By Andrea Shalal
LITTLETON, Colorado (Reuters) - Lockheed Martin Corp, the Pentagon's biggest supplier, is ramping up its use of 3D printing and virtual reality simulators to drive down the huge costs of producing national security satellites and safeguard profits in the face of reductions in U.S. defense spending.
The company expects to finalize a government contract to buy two new missile-warning satellites in coming weeks for 40 percent less than projected by Pentagon cost estimators due to changes in its manufacturing methods, plant closures and layoffs. Analysts say the deal will be worth around $2 billion.
"We're trying to find new ways of doing things. We're leaving no stone unturned," Mark Valerio, vice president and general manager of military space for Lockheed, told Reuters in an interview at the company's facility south of Denver.
Valerio said Lockheed was pushing hard to continue lowering costs so it could maintain strong operating profits even as lower military spending squeezed revenues. "We haven't hit a wall yet," he said. "But that's when you bring in technology."
He said Lockheed had reached agreement with the Air Force on the 5th and 6th Space-Based Infrared System (SBIRS) missile-warning satellites, and hoped to finalize the details by early July, the company's first confirmation a contract is near.
Last year, Lockheed signed a deal with the Air Force for a separate program to build two military communications satellites for $2.2 billion, $1 billion less than initially expected.
Lockheed, which built the first Titan intercontinental ballistic missile at the Littleton, Colorado, site in 1955, and Boeing Co have long dominated the U.S. government military space market. But the weapons makers are scrambling to cut costs and hold onto their share of the military satellite market, given a downturn in U.S. military spending, and efforts by the U.S. Air Force to bring in new competitors.
The cost of military satellite programs has begun to edge lower in recent years, but most bigger satellites still cost upwards of $1 billion to build since it is difficult to achieve the economies of scale seen on weapons with large volumes.
Those costs have driven the Air Force to study smaller satellites that would be less complex to build and cheaper to launch, an area that is drawing interest from smaller companies that have long been shut out of the lucrative market.
Lockheed executives say additive manufacturing, or 3D printing, could trim the weight of key components on spacecraft, allowing the government to pack on more sensors, or launch satellites on smaller, less expensive rockets.