On Tuesday, May 12, 2009, Tom Vice, sector vice president, Northrop Grumman Aerospace Systems, addressed the APICS Space Coast Chapter on the challenges facing the future of the aerospace industry along Florida's Space Coast. Below are his remarks.
The Future of the Space Coast of Florida
It’s a pleasure to be back here on the Space Coast where I live and sometimes find time to work. The fact is I spend most of my time in planes shuttling between customer meetings and visiting our facilities across the country.
Now Bethpage, Long Island is our division headquarters. Terrific people. An Aerospace tradition second to none. But as I said, I live here in Melbourne. That’s because despite leading the Battle Management and Engagement Systems division of the $10 billion Northrop Grumman Aerospace Systems business Sector, a division with over 4,000 employees working on dozens of programs essential to our national security, I have to answer to higher authorities. One is Gary Ervin, president of our sector, who may have preferred I stay in Bethpage. The other is my wife, Kim, who loves Palm trees and 82 degrees in January. No prize for guessing who is the highest of those highest authorities.
Over the next few minutes I’ll examine the future of the Space Coast in the context of the challenges faced by the country, the state and the aerospace industry. And let me say straight out that I believe as uncertain as times are, only a proactive, aggressive approach will ensure this community’s economic competitiveness.
And whatever your political leanings, I believe President Obama is correct when he says that persistence is what will be needed if we as a nation are to emerge from this economic crisis more competitive and stronger than before.
Now as I look to the future of the Space Coast I do so with real trepidation. People much wiser than me have been famously awful at predictions.
For example, take this prediction from 1932. And I quote: “There is not the slightest indication that nuclear energy will ever be obtainable. It would mean that the atom would have to be shattered at will." Thank you, Albert Einstein, for that brilliant insight.
And now you’ll be treated to my brilliant insights. Full disclosure: I never won the Nobel Prize in physics.
First and foremost, we are fighting two conflicts overseas. All of us meeting here tonight in the comfort of this beautiful setting appreciate the great sacrifices of our service men and women still in harm’s way.
There was a time when those conflicts dominated the news. Now it’s the economic crisis. Trillions of dollars of net worth have evaporated with the fall of world equity markets. Personal bankruptcies and home foreclosures are trending upward as is the unemployment rate. Last year at this time the Brevard County unemployment rate was around 5.7 percent. Right now it’s around 10 percent.
Nothing like the chaos in the financial and auto sectors has befallen the defense industry. But change is coming. Defense Secretary Gates recently announced his recommendations to the president with respect to the fiscal year 2010 defense budget. He wants to rebalance the Pentagon’s programs to support more of the irregular-type warfare we are currently fighting. This included an emphasis on Intelligence-Surveillance-Reconnaissance asset – ISR, and Unmanned Aerial Vehicles – UAVs. In addition, he called for the aerial tanker competition to be rebid this summer and the cancellation of the F-22 while ramping up production of the F-35 Joint Strike Fighter.
The Obama administration hewed very closely to Gates’ recommendations. Last week they made a $664 billion request for the military in fiscal 2010. This included $130 billion for the wars and a base budget of $533.8 billion that signals a slowdown in spending.
The $533.8 billion represents about 2 percent real growth over the current year, when adjusted for inflation. The base budget from fiscal 2001 through this year increased on average about 4 percent annually when adjusted for inflation.
Of particular interest to this area is the competition to build new aerial refueling tankers for the U.S. Air Force. Northrop Grumman won this competition last year though Boeing won a protest to appeal the decision. The Pentagon included $440 million in its budget for the program’s design phase and would like to award a contract by March 31, 2010.
Northrop Grumman is fully committed to winning this program again and will continue to support design and engineering from our Melbourne facility.
Now Congress will have the last word on the military budget, and nothing is set in stone but let me repeat: Change is coming.
I’d like to now focus on the manned space program where events are moving at a rapid pace.
