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Manufacturers Focus On ‘Inefficiency From Within’

By | March 13, 2002

      The satellite manufacturing industry has been dogged in recent months by execution problems, leading many manufacturers to take a long, hard look at themselves to improve quality of services.

      Randy Brinkley, president of satellite systems at Boeing Satellite Services [BA], speaking at a satellite manufacturing session during PBI Media’s Satellite 2002 conference, said: “The industry has misapplied the ‘better, cheaper, faster’ maxim. Doing things right the first time will work out cheaper in the long-haul. If we don’t do it better now than in the past, then we won’t do it at all. There are two key factors – on-orbit reliability and product quality. The slowdown has given us opportunities to restructure.”

      It has been a tough time for satellite manufacturers, but most seem to understand that they have to deal with a number of problems internally in this market. Ted Gavrilis, president, Lockheed Martin [LMT] Commercial Space Systems, said: “There can be a graceful weathering of the storm. The real issue is inefficiency from within. The keys to profitability are on-time delivery, flawless on-orbit performance. Flexibility is also important. There is a need to have one product with a broad capability, as well as on-orbit efficiency.”

      One of the key reasons for poor performance of satellites is that the marketplace for satellite launches has become particularly fierce in recent times, leading many manufacturers to make deals that may not have been commercially wise. Gavrilis said: “The balance between risk and reward is not in our favour right now. There has been a certain frenzy in terms of making deals but that has led us down a path where we have been making a number of high-risk deals.”

      Patrick DeWitt, president of space systems at Loral Space and Communications [LOR], observed: “Reliability is going to be the first and foremost issue. There have been concerns expressed that industry is spending too much time on cost issues? There are questions that need to be answered as to whether big satellites are more vulnerable. There are issues such as lower costs, shortened schedules and added capabilities.”

      Quality issues are likely to become far more important than doing the deal at the cheapest price. Brinkley admitted that Boeing was “no longer interested in being the price leader” in the industry, but wanted to succeed more on quality and reliability.

      DeWitt added, “We have reviewed our test facilities and our reliability has not deteriorated, but it is still not good enough. For major new developments, we bring in an outside team to look at it. We are not taking shortcuts.”

      Industry consolidation could also become a factor. Jean-Michel Aubertin, the deputy CEO of Astrium, was particularly bullish on this topic.

      He said: “We intend to take part in industry consolidation and be one of the possibly three global players that will exist in this market space. This can either be with a partner or without. European manufacturers have no choice but to improve.”

      Despite the concerns over quality and reliability, many are still optimistic that there is a lucrative business out there. Aubertin said, “There is more cautiousness in the market. We are confident that the market will recover. Broadband will be the next engine for growth. We are confident that the satellite market will return to 20-25 satellites per annum.”

      The acceleration of broadband deployment remains a key for the whole industry and one in which satellite manufacturers hope to play a part.

      Pascale Sourisse, chairman and CEO of Alcatel Space, added: “The broadband access market is growing, albeit maybe slower than expected. Satellite has a position to develop, as well as other technologies. Terrestrial solutions are not going to serve 100 per cent of the market. We think satellite has the potential to have around 30 per cent market share.”

      — Mark Holmes

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