Gwynne Shotwell is president and COO of SpaceX. (SpaceX)
COLORADO SPRINGS, COLO. — In the defense industry’s ideal world, budget dollars would flow like Niagara Falls — quick and heavy.
That’s obviously not the case, but the transition from the mid-2000s financial waterfall to a relative trickle in the post-sequestration era has the silver lining of forced innovation, according to a panel of top space CEOs who spoke Tuesday at the National Space Symposium.
“I think reduced budgets really make organizations and governments think really hard about where they spend [and] how they spend,” Gwynne Shotwell, president and COO of SpaceX, told the audience in Colorado Springs, Colorado. “I think depressed budgets are actually helpful.”
“The current state has created an incredibly healthy dialogue that might not have happened” in a traditional budget atmosphere, Intelsat General president Kay Sears said, adding that it’s forced officials in the Pentagon to actually act on what might have otherwise been theoretical discussions.
Both women’s companies represent something of upstarts when it comes to the Pentagon. SpaceX is involved in a well-publicized attempt to break into the military launch market, one which has resulted in legal action against the Air Force, while Intelsat is one of a number of commercial satellite companies who are hoping for changes in how the Pentagon buys commercial bandwidth.
While the budget situation has led to new opportunities for companies, it could also set up consolidation in the industry. The first domino fell in early May, when Orbital and ATK announced a merger agreement, and executives on the panel openly wondered whether more could come.
“I think any healthy company should always be looking at opportunities for merger or acquisitions,” said Craig Cooning, Boeing’s vice president and general manager for Space and Intelligence Systems. While noting that his company doesn’t have a “specific target” in mind, Cooning said “as you look at the market, you see what would be complimentary that would help get you that market ... we are always looking at that.”
Another opportunity, particularly in the space realm, is finding companies that are willing to sell off specific business units, said Erik Spittle, president of SSL Federal.
“I can definitely conceive of more of that,” Spittle said. “The top end is going to be a very interesting thing. I think in most cases it would be divestitures of some business units that create opportunities for acquisitions for other companies. There clearly seems to be ... more satellite manufacturing capacity than there is demand for larger space craft.
Perhaps the most famous merging of assets is the United Launch Alliance, which has a monopoly on military space launches and was created by an agreement between Lockheed Martin and Boeing when those two companies decided they could make more money by working together rather than competing. But don’t expect ULA to recreate that experiment with it’s growing competitor, SpaceX.
Asked whether we could see those two companies merge, ULA’s Michael Gass responded “Anything’s possible ... in somebody else’s lifetime.”