Northrop says it has received 'civil investigative demand' from Federal Trade Commission

By Marjorie Censer / October 24, 2019 at 11:41 AM

Northrop Grumman said today it received a "civil investigative demand" this month from the Federal Trade Commission in connection with the company’s compliance with a 2018 FTC order on solid-rocket motors.

The demand relates to the company's compliance "in connection with a pending strategic missile competition," Northrop disclosed in a Securities and Exchange Commission filing today. That competition is most likely the Ground Based Strategic Deterrent program.

In July, Boeing said it would not compete for GBSD, partly because of what a top Boeing executive called Northrop's "unfair advantage" within the solid rocket motor industrial base. Aerojet Rocketdyne and Orbital ATK, which Northrop acquired in 2018, are the only SRM providers.

In a statement, Boeing spokesman Todd Blecher said: "One of the factors in Boeing's decision not to bid for the U.S. Air Force's Ground based Strategic Deterrent program was our concern about Northrop Grumman's compliance with a 2018 Federal Trade Commission order that prohibits it from discriminating in the sale of solid rocket motors. Northrop Grumman has now acknowledged that the FTC is questioning its compliance with that order. We stand ready to support the FTC inquiry."

When Northrop acquired Orbital ATK, the FTC imposed conditions meant to ensure continued competition in this market.

In today's filing, Northrop said it is "working to respond" to the new FTC request.

"We believe the company has been and continues to be in full compliance with the Order, but we cannot predict any potential impact on the pending competition," Northrop added.

In a call with analysts Thursday, Kathy Warden, Northrop’s chief executive, said the company does not currently expect any change to the Air Force acquisition strategy for GBSD.

“Our proposal is due in December and so, obviously, we will continue to monitor that,” she said.

Asked whether Northrop has received pressure to join a national team with Boeing, Warden said “we are not receiving any pressure to engage in a national team, because I would point out that we do have what we’re calling a nationwide team that includes many large and small companies across the country.”

Northrop in September detailed its list of teammates.

Meanwhile, the contractor said today sales in its most recent quarter reached $8.5 billion, up 5% from the same three-month period a year earlier.

Northrop’s quarterly profit hit $933 million, down 25% from the prior year. The company said its profit last year benefited from a settlement of cost claims as well as gains related to pension-related items.

The company's innovation systems posted the largest sales growth this quarter, reporting a 12% increase over last year.