Space Industry Goes Into ‘State of Shock’ |Los Angeles Times January 29, 1986 Ralph Vartabedian and Michael A. Hiltzik Reprinted With Permission

The aerospace industry went into a “state of shock” Tuesday in the aftermath of the shuttle accident, which was widely seen as a major psychological and technical blow to the ambitious and fast-growing space program, with broad ramifications that were quickly felt in Southern California.

Moreover, a prolonged grounding of the space shuttle program could result in sizable economic losses throughout the military and commercial space industