Space

Mr. Chairman and Members of the Committee; thank you for the opportunity to be present this morning. I am Oren Phillips, Vice President of Business Development for Thiokol Propulsion, a subsidiary of the recently renamed Cordant Technologies Inc. The names have changed but the composition of the company remains essentially the same.

Thiokol Propulsion is in the business of designing, developing and producing solid rocket motors for a variety of military, civil and commercial applications. Our products range in size from the solid rocket motors used to power NASA's Space Shuttle on one extreme, to small Divert and Attitude Control motors that are used on Ballistic Missile Defense kill vehicles. Thiokol has produced solid rocket boosters for every strategic missile in the U.S. arsenal. We are currently involved in the production of the Navy Trident D-5 missile and will soon be remanufacturing Minuteman III motors. We produce solid rocket motors for many of the tactical and theater missile defense systems for all three military services. We also have developed and manufactured solid boosters for civil, commercial and military space launch vehicles including Atlas, Delta, Athena and Taurus vehicles. Our Elkton, MD plant manufactures a series of STAR motors that are used to deliver satellites to their final orbits. To remain a leader in the solid propulsion field, we maintain an extensive research and engineering capability involved in developing and testing new propellants, materials, and rocket motor hardware. We have support facilities in Alabama, California and Florida in addition to our production facilities in Utah and Maryland. Our annual propulsion sales are in excess of $600 million.

We not only sell our products to U.S. government and commercial entities, we also actively seek foreign customers for our products in compliance with U.S. licensing procedures. We are currently working with Japanese companies to provide new propulsion systems for their HIIA launch vehicle. We are also working with companies in Spain, France, Germany and elsewhere to sell boosters that will be used on their launch vehicles and potentially launched from U.S. spaceports. Our STAR motors have been integrated into satellites manufactured by U.S. companies such as Hughes, Lockheed Martin and Loral on various foreign launch vehicles. We are particularly mindful of the potential transfer of sensitive technology when we are involved in foreign activities and carefully abide by all Department of Defense, State, and Commerce requirements that are contained in the licensing approval documents.

Mr. Chairman as you are well aware, with the opening of the U.S. commercial satellite market to foreign launch vehicles, the U.S. launch industry is facing unprecedented price competition from the non-market economies of Russia, China, and Ukraine. Let me be realistically blunt in my assessment. With their current labor costs at a tenth of those in the U.S., there is no way to compete directly with them, no matter how good our technology is, how efficient our production processes are, or how low cost our new paper vehicles could be. The math is simple. With increased business these non-market economy vehicles will mature and become more reliable. They will have an enormous impact on the commercial satellite launch vehicle market not only affecting the U.S., but Europe and Japan as well.

The U.S. satellite service community has a great desire to find cheaper launches for their satellites and new markets for their products and services. Both of these opportunities are readily available in several foreign countries, particularly non-market economies. The possible business rewards are too great in these foreign countries to be ignored by U.S. satellite companies.

What is ignored, however, is the potential impact of this "mad rush for market share" on the U.S. defense capability and industrial base. The global space and strategic defense business and the commercial space business are inseparably linked. The same technologies, facilities, people and products support both markets. Three quarters of Thiokol's propulsion business is in the commercial and civil space market today. Only one quarter of our business is defense related. Ten years ago this ratio was reversed. Many U.S. aerospace companies are in a similar situation. If the U.S. launch vehicle industry were to lose significant market share to foreign competitors, the U.S. defense infrastructure would be greatly affected. Our commercial space business subsidizes significantly our defense business. Without that subsidy, the U.S. government would have to provide greater amounts of defense funding at taxpayer expense to retain our current industrial base capability. A healthy, robust U.S. commercial launch vehicle industry is critical to our strategic missile capability and to our future.

At the same time as our defense capability deteriorates, launches of U.S. commercial satellites on launch vehicles of our former adversaries greatly subsidizes their military. Since their launch vehicle business is government controlled, every dollar of profit is one less dollar they would have to spend on their defense program. They would be able to invest more money in technologies and infrastructure. The current policies of the U.S. government and the global pursuits of the U.S. launch vehicle industry help to preserve and expand the Russian and Chinese strategic missile design and manufacturing capability at the expense of our own similar capability.

Since Thiokol has not been involved in the recent controversy relating to possible transfer of critical missile technology to China, I cannot speculate as to whether this has taken place or not. I can say is that in our experience U.S. policy and regulations provide a good basis for control of sensitive technology if followed as specified. Thiokol has received a number of export licenses in the last few years for many different foreign customers. In each case, the government agencies have been very thorough in their evaluation of our license request and very specific on what we are allowed to export. In the end, however, the responsibility for controlling sensitive technology rests with the individual contractor and how well his employees are trained relating to technology transfer.

As I have mentioned previously, Thiokol has exported our rocket motors to various foreign customers. Some of our STAR motors have been included by the satellite prime contractors in their satellite payloads launched on non-market economy launch vehicles. Although there has been no technology transferred, to our knowledge, as a result of these exports because of the safeguards in place, one can ask does it benefit their launch industry. The answer is yes. Not necessarily because of technology transfer but because with each launch they become a little smarter, a little more capable, a little more reliable, and ultimately more competitive. In the final analysis, we are directly strengthening non-market economy countries' space launch capability and indirectly strengthening their strategic missile capability while damaging our own.

Mr. Chairman, I am sure that you are aware that there is wide divergence of opinion on the use of foreign launch vehicles within U.S. industry. In fact, none of us are completely pure. The companies that deal in the production of satellites and services are looking for the cheapest, most reliable launch they can find. Many of these companies are involved in the production of satellites as well as launch vehicles. They could argue for either greater or fewer restrictions on the use of foreign launch vehicles depending on what position they want to take. A few of them are even importing foreign launch vehicles or components to improve their competitiveness. Companies like Thiokol that produce launch vehicle components generally argue for greater restrictions on the use of foreign launch vehicles. But even in the case of Thiokol, we attempt to sell boosters and components in foreign markets when policy and licensing procedures so allow.

Like most difficult problems, there are no easy solutions. Decisions must be made in a global market context. Imposing additional launch quotas may be politically impossible and economically unwise as well. At the same time dropping all quotas could be disastrous to the U.S. launch industry and our national defense capability.

A balance between the two is needed.

Thank you for the opportunity to testify on behalf of Thiokol today and I will be happy to answer your questions.