing's more daring plan is to modify its 737-800 commercial airplane body for military use.
Speaking from St. Louis on a conference call with reporters, John Lockhard, Boeing's vice president of naval systems, said Boeing hasn't been debriefed by the Navy, and so he couldn't comment specifically on why the Navy picked Boeing.
Analysts had suggested that Lockheed could produce a modified P-3 with less risk and at a lower cost but that Boeing could deliver more sophisticated technology on a faster-flying plane.
Boeing will begin delivering the aircraft in 2012, Lockard said.
In about four years, when the development stage is fully ramped up, Boeing will have 1,200 employees in Seattle working on the MMA, Lockhard said, with an additional 200 in St. Louis and 150 in Patuxet River, Md.
John Young, assistant secretary of the Navy for research, development and acquisition, said "today's MMA decision represents an important milestone for the war fighter and acquisition team. Our P-3 has made major contributions to operations in Afghanistan and Iraq while also performing their core maritime mission."
He said it was "becoming urgent" to replace the P-3 fleet.
The Navy had originally proposed building 125 of the new aircraft. If that were to happen, the value of the contract could have been as much as $20 billion.
Meanwhile, Lockard said, "there is significant opportunity" to sell the aircraft to countries outside the U.S. as replacements for P-3s. Worldwide, he said, there are 500 P-3s in operation.
Subcontractors on the Boeing team will include CFM International, Northrop Grumman Corp. (NOC), Raytheon Co. (RTN), and Smith Aerospace. During the eight- year development phase of the contract, they will produce seven test aircraft. Boeing put the value of the contract for 109 aircraft at $15 billion over a 10- year production run.
Lockard said he doesn't see Boeing adding additional subcontractors, such as Lockheed Martin, to aid in producing the aircraft.
In after-hours trading, shares of Boeing traded at $49.43 on INET, up from their closing price of $48.83.
-By Ann Keeton, Dow Jones Newswires; 312-750-4120;
ann.keeton@dowjones.com
Dow Jones Newswires 06-14-04 1857ET Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.