Students at the University of Colorado got an unexpected lesson about the speed of business transformation recently, when a recording of their guest’s candid remarks was posted to the internet, and led to his resignation the next day.
Brett Tobey, an aerospace industry veteran who worked at Lockheed Martin for 32 years before joining the space launch company United Launch Alliance in 2015, was visiting his alma mater to talk to engineering students (pdf). He spoke about his efforts to help the company, a joint venture of Lockheed and Boeing, cut costs in response to the challenge from SpaceX.
But his candid description of ULA’s business, while no doubt educational, also proved likely to upset the company’s important relationship with everyone from contractors to competitors to their number one client, the US government. After an attendee at the seminar posted a recording of the audio on line, Tobey stepped down.
“The views, positions and inaccurate statements Mr. Tobey presented at his recent speaking engagement were not aligned with the direction of the company, my views, nor the views I expect from ULA leaders,” ULA chief executive Tory Bruno said in a statement.
Here’s where Tobey went wrong.
Don’t piss off your contractors
ULA’s primary rocket, the Atlas 5, depends on engines bought from Russia, but since Vladimir Putin gave the order to annex Crimea, the US government has moved to block purchases of the engines. ULA is now looking to develop a new engine, and has hired Blue Origin, the space company funded by Amazon founder Jeff Bezos, and Aerojet Rocketdyne, a long-time player in the space industry that built the engines for the Space Shuttle. Tobey was very forthcoming about the process of choosing between these two.
“We’re sitting here as a groom with two possible brides,” Tobey said. “We’ve got Blue Origin over here, the super-rich girl, then we’ve got this poor girl over here in Aerojet Rocketdyne, who we have to take and continue to plan rehearsal dinner, buy cakes, set up insurance planning. [We’re] doing all this work for both of them, and the chances of Aerojet Rocketdyne coming in and beating the billionaire is pretty low. We’re putting a whole lot more energy into BE-4, Blue Origin.”
It may be the right decision—Tobey also said Blue Origin’s engine is significantly cheaper than Aerojet Rocketdyne’s—but not exactly politic to reveal this, while both companies are still preparing for a possible “marriage.”
Don’t piss off senators
That fight over the Russian rocket engine has also played out in the halls of Congress. Arizona Senator John McCain, a major critic of Russia, has been a leading proponent of blocking sales of the engines. Tobey suggested that this was really about McCain’s relationship with Elon Musk.
“[He] basically doesn’t like us,” he says on the recording. “He’s like this with Elon Musk, and so Elon Musk said, ‘why don’t you guys go after ULA and see if you can get that engine to be outlawed?'”
McCain’s office had no comment. But Tobey went further and let the students in on the open secret of traditional aerospace, which is that it protects government funding streams by placing investments strategically.
“We have this friend—I told you about that big factory down in Alabama, Decatur—this is Senator Richard Shelby from Alabama,” Tobey said.
Shelby has been a loyal supporter of ULA, and has attempted to shoehorn in money to buy the RD-180 engines from Russia, against the wishes of McCain and the rest of the Armed Services Committee.
Don’t piss off your client
ULA’s main client is the US military; it has launched, for example, every GPS satellite, not to mention numerous other US spy satellites and NASA projects. But its relationship with the Air Force has been under scrutiny because SpaceX sued the government, alleging that it was unfairly favoring ULA and not allowing real competition. The lawsuit was settled, allowing SpaceX to bid on contracts, but ULA pulled out of a recent competition because it couldn’t use its Russian engines—even though, Tobey claims, the government rigged the bid in their favor.
“The government was not happy with us not bidding that, because they bent over backwards to lean the field to our advantage,” Tobey said.
This is not something Air Force procurement officers want to see quoted in the next SpaceX lawsuit. Nor is it something that McCain was happy to hear. At a hearing this morning, he called for an investigation into the contract.
“These statements raised troubling questions about the nature of the relationship between the Department of Defense and ULA,” he said. “This Committee treats with the utmost seriousness any implication that Department showed favoritism to a major defense contractor or that efforts have been made to silence members of Congress.”
Don’t admit you can’t compete
On that note, while it’s been obvious for a while that SpaceX’s low costs are putting pressure on the rest of the launch access industry, ULA has consistently argued that its services provide more bang for the buck. But Tobey basically said his company couldn’t compete on price (though he did argue that the extra $800 million ULA receives on top of per-launch costs, known as a “capabilities contract,” allows the company to provide more flexible service).
“Along came Elon Musk and changed the game completely…we can’t afford [to bid] any more because the price points are coming down as low as $60 million,” he said. “The best day you’ll see us bid at $125 million or twice that number. Add in the capabilities cost, it eclipses the $200 million. … So now we’re going to have to take and figure out how to bid these things much lower cost. The government can’t just say, you know, ULA’s got a great track record, they’ve done 100 launches.”
Don’t mock your competitors for things you can’t do
The pursuit of reusable rockets at SpaceX and Blue Origin has captivated the industry. Tobey, while conceding that SpaceX’s booster landing gave him goosebumps, said the design behind it was “dumb” because it requires flying additional fuel to perform the landing. He noted the delays engendered by the fuel system, though SpaceX says that problem is now largely solved.
Then he went on to discuss ULA’s plans for reusable rockets.
“What we believe is the best way to reuse components of the vehicle is, basically, in order to have better performance, [to have] Atlas shed its rocket engines,” he said.
He described a system where the engines would be jettisoned after firing and parachute back down toward earth, but would be recovered by helicopters before they hit the ocean. Then, it would be fairly inexpensive to re-use the engines in another rocket.
The only problem? The company has been studying this solution since at least 2008 (pdf)—two years before the first Falcon 9 rocket even flew—and still hasn’t implemented it.