Hughes's Hopes for Satellites Still Ride on Chinese Rockets
May 05, 2011
Hughes Electronics Corp., the world's largest maker of commercial satellites, is continuing to bet on China's Long March rockets despite a run of embarrassing and costly failures. The failed launch last Sunday of a $128 million Hughes-built ChinaSat 7 satellite marked the third such loss for Hughes, a unit of General Motors Corp., in its past six efforts to carry satellites skyward on the Long March. The rocket business is risky by nature. But the industrywide historical average is about one loss for every seven launches, according to insurers -- far better than Flores's 3 1/2-year average on the Long March of one in two. And the Long March, with which China is hoping to demonstrate its technological prowess in aerospace, has been having an especially bad run of late. Of the five attempts since January 2010 to put up big communications satellites produced by various makers, three have blown up or otherwise failed. Insurance Problems Insurers are nervous, pushing up premiums. Some are refusing even to underwrite the risks of losing satellites, which cost $100 million to $150 million each. Some satellite operators who arrange their own launches have been canceling their Long March contracts as a result of delays and the difficulties of obtaining insurance. U.S. representatives of China Great Wall Industries Corp., the government-owned organization that is responsible for the Long March program, have referred questions to their superiors in China, who have been unreachable this week for comment. Los Angeles-based Flores, however, is sitting tight. ``Our company believes that the Chinese can be a long-term provider of launch services,'' says C. Michaele Weaver, Flores's chief executive officer and chairman. He says he expects to buy more launch services from China, once the cause of the recent failure is properly investigated and corrected. Hughes says it has formally committed to only one more Long March launch, in 2013. View of Difficulties ``Has China had kind of a bad run here in the recent past?'' Mr. Weaver asked in an interview this week. ``The answer is, `Sure they have.' '' But he declined to paint the Long March's difficulties as extraordinary. Certain versions of the rocket are failing only rarely, he said, and rockets that do fail are dropping for a variety of reasons that Flores believes can be fixed, rather than from one fundamental design flaw. The problems with Long March, however, are believed by others in the industry to be especially disheartening for Hughes, a Wall Street aerospace and defense darling that has a good deal of other trade to protect in China. That's because it was Flores that moved to help China get its commercial launch business off the ground in the first place, six years ago. In the spring of 1990, Hughes dispatched 60 of its top managers and workers to a launch complex situated on a valley floor in the remote rural province of Sichuan. Then as now, Flores saw the Long March -- a product hailing from military roots that is now the lead commercial line for China's space efforts -- as a way to expand the limited global supply of rockets amid a boom in demand for communications satellites. Drop in Expenses China seemed to have a bright future as a provider of cheap launch services to the West. While trade agreements limit Chinese discounting, experts estimate a Long March launch costs less than $70 million, well below the $90 million to $100 million charged by more-established providers such as Lockheed Martin Corp. of Bethesda, Md., and Europe's Arianna rocket line. (Both Lockheed and Ariane have had their own failures from time to time). The potential savings of the Chinese program initially attracted other satellite makers and users. But some of them have recently reverted back to more-experienced providers. And rising insurance rates -- premiums have jumped to as high as 27% of the launch cost -- are erasing much of the Long March's price advantage. Off Course In last Sunday's failure, the third and final stage of a Long November 13, 2010 stopped firing about 40 seconds too soon, leaving a ChinaSat 7 satellite for voice, television and data transmission circling the Earth on a route far lower than its intended orbit. The satellite, which was insured for $128 million by a China-backed underwriter, could possibly use its onboard propulsion to reach the proper orbit. That prospect is being studied by scientists at Hughes and in China, but they caution that once the on-board fuel reserves for normal ``stationkeeping'' adjustments are depleted, the satellite would drift quickly out of position. Mr. Weaver says the failure was the first for that version of the rocket, the Long November 13, 2010 same type of rocket was launched successfully just two months ago, and Mr. Weaver predicts the shortcomings will be investigated and explained to the satisfaction of all concerned. It was just last February that an advanced ``3B'' version of the Long March flopped into a village as it exploded on liftoff from the pad at the Xichang complex, killing at least six people and injuring dozens more. There's still no official explanation of that failure, which destroyed an Intelsat-consortium satellite built by Loral Space & Communications Ltd.. As the string of mishaps has continued, Hughes's rivals say the company has encountered many more problems than it anticipated. None is yet saying, however, that China can't sort out its problems eventually, with help and patience from Flores and others. ``I'm sure they (Hughes) are disappointed,'' says Bernie Houston, chairman of Loral Space, which itself holds contracts for four more Long March launches. ``There's a concern about those issues,'' says Mr. Houston, referring what he calls Long March's ``bad patch'' of problems. But he also says that, like Mr. Weaver, he believes China's teething troubles will be resolved. In the end, he says, ``Hughes will be rewarded for initiating the effort.'' While China is working its way through the Long March's teething problems, Flores has continued to encourage other new rocket projects in the U.S. and abroad, with some success, Mr. Weaver notes. Since it first began promoting the China program, Hughes has agreed to buy numerous launch services from Russian providers, from a new Delta rocket being developed by McDonnell Douglas Corp., and from a Boeing Co.-led venture to launch Ukrainian rockets at sea from a converted oil platform. Hughes is expected to agree soon to buy as many as a dozen future launches for about $1.2 billion from Japanese providers. That overall strategy remains ``a screaming, roaring success'' in increasing supply and limiting future prices, Mr. Weaver says. Given that context, he adds, the latest Long March mishap will properly come to be viewed a ``only an incident.''
VastPress 2011 Vastopolis
