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The Boeing Corp. (NYSE:BA) has been inundated with press attention in recent months, thanks to the ongoing trials and travails of its grounded 737 MAX jet plane. However, Boeing faces a number of challenges outside of its commercial aircraft manufacturing business. Its lucrative defense arm is also feeling the heat.
Indeed, the venerable aerospace and defense company faces a tough fight to get back in the race to provide the U.S. military with its next-generation of ground-based nuclear missiles.
America's next top nuclear deterrent
The Minuteman III intercontinental ballistic missile (ICBM) has been the mainstay of the U.S. military's ground-based nuclear arsenal since the 1960s. Multiple technological and engineering refreshes have kept the Minuteman ICBMs operational over the years, but their operational life is finally approaching its end. By 2028, they will be phased out in favor of a new ICBM weapons system dubbed the Ground Based Strategic Deterrent (GBSD).
On the July 16, the Air Force Nuclear Weapons Center (AFNWC) issued a public procurement notice:
A lucrative prize
Military procurement contracts are usually awarded on a competitive basis. However, with only a tiny number of potential providers, this competition is highly limited at best.
In 2017, the Air Force reduced the potential competition for the GBSD contract to just two companies, Boeing and Northrop Grumman Corp. (NYSE:NOC). At the time, it awarded Boeing $349.2 million and Northrop Grumman $328 million to develop competing offers.
These awards represent merely the tip of the iceberg. The GBSD program is projected to cost more than $85 billion over the next couple decades, representing a massive prize for any aerospace contractor.
Boeing pulls out
In its July 16 call for bids, the Air Force laid out a number of specifications required of the future GBSD, with the aim of minimizing cost. Unfortunately for Boeing, this seemed to favor Northrop Grumman and its in-house rocket motor arm, which the latter obtained in 2018 through the acquisition of Orbital ATK.