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L3Harris' rocket motor unit investments boosting output

investing.com 31/10/2024 - 18:23 PM

Investments by L3Harris Technologies Boost Aerojet Rocketdyne

By Mike Stone

HUNTSVILLE, Alabama (Reuters) – Investments by L3Harris Technologies (NYSE:LHX) into its Aerojet Rocketdyne rocket motor unit have improved facilities and processes after years of underinvestment and late deliveries, an executive told Reuters.

Aerojet was purchased by L3Harris 15 months ago and is one of only two large solid-fuel rocket motor makers for the Pentagon. It's a key producer of weapon components as the U.S. replaces aging Minuteman III intercontinental ballistic missiles and builds tactical missiles to deter China.

"The challenge that we've been addressing is … historical underinvestment in some areas of the business," said Ross Niebergall, president of the Aerojet Rocketdyne segment, in an interview at one of his Huntsville, Alabama factories.

Despite its national importance, Aerojet has been under pressure for years. In 2019 – prior to the pandemic and a 14-month antitrust saga that ended in Lockheed Martin Corp (NYSE:LMT) abandoning an acquisition attempt – the company's revenues were flagging.

The Federal Trade Commission blocked the deal over antitrust concerns, weeks before Russia's 2022 invasion of Ukraine. Deliveries from Aerojet to customers such as RTX were months behind schedule.

When L3Harris offered to purchase Aerojet in December 2022, the company was behind on many thousands of motor deliveries across multiple missile programs, Niebergall said. It was a gamble as no one knew how long the Ukraine war would last or what would happen to demand.

Capital Spending

One example is the Javelin missile, heavily used in Ukraine. "When we took over, we were 700 ship sets behind on that missile. As of right now, we're 50 ahead. So we've gone from being behind for over five years to being ahead," said Niebergall.

Since the deal's closure, L3Harris has increased capital spending on the rocket motor unit by 84%. The investment has paid off; revenue in the L3Harris business unit was $598 million this quarter, up 23.6% from $482 million five years ago.

The company has digitized factory operations, reducing hundreds of pages of paperwork that accompanied several types of motors. It also invested $25 million into its supply chain, creating a second source for a rocket motor case, which resulted in a 600% increase in output. L3's funds helped reopen one factory and allowed another supplier to add a second shift of workers.

The rocket motor case holds a chemical propellant burned and focused by a nozzle to shoot the missile towards its target.

Demand for rocket motors is surging as militaries believe future conflicts will require more rockets and missiles for precision firepower to defeat foes. New entrants into the U.S. rocket motor manufacturing space have emerged, but they lack the mass-production capabilities necessary for Pentagon qualification.

The company has made progress, and Niebergall is "pleased, but not yet satisfied."




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