Satellite Firms Decry Government Budget Cuts

There is a growing industry frustration with ongoing budget cuts in the Obama administration, particularly with regard to defense spending reductions on tap for 2013. A defense spending plan submitted to Congress in February proposes a one-per-cent drop in the Pentagon’s base budget to $525.4 billion, and may see reductions of 100,000 jobs – particularly since the United States has pulled out of Iraq.
Two panels featuring satellite operators and manufacturers discussed the implications for space Wednesday morning at the National Space Symposium in Colorado Springs.

SES Government Solutions is hearing from its industry partners that they are not interested in dealing with the government in the foreseeable future due to so many programs shifting around or being cancelled, said its CEO.

“In the budget bind we are entering, we’re going to have to do a better job of creating real partnerships where government can deal with industry in such a way that industry can be secure in investments,” said Robert (Tip) Osterthaler, calling it a “serious problem.”

Given that a lot of government programs require support from industry, to have commercial providers decline contracts would be a difficult situation indeed for an administration hamstrung by a growing deficit.

The satellite companies speaking Wednesday said the uncertainty was playing into their budgets in a big way.

“It could have big ramifications for us if we make the wrong decision,” said Matthew Desch, the CEO of Iridium Communications Inc.

“They need to change the way they’re interacting with us to overcome skepticism,” added Kay Sears, the president of Intelsat General.

But these companies are doing more than just complaining about the situation, by diversifying their business and keeping an eye on ongoing trends in the commercial industry.

Specific examples include:
– Adding more commercial business to the balance sheet, as Boeing Space and Intelligence Systems has been doing. Commercial now accounts for 25% of their business, up from 10% a few years ago, said Maj. Gen. Craig Cooning, the company’s vice-president and general manager.
– Watching the supply chain, which is the most likely to be affected by cuts in defense. David Bernstein, senior vice-president of program management at Space Systems/Loral, said suppliers would be hit first. He provided no example of mitigation for the moment except “keeping an eye on it” and being prepared to make changes if necessary.
– Focusing on transferable skills within the workforce, so that if one program is cancelled the same workers can be shifted over to another. This has worked well for Northrop Grumman Aerospace Systems, according to Jeffrey Grant, the sector vice-president and general manager for space systems.

There also was discussion of partial successes, such as the Wideband Global SATCOM program that is intended to allow more efficient information exchange for defense applications, such as surveillance, reconnaissance and battle management.

Boeing, the major contractor for that program, is pushing for more satellites to be added to the constellation following the launch of the first four between 2007 and January of this year. The company has been changing the testing procedures for these satellites to be more in line with commercial requirements, saving $50 million per satellite, said Maj. Gen. Crooning.

But it will be up to the Obama administration to prove its commitment to the space industry by providing clear guidelines about what programs will be cut or reduced, and opportunities for replacements, so that companies do not turn their back out of frustration.