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Boeing Lockheed's 'Rocket Man' up Against SpaceX Low Costs

March 29, 2016
United Launch Alliance's Tony Bruno "is in the peculiar position of having a perfect performance record and being under pressure from all sides,” said Loren Thompson, defense analyst at the Lexington Institute. 

After a United Launch Alliance rocket blasted off in a fiery arc from Florida last week, Tory Bruno shook hands with everybody in the control room. Then he headed home.

It’s his low-key routine for celebrating each spaceflight by the largest U.S. rocket company after 106 uneventful missions. “I have a nice glass of single-malt whiskey and then we move on to the next launch,” Bruno, chief executive officer of the Boeing Co.-Lockheed Martin Corp. venture, said in an interview.

Bruno’s ritual may be shaken by billionaire Elon Musk. With audacious talk of colonizing Mars, Musk’s SpaceX is upsetting the once-staid industry with lower-cost rocket flights and reusable boosters. The company has also broken ULA’s lock on U.S. defense missions.

“Bruno is in the peculiar position of having a perfect performance record and being under pressure from all sides,” said Loren Thompson, defense analyst at the Lexington Institute. “His company has literally never had a failed launch and yet the government, his competitors and even his co-owners are putting continuous pressure on him to change the enterprise in order to deliver better results.”

‘Warrior Monasticism’

The challenges of revamping a company unused to price competition doesn’t faze Bruno, 54. He’s a mechanical engineer who has written management books based on the medieval Knights Templar, exploring themes such as “warrior monasticism.”

Since joining ULA from Lockheed in 2014, Bruno has shrunk executive ranks by a third, trimmed supplier costs 40% and overhauled manufacturing. He is developing a rocket to replace the storied, but expensive, Delta dating to the Sputnik era. The goal: compete with upstarts like SpaceX in a market where low costs now trump an unblemished track record.

“We’re making good progress, actually ahead of our plans,” Bruno said by telephone.

Rocket Explosion

Musk’s Space Exploration Technologies Corp. can’t match ULA’s decade-long history of perfect launches. Even so, the explosion of one of SpaceX’s Falcon 9 rockets minutes into a June flight hasn’t diminished demand: It has a lineup of 70 scheduled launches valued at more than $10 billion, according to its website.

“ULA has never come up against a company like SpaceX, and frankly no one else has either,” said Marco Caceres, senior space analyst at Teal Group. “Every time they go after a segment of the market, everyone says they’ll never do it. And then they do it.”

After SpaceX won U.S. Air Force certification to bid for national security missions, ULA skipped the first competition for the launches last year. A former alliance executive caused a flap with his critical assessment of that contest and of Arizona Senator John McCain, who has sought to limit imports of the Russian-made engines that fire the alliance’s Atlas V rockets.

McCain questioned whether there was Pentagon “favoritism” toward ULA, and Defense Secretary Ashton Carter ordered the department’s inspector general to investigate.

"Absolutely we will cooperate. We have nothing to hide,” Bruno said of the probe.

Price Counts

The alliance opted not to bid in part because entries were judged on price rather than track records. Another provision focused on cost disclosures. The criteria hadn’t been included in previous contracts and “put us at a competitive disadvantage,” Bruno said.

Neither ULA and SpaceX make financial details public. Under Bruno, ULA has cut in half the time it takes to build and launch the Atlas V. Along with renegotiated supplier contracts, the changes reduced launch costs by about one-third from a $184 million baseline. Bruno aims to bring those costs below $100 million by 2019.

That’s still way above the $61 million base price that SpaceX lists on its website for a launch. Musk is ramping up the pricing pressure even further by focusing on lowering operating costs, which AlixPartners estimates are already about 50 percent below those of its rivals.

Vulcan Rocket

United Launch Alliance is preparing a new rocket, known as the Vulcan, to stay in the game. The first flight is planned by 2019.

A version of the craft slated to debut by 2023 will offer a twist on the reusability concepts pioneered by Musk. Its upper stage, which maneuvers payloads to their final destination in space, will be able to remain in orbit for seven or eight days, far longer than the current hours-long voyages. It also would be fully reusable.

“Eventually, it will change the way we go to space entirely,” Bruno said. He envisions space travelers journeying to a way station in low Earth orbit, where the craft will “swoop down and take you where you where you need to go.”

Boeing and Lockheed Martin are keeping tight watch on the Vulcan’s development, providing ULA funding in increments. Caceres, the Teal Group consultant, questions whether they’ll share Musk’s willingness to weather the failures that come with new concepts.

SpaceX is “an outgrowth of Elon Musk’s personality. He’s the founder, clearly the one who makes decisions. He’s not beholden to shareholders,” Caceres said. Bruno is trying to transform a company whose roots date to the dawn of spaceflight to “be more like SpaceX: more competitive on price, more flexible.”

Bruno is excited by the challenge. 

“This is the coolest job in the world,” he said.

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