Last Thursday (May 7, 2009) the Obama administration revealed its detailed budget request for NASA in fiscal 2010. Of a total $18.7 billion, $630.4 million was added for exploration in FY ’09-10. But that includes $400 million from the economic stimulus package adopted for FY ’09. In the three years after that the request drops $3.760 billion from the comparable out-year figures in the final Bush administration budget request last year, for a net loss to exploration of $3.130 billion.
On top of that, the administration has just commissioned a panel to be headed by former Lockheed Martin CEO Norman Augustine. Comprised of NASA insiders and outside experts, the panel will examine a number of issues and thoroughly review President Bush’s “Vision for Space Exploration.”
The panel, known as the “Review of United States Human Space Flight Plans” will finish up no earlier than August. Just about everything is on the table, and the future is uncertain at this point.
In response, Acting NASA administrator Chris Scolese and Doug Cooke, associate administrator for Exploration Systems, vowed to continue plans for exploration while the review is under way, using the extra funding in FY '09-10 to buy long-lead items and accelerate testing. But they don't plan to initiate any new contracts for the lunar exploration phase of NASA's plan – including study work on the Ares V heavy lift rocket and Altair lunar lander – until the Augustine panel finishes its work.
Now we all know what the shuttle retirement and ensuing gap between the advent of the Constellation program could mean. Figures released by NASA in March predicted the retirement of the shuttle will result in the loss of at least 3,500 jobs at the Kennedy Space Center. NASA further estimates that each job at KSC creates about 2.82 jobs in the community. However, some 14,500 people work at KSC, and shuttle contractors have predicted the total job loss could be 10,000. We can argue about numbers from now until the final shuttle flight. At the end of the day we are talking about a potentially devastating impact here in Brevard County.
Florida’s Washington delegation is fighting the good fight. But the situation is fluid, and I won’t speculate on Washington politics. That’s what cable news and talk radio is for. But like all of you, I’m in business. I have to be realistic about the challenges ahead. I can assure you, however, that though times are tough I am, in fact, an optimist.
After all, I’m an engineer. And engineering is about problem solving. So it’s in my DNA to think that the problems we face now offer us a great opportunity to emerge stronger than before. Tough times free us to take bold action.
My own company offers an excellent example. Northrop Grumman is doing well, with robust sales and a significant backlog. But we are far from complacent.
At the beginning of the year, we began a reorganization that took us from seven business sectors to five. I myself used to work at what was formerly known as Northrop Grumman Integrated Systems or NGIS. That sector is now known as Northrop Grumman Aerospace Systems or NGAS as we’ve combined our aircraft business with the former Space Technology sector or NGST.
These are big changes and involve merging different cultures and thousands of employees. All the while our commitment to our customers can’t miss a beat. So why tackle so much change in such an uncertain time?
Quite simply, we can’t afford not to if we hope to stay competitive. By consolidating, we’ll realize significant savings from eliminating redundancies and streamlining processes. We’re going to make it easier to share talent across programs and better utilize our resources. The promise of combining air and space assets, knowledge and employees is part of our plan to become more competitive, agile and flexible moving forward.
We like to say that there’s no hyphen in the word “Aerospace.” It’s one word. And it’s ultimately one mission – providing the best solution to our customer regardless of the platform or payload.
As head of the Battle Management and Engagement Systems division, I know well how space technology is integrated into our programs. The Navy’s airborne battle-management command and control is provided by the E-2C Hawkeye. Our follow-on to the E-2C, the E-2D, has greatly expanded capabilities including integrated satellite communications. And we plan to win the competition for Altair Lunar Lander. When we do, we’ll build it up at St. Augustine. This is part of our proud legacy. My division built the original Lunar Excursion Module that took the astronauts to the moon. And the precursor to our Space Systems Division built the engines for the LEM.
These are just some of the programs where two business sectors, one focused on air, the other space, are now combined and can work as one, sharing ideas and engineering talent.
