By Drew FitzGerald
The Pentagon long relied on one U.S. company to make the main ingredient that fuels its most powerful missiles. Northrop Grumman's effort to build a second source has been slow to take off.
Years after building a factory to make more of the key chemical, Northrop's output is still missing from the fuel powering many U.S. weapon systems -- when global conflicts have spurred demand for a range of tactical missiles. A new $95 billion spending package to support Ukraine, Israel and Taiwan will further bolster weapons demand abroad and pay to replenish U.S. arsenals.
Northrop's self-made fuel isn't yet fully approved for use in big weapons programs such as the Navy's ballistic missiles, a Defense Department official said.
Most of that fuel still comes from a specialty-chemicals company in Utah called American Pacific. It is an example of the single-source chokepoints that Pentagon logistics experts have long flagged as a national-security risk.
Despite efforts to diversify, many weapon materials have no U.S. manufacturers. Others have only one source or a dominant provider. The supply-chain snarls caused by the Covid-19 pandemic heightened officials' sense of urgency by exposing other materials only made in adversarial countries such as China.
"Market forces drove those manufacturing capabilities to other places," said Jerry McGinn, a former Pentagon industrial-base official. "The challenge is how do you keep the market forces from taking over again? How do you not make it become a permanent ward of the state?"
Northrop, which is best known for making stealth jets such as the B-21 Raider, also makes missile-defense systems and solid-rocket motors that need a chemical called ammonium perchlorate to fire. It tried to lower the prices it paid for the chemical by investing more than $100 million to build production lines at a campus in a corner of northern Utah.
Northrop declined to detail its ammonium perchlorate production levels. The company said it both produces the chemical and purchases it from suppliers to ensure it can support the Pentagon, the National Aeronautics and Space Administration and commercial customers. That "supply base encourages competition and delivers available capacity," the company said in a statement.
Fuel troubles
Defense companies including Northrop are trying to balance governments' rising demand for advanced weaponry while avoiding money-losing projects. Higher prices for materials such as ammonium perchlorate can dent contractors' profits on so-called fixed-price contracts when they are left on the hook for cost overruns.
As one of two major U.S. solid rocket makers, Northrop has long been a big buyer of ammonium perchlorate. The company's rocket motors are used in missile systems such as Lockheed Martin's Guided Multiple Launch Rocket System, or GMLRS. The U.S. has sent thousands of these missiles to Ukraine.
The military's exacting requirements for its arsenal -- which include at least a year of testing materials for shelf-life and performance before they can be certified for specific weapons -- have limited demand for the Northrop-made ammonium perchlorate.
"The step that they need to overcome is how do they get that source certified and qualified," the Defense Department official said.
Northrop's production, however, can fill boosters on the space rockets that lift satellites into orbit and NASA's Artemis program. And the added capacity has already lowered prices for fuel in weapons, said Christine Michienzi, a former Department of Defense acquisitions technology chief. "We wanted to have two [suppliers] so that there was competition," she said.
Cold War shifts
Cold War demand once supported four domestic makers of ammonium perchlorate, a white, saltlike solid compound. American Pacific, founded in 1955, was among them.
A 1988 explosion at an American Pacific plant in Henderson, Nev., killed two workers and destroyed the production line. The company later built a new plant in a more remote spot outside Cedar City, Utah, with Defense Department help.
By the turn of this century, there were two U.S. suppliers. Demand sank further with the demise of NASA's Space Shuttle program. Newer rocket makers including SpaceX don't buy the material, preferring instead to use liquid fuels.
Ownership of American Pacific changed hands several times over the years, but it enjoyed strong pricing power once it became the sole U.S. source of the chemical. In 2015, it was acquired by Utah's wealthy Huntsman family.
The rocket maker Orbital ATK -- one of American Pacific's biggest customers -- had long discussed making its own fuel with government officials. Northrop inherited the project when it bought Orbital ATK in 2018.
That do-it-yourself effort met resistance from members of the Trump administration who expressed concern about the potential business impact on American Pacific, said people familiar with the matter.
A spokesman for Huntsman Family Investments said the debate occurred when demand for the chemical was lower than it is today.
The Huntsmans sold the business in 2020, and it changed hands again this year in a $700 million deal. It is now a subsidiary of NewMarket, which owns chemicals businesses. American Pacific Chief Executive Hal Murdock declined to comment.
Utah plant
Northrop's plant construction went forward in 2020 without Pentagon help.
"We saw their attitude and said, 'You know what, we just don't want you to stop us,'" said Bob Wardle, Northrop's former senior director of advanced programs for propulsion systems.
Northrop picked its sprawling Promontory complex in Utah to house the production of both ammonium perchlorate and a precursor chemical used to make it. The campus already recycled old rocket fuel by washing out decommissioned missiles, so workers had experience working with the chemical.
Over the coming years, the biggest source of projected U.S. ammonium perchlorate demand will be another Northrop project: a next-generation nuclear missile upgrade known as Sentinel. Cost overruns bedevil the multibillion-dollar program, making expense management a priority for the company.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
April 27, 2024 10:00 ET (14:00 GMT)
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