WASHINGTON — Northrop Grumman reported a virtually $1.6 billion pre-tax charge on the B-21 Raider program within the last quarter of 2023, because the stealth bomber moved into its low-rate initial production phase.
The charge was mainly attributable to higher-than-expected production costs and macroeconomic disruptions, company officials said in an earnings call with investors Thursday. The B-21′s charge included $143 million in cost growth on the primary LRIP lot, they said.
The Air Force plans to field a fleet of at the very least 100 of the Northrop-made bombers, starting within the mid-2020s. The B-21 is designed with the newest stealth technology and intended to penetrate deep into enemy territory for strike missions, even against adversaries with the newest radar and air defenses.
The B-21 program has been relatively successful and on schedule to date. It was publicly rolled out in December 2022, and almost a yr later, moved into the flight testing phase at Edwards Air Force Base in California. The Pentagon was impressed enough with the outcomes of the B-21′s ground and flight tests to start out production late last yr.
But throughout 2023, Northrop Chief Executive Officer Kathy Warden repeatedly warned investors that losses were likely because the B-21 moved into production — losses which are now beginning to materialize.
She said the Northrop was “disenchanted” by the charge and the way its initial assessment of how the LRIP conditions shook out, but emains confident that it may deliver on the corporate’s outlook going forward.
The B-21 charge caused Northrop’s aeronautics sector to record a lack of nearly $1.3 billion for the quarter, and the corporate as a complete reported a net lack of $535 million.
The outcomes for all of 2023 were somewhat more positive. The aeronautics sector lost $473 million, while the corporate overall saw $2.1 billion in earnings.
Warden said the Air Force last yr provided about $50 million in inflation relief funding on the initial LRIP lot — but cautioned investors to not get their hopes up for future relief.
Northrop is attempting to work with the federal government to see if there are any further opportunities for further inflation relief, Warden said. Given the Pentagon’s tightening budgets, nonetheless, Warden said the corporate is tempering its expectations.
Now that Northrop has the production and ground test of the primary B-21 under its belt, “we now have so much more information today than we did right now last yr,” CFO Dave Keffer said on the decision.
Northrop also has many of the suppliers for the Raider program under contract, and has almost finished negotiating with the remaining, and latest productivity estimates. The stabilizing economy and inflation also will help, Keffer said.
Sentinel nuclear missile
Warden also said the corporate will work with the Pentagon over the following few months to look for methods to bring costs down on the LGM-35A Sentinel nuclear missile.
The Air Force notified Congress last week that the intercontinental ballistic missile program’s costs had grown by at the very least 37%, triggering a critical Nunn-McCurdy breach and an automatic review. The Pentagon will now review this system and maybe restructure it. A Nunn-McCurdy breach could also result in a program being cancelled, however the Air Force has ruled that out.
Air Force officials have repeatedly called Sentinel one of the crucial complicated acquisition programs it has ever undertaken — but one which it has no alternative but to finish.
Lt. Gen. Richard Moore, the Air Force’s deputy chief of staff for plans and programs, said at a Center for Strategic and International Studies panel Wednesday that the Nineteen Seventies-era Minuteman III ICBMs were only originally expected to last a few decade and are well past their expected lifespan.
Moore said repeatedly the Air Force is committed to Sentinel and that it should make the mandatory tradeoffs to pay for it.
“Sentinel goes to be funded,” Moore said. “There is just not a viable service life extension program for Minuteman III. Extending it for some lengthy time period, that’s not a viable option.”
Warden said the Pentagon’s review of the Sentinel program will likely last several months. She noted that the Air Force has attributed the majority of the price growth on Sentinel to its command and launch segment. This can be a complex process that involves the development of greater than 400 recent launch facilities, laying of 1000’s of miles of fiber optic networks, 1000’s of miles of utility tunnels, and obtaining real estate easements from lots of of landowners.
The price growth estimates on Sentinel included inflation since 2020, the last time this system’s projected costs were estimated, Warden said.
Throughout the most up-to-date three years of Sentinel’s engineering and manufacturing development phase, Warden said Northrop has brought on engineers, matured the system’s design, and achieved milestones reminiscent of successful static fire tests of the solid rocket motors for Sentinel’s first two stages.
Stephen Losey is the air warfare reporter for Defense News. He previously covered leadership and personnel issues at Air Force Times, and the Pentagon, special operations and air warfare at Military.com. He has traveled to the Middle East to cover U.S. Air Force operations.