Embracing a proactive approach during tough times works for communities as well as companies. I’ll now look at what business and Brevard County can do to ensure the economic focus of the space coast. I’m going to focus on three areas:
The Space Coast has to maintain educational excellence at all costs, which acts as a magnet for business. And quite simply, we can’t compete as a company, a community or a country if we don’t inspire kids to study math and science.
Studies have concluded that between 50 and 85 percent of the growth in America’s Gross Domestic Product over the past half-century is rooted in our advancements in science and engineering. Estimates put two-thirds of the increase in American productivity in recent decades to advancements in science and engineering.
While today, only 4 percent of America’s work force is comprised of scientists and engineers, this 4 percent contributes disproportionately to job creation for the other 96 percent. Meanwhile, China graduates more English-speaking engineers in a month than the U.S. does in a year.
It doesn’t have to be that way. Our children have embraced technology – just look at their love of iPods, video games, Facebook and YouTube. We need to create that same excitement when it comes to math and science.
We’re trying to do our part. In 2006, I brought the Northrop Grumman Foundation Weightless Flights of Discovery to math and science teachers in our grade schools across America – to allow them to carry their experience in “zero-gravity” back to the classroom. In 2008, we brought that experience to 60 teachers across Brevard County, this state and the media.
I visited a high school recently in Melbourne. It was mostly seniors and juniors trying to decide on their careers. During the Q&A the first question was “How much money will I make if I work for you?”
That’s typical. But by the end of my briefing, after the kids had seen the amazing programs and technology, that’s the last thing on their mind. They become inspired and want to be a part of something bigger than themselves.
I know money is tight, but we can’t cut school budgets to the bone. The public schools need art and sports as much as math and science. All of it leads to happier, better-rounded kids. Parents who pay their taxes and can’t afford to send their kids to private school shouldn’t bear the brunt of budget cuts and neither should their kids.
This state is well-positioned to remain a leader in aerospace as it has extremely strong institutions of higher learning, University of Florida and Florida State among them. We have terrific local institutions like Florida Institute of Technology and Embry-Riddle Aeronautical University.
And companies have to remain committed to supporting these institutions. We recently donated $1 million to FIT to fund the Northrop Grumman Engineering and Science Student Endowment. And of the 427 FIT degrees held by Northrop Grumman employees across the company, almost half reside here in Melbourne.
Other companies contribute generously as well. And industry must continue to invest in the educational assets of their communities no matter the course of the economy.
The aerospace community has to do a better job of communicating the value of what we do. If the public feels a stronger stake in our success and our achievements, it will encourage policy makers to fight tooth and nail for our programs and economic incentives to keep them viable. That will strengthen communities like the Space Coast.
We have a great story to tell. Aerospace remains a pillar of our national security and our economy.
We are fighting major conflicts in both Iraq and Afghanistan. Events like the recent North Korean missile launch, Iran’s nuclear ambitions and the escalation of unrest in Pakistan remind the public that the world remains a dangerous place.
As far as economics, when President Obama says he wants to preserve millions of good-paying jobs in American manufacturing, aerospace is one of the few sectors where that is possible. We are not the auto industry, steel-making or textiles. Aerospace is still a world technology leader. We are still a powerful engine of employment and innovation.
Our industry affords excellent job security in tough economic times. Many aerospace jobs are unique and require specific skills. Workers who possess them are in demand. And given that many of our programs involve national security and U.S. citizenship, we create jobs that can’t be sent overseas.
We have to do a better job of selling the excitement and value of space. Most people take for granted the everyday activities that space systems provide, such as global positioning systems and weather forecasting. Often they don’t connect them to space at all, not realizing Google Earth is impossible without space.
That has to change. We have to show a sustained, creative commitment to engaging the public. Events like today are terrific, but we can’t limit ourselves to talking within our own community of business leaders. Companies and communities must coordinate and be out there selling the aerospace industry to the public and politicians with an engaging, disciplined set of messages.
