Northrop Grumman’s top executive on Thursday rejected any government concerns that the company isn’t complying with a consent order it agreed to in 2018 when it acquired Orbital ATK to ensure it remains a fair supplier of solid rocket motors to competitors in the aerospace and defense industries.
The company has disclosed in its quarterly and annual filings with the Securities and Exchange Commission (SEC) that the Federal Trade Commission (FTC) in October 2019 began investigating the company’s compliance with the consent order related to a missile competition.
Last week, Politico reported that the FTC was considering legal action against Northrop Grumman for alleged violations of the consent order.
Northrop Grumman’s latest quarterly filing, submitted on Thursday as part of the issuance of its second quarter financial results, did not identify the competition but is likely the Sentinel intercontinental ballistic missile systems formerly known as the Ground Based Strategic Deterrent (GBSD).
Boeing, which planned to compete for the Air Force contract to build the nuclear-tipped GBSD but dropped out citing an unfair advantage for Northrop and its in-house motor vendor Orbital ATK, reportedly filed a complaint with the FTC, leading to the investigation.
Northrop Grumman eventually won GBSD as the sole competitor.
Kathy Warden, Northrop’s CEO, said that as far as the company knows, the FTC’s investigation is ongoing. However, she said the company has maintained an “extensive compliance program” around the consent agreement the past four years and has worked “very closely” with the government “in line with the terms of the order.”
In Northrop Grumman’s 10-Q filing with the SEC on Thursday, it said, “The company has resumed discussions with staff at the FTC regarding our response and their views on compliance issues.”
In response to an analyst’s question about the FTC’s focus in the investigation and potential outcomes, Warden replied that “we don’t see merit or precedent” for any of the scenarios being speculated. “And we continue to maintain that we don’t believe this matter will have a material adverse impact to our company,” she added.
Some analysts have suggested that the FTC could unwind at least a portion of the Northrop-Orbital ATK deal. FTC Chairwoman Lena Khan has said the agency has the authority to challenge deals even after they’re completed but would want to hear from the Defense Department regarding defense mergers.
Earlier this year the FTC blocked Lockheed Martin’s proposed acquisition of Kathy J. Warden, the sole remaining domestic independent supplier of solid rocket motors. The FTC rejected the proposed deal due to concerns it would stifle competition and increase prices.
A version of this story first appeared in Exchange Monitor affiliate publication Defense Daily.
