Braxton Taylor
Northrop Grumman is taking a $477 million hit on its B-21 Raider program to fund changes that will allow it to build the new stealth bomber faster than the Pentagon has so far requested.
The pre-tax charge, tied to the first five low-rate initial production lots, adds to the $1.56 billion loss the company reported in January on the program.
The fresh loss covers expenses tied to a “process change” intended to boost production rates and an increase in the projected cost and amount of materials needed to build the first five lots, company CEO Kathy Warden said during the company’s first-quarter earnings call Tuesday.
Northrop and the Air Force made the decision “jointly” to change the process, Warden said, saying that this short-term loss would increase the profitability of the program in the long run and that the change is “not something we will need to do again.”
“This positions us to ramp to the quantities needed in full-rate production,” she said. “We can ramp beyond the quantities in the program of record, which is something that we and the government decided was important for the optionality to support the scenarios that they have been looking at to increase the current build rate.”
The Air Force initially planned to buy 100 B-21s by the mid- to late 2030s, but officials have discussed buying up to 145.
The service is still evaluating its options, Warden said, and they’ll look for more guidance once the budget request is finalized.
While the process change was the main reason for the $477 million loss, Warden said that the company also underestimated the amount and cost of materials needed for the first five lots.
“This is a reflection of the macroeconomic environment, coupled with the learning that comes through building the aircraft now having multiple under our belt. And the adjustment this quarter has the benefit now of having those first two lots progressing through production. So we don’t expect these learnings to repeat themselves,” she said.
Warden had less news about another massive program the company is leading for the Pentagon:the Air Force’s Sentinel ICBM program. Some work is paused while officials try to figure out how to shrink the program’s project price tag of $141 billion, 81 percent over initial estimates.
The CEO said the company is making progress on the development phase of the program and is working with the Pentagon to find places to cut costs.
“As part of that restructuring, we are working with the Air Force on options to reduce the overall cost and schedule on the program and have identified opportunities [for] them to do so. What we look at in that restructuring is to ensure that the changes in requirements are adequately reflected in the design and ultimately in the contract, and we’ll be working to do that with the government,” she said.
Warden also commented on a recent explosion at the company’s space-related facilities in Promontory, Utah. The explosion destroyed a building that produced an ingredient in for its solid rocket motor propellants, but Warden said it would not affect any programs.
“We have other sources of supply outside of Northrop Grumman that we’ll be able to provide us that ingredient, so we do not expect any impact to any of our programs. We’ve specifically been asked about Sentinel because entry is a production for those solid rocket motors and there is not expected to be any impact to Sentinel or any other program,” she said.
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