War Profits

Weapons replacement spells money for Raytheon

By David Abel  |  The Boston Globe  |  6/10/1999

WASHINGTON - It was just after 7 in the Adriatic Sea on the first night of NATO's strikes on Yugoslavia when a British sub neared periscope depth, opened several of its torpedo doors, and let fly a volley of blast-belching Tomahawk cruise missiles.

The attack's significance went beyond the fact that it was the first time such weapons were fired by a nation other than the United States. The launching heralded a boon for the nation's third-largest military contractor and the maker of Tomahawk, Lexington-based Raytheon Co., which said last week that it expects to earn $1 billion to replenish spent stocks from the Yugoslav air campaign.

Since that night in late March, the British have fired nearly half of the 65 cruise missiles they bought earlier this year from Raytheon. And those sea-skimming precision munitions are only a fraction of what the US Navy launched against Yugoslavia and other foes in the past year.

Though the information remains classified, Navy sources say the United States has fired more than 600 of the $1.2 million sea-launched cruise missiles in the past nine months, including more than 220 in Yugoslavia, at least 330 during attacks on Iraq in December, and about 80 in strikes against targets last summer in Sudan and Afghanistan.

That spells a familiar word for Raytheon: M-O-N-E-Y.

Indeed, President Clinton signed an emergency-spending bill last month that earmarked $12 billion for the air war. Of that, $420 million will go to update 624 older Tomahawks to the newer, more effective versions. In addition, the Pentagon will divide $1.1 billion between the services to replace used bombs and missiles.

"We will be lobbying for this money to go to increasing our Tomahawk capability," a senior Navy official said. "It's our weapon of choice."

One area where some of the extra money from the emergency bill might go is to arming Britain. While London has requested an additional 30 cruise missiles, British military officials say they will need hundreds to supply 12 Tomahawk-capable attack submarines by 2003.

Those extra Tomahawks will not come off Raytheon's production line, which closed in January, but from the Navy's remaining supply of 2,200 such cruise missiles. Still, the $20 billion company would profit in at least two ways.

Raytheon would benefit from the millions of dollars it would cost to upgrade to the "Block III" Tomahawk, which flies farther, requires less fuel, and packs a stiffer punch than the older "Block IIs." Currently, more than half of the US Navy's arsenal consists of the less-advanced cruise missiles.

The other benefit to Raytheon is the Navy's decision to accelerate production of the next-generation Tomahawk. The cruise missiles launched in Yugoslavia and increased British demand pushed the Navy to request Raytheon to produce six times the number of planned "Tactical Tomahawks" in its first year of production in 2003, a Navy official said.

"This is certainly good news for Raytheon," said Paul Nisbet, a military analyst at JSA Research in Newport, R.I. "The sooner they deliver, the better."

The overall number of Tactical Tomahawks, which are supposed to cost 40 percent less than current versions and fly 30 percent farther than Block IIIs, that the Navy plans to purchase from Raytheon will remain 1,353.

The next-generation Tomahawks are just one of many defense contracts fueling a resurgence at Raytheon, which had sales of $4.9 billion for the quarter ending in April. The defense giant's portfolio includes the Army's Patriot missile defense system, expensive new missiles such as the Joint Standoff Weapon, and most recently a multimillion-dollar contract to develop a new radar system for future aircraft carriers and destroyers.

Still, replenishing Tomahawks by upgrading the older ones and accelerating the production of newer ones promises to account for a large chunk of Raytheon's future revenue.