Dream Teams and Brilliant Eyes
The SBIRS Low Program, Northrop Grumman's
Acquisition of TRW, and the Implications for the Structure
of the Military Space Industry
We've sort of become the leading underdog of the satellite guys. We're the company
shaking things up. Frankly, this industry has a history of poor performance and cost
overruns. The Pentagon wants to change that.
DAVID THOMPSON, founder and CEO, Spectrum Astro1
In the summer of 2002, Northrop Grumman, the third-largest arms manufacturer in the United States and the fourth largest in the world, acquired TRW, a car parts maker more valued for its expertise in lasers and space satellites. Northrop Grumman's proposed acquisition of TRW was intended to produce a single company with stronger skills in space satellites, missile defenses, and electronic intelligence systems. The integration of the two companies—billed as “relatively simple” by management—would produce a firm better able to compete on a wide range of large projects against Lockheed Martin, Boeing, Raytheon, British Aerospace, and EADS.2 Those large projects were those that would, by the company's estimation, produce the “systems of systems” that were supposed to transform the Pentagon's military machine into an unassailable twenty-first-century force.3 Large systems, the argument goes, require large contractors, so a combination with TRW would be in the best interests of the Department of Defense, if only to increase the ranks of the largest U.S.-based contractors from two to three.
In this context, an excellent case study for the ex antevalue of the proposed merger is the U.S. Air Force's (USAF) Space-Based Infrared System Low (SBIRS Low). A development of the earlier “Brilliant Eyes” program, SBIRS (pronounced “sibbers”) Low was a plan for a large constellation of ballistic missile tracking satellites. This was probably the only program in which Northrop Grumman and TRW were working so closely that it posed vertical integration issues with antitrust implications.4 Just before the acquisition was proposed, TRW was a potential prime contractor competing against the