By Andrea Shalal
WASHINGTON (Reuters) - Orbital ATK Inc beat out Aerojet Rocketdyne Holdings Inc to become the future sole supplier of solid rocket boosters for United Launch Alliance by offering better long-term pricing agreements, substantial cost reductions and more investment, ULA said Friday.
Tory Bruno, chief executive officer of the 50-50 venture owned by Lockheed Martin Corp (NYSE:LMT) and Boeing (NYSE:BA) Co, said the deal with Orbital, announced last week, was one of many strategic agreements the company was forging with big suppliers to drive down costs and prepare for more competition.
He told a teleconference that ULA would release more details soon and observers would be "amazed" to see the savings it was able to generate through agreements with "the most expensive parts of our supply chain."
ULA announced on Sept. 22 that Orbital would provide all solid rocket motors for its Atlas 5 and Vulcan launch vehicles from 2019, dealing a serious blow to Aerojet, which currently builds those motors for the Atlas rocket.
Bruno said ULA's decision to choose Orbital did not change the fundamental nature of its relationship with Aerojet, which still provides other components to ULA, including RL-10 motors that power the upper stages of the Atlas 5 and Delta 4 rockets.
He said Orbital simply offered ULA a better deal in this case, including its willingness to invest in non-recurring items to help drive down its costs.
Bruno categorically declined to discuss Aerojet's $2 billion cash offer for the company, which was rejected by ULA's owners earlier this month, or reports that Aerojet and ULA remain in discussions about a number of business arrangements.
He said ULA saw continued progress on the BE-4 engine being developed by Blue Origin, owned by Amazon.com (NASDAQ:AMZN) founder Jeff Bezos, and the engine should enter full-scale testing next year. He said Aerojet was also making "very good progress" on its rival AR-1 engine, but it lagged the BE-4 program by 16 months.
"They're a great company. They have awesome people. We continue to need them to build the rockets," Bruno said.
Bruno also rejected concerns raised by some analysts that ULA was taking on too much risk by switching to Orbital as its solid rocket booster supplier, noting that the company already made large boosters for NASA, and accounted for 95 percent of the overall U.S. production of solid rocket boosters.