Is Northrop Grumman Bailing Out of T-X?

Northrop Grumman has “not reached a conclusion” about whether it will pursue the T-X trainer competition for the Air Force, Chief Executive Officer Wes Bush said Thursday. Speaking in a fourth quarter/end of year earnings conference call, Bush said his extremely cautious tone on the program is “a reflection of the discipline we have” in carefully evaluating programs before committing to work that may not be profitable. “We are really looking at these opportunities through the cold, hard lens of, ‘what does the RFP [request for proposals] really tell you?’” Bush explained. He said the company wants to ensure “we’re not kidding ourselves about the real cost and what the investment would look like.” The final RFP for the T-X was released Dec. 30, and the terms had not changed from an earlier draft version, so Bush’s diffidence was noteworthy. While the company has made significant investments of its own money in T-X, “which, by the way, tend to have broader applicability,” Bush said, “we need to be … thoughtful on every single one of these RFP activities” and the potential “business case.” He doesn’t want the company to “walk ourselves into a decision to do something just because we’ve been doing it.” Northrop Grumman has a prototype T-X flying, built by its Scaled Composites subsidiary.

Asked by one analyst if the final RFP indicates the Air Force is setting up a “price shootout” among competitors, Bush said, broadly, “If it’s a situation where it’s just low cost because that’s what the customer really cares about, and we don’t see a whole lot of differentiation” among products being offered, “those are probably less interesting opportunities for us.” Of greater interest to the company are programs where the government sees “a little bit of a trade space between cost, and performance, and value.” The Air Force has said it is more willing to trade price versus value on the JSTARS replacement, though Bush did not connect his remarks to that specific program. The bottom line on T-X, Bush said, is that the company now has all the information and “sometimes it takes a little longer to call it” and come to a “high-quality decision.” Bush said “we are looking at how the customer is communicating around its view of the business deal and what’s really important to them.”

Raytheon and Leonardo announced without much explanation Wednesday that they will not pursue the T-X as a team, but the topic did not come up during Raytheon’s own fourth-quarter call Thursday. Industry sources said Thursday the two companies couldn’t agree on how to get the cost of their offering—the T-100, a variant of the M-346 Master—down to levels that Raytheon believed would make the jet competitive in the T-X contest.