I realize most companies can’t afford expensive media campaigns but the price of silence will be irrelevance. So we have to embrace Web 2.0 technology, blogs, social network sites, Twitter, to get our message out. I’m happy to report that our E-2D Hawkeye has its own Facebook page and YouTube commercials calling on President Obama to protect the Hawkeye. That’s just the beginning. We can and will do more. And that brings me to my final point.
Industry, academia and government, local, state and federal, must show real motivation to preserve the economic viability of this area.
Let’s be honest. Good engineers go where the action is, and right now good stuff to do is leaving Florida. I saw a similar exodus of engineering talent leave Long Island due to high taxes and the lack of affordable work force housing.
A big reason? Many industries can’t get incentives to stay in Florida until they threaten to leave. Meanwhile, other states are offering more compelling incentive packages. When Florida competes with Virginia for space projects there’s something wrong. Florida has history and geography on its side. Quite simply, the closer you are to the equator, the easier it is to launch satellites into space.
Now while there is much uncertainty surrounding NASA at the moment, the private space industry has enormous potential for growth. Companies like SpaceX and Scaled Composites, which is part of Northrop Grumman Aerospace Systems, are pushing the edge of the envelope. They have vision, capitalization and a commitment to rewriting the rules.
We can’t be complacent. The days of saying “We’re the place for space because we launched Apollo” are gone. What happened to Detroit must not happen here. Michigan has lost more than 83,000 automobile manufacturing jobs in the last 15 years, but the South has gained that many auto jobs and more. We could find ourselves in a similar situation as Florida is now competing against motivated players. Vandenberg in California. Marshall Space Flight Center in Alabama, The European Spaceport in French Guiana.
So what’s being done right? I think the Economic Development Commission of the Space Coast under Lynda Weatherman’s leadership has set a fine example. They get it. Their industry cluster concept is focused where the community has clear, competitive advantages: Advance Security. Aerospace. Communications. Electronics. Emerging Technologies.
They are playing to the area’s strengths, the infrastructure, excellent schools, and low labor costs, and most importantly, the critical mass of top companies already here as well as the engineering talent and cutting-edge technology they bring to the table.
These industry clusters share similar markets, labor, technology and processes that can be leveraged across businesses. So can the marketing and advocacy efforts on their behalf. In a sense, the cluster concept mirrors what we’ve done at Northrop Grumman with our reorganization. It’s an integrated solution on an economic development level.
And I think it’s paying off. The decision of Brazilian aircraft manufacturer Embraer to come to Melbourne is one of the real success stories that we’d all like to see repeated. And other opportunities abound.
Space tourism, though in its infancy, should find fertile soil in Florida despite some recent missteps. This state has the assets and experience in both space and tourism to become a dominant player.
I mentioned earlier that Secretary Gates emphasized a commitment to the acquisition of more UAV’s and ISR assets. Well Melbourne is a center of excellence for ISR and it has plenty of room to grow. ISR will be an important part of this area’s future. Let’s make sure we focus our energy on being not just the Space Coast but the ISR Coast – ASAP.
Finally, I think a reevaluation of ITAR (International Traffic on Arms Regulations) has growing support in Washington. Our national security must always be of paramount importance, but there may be ways to amend ITAR to make us more competitive abroad. Our nation’s dominance in exporting space technology has been seriously eroded in the last decade, and this warrants further study and thought.
I should note that once launched, we plan to manage the NATO Alliance Ground Surveillance program, a cutting-edge ISR system, from our Melbourne facility. And we recently hosted the 95th meeting of NATO’s Air Force Armaments Group so I have some skin in the game in seeing this area become an export engine.
I close with this: Let’s follow the energetic lead of the EDC. I think if they can leverage their innovative ideas up to the state and federal level, the future of the Space Coast will be as limitless as space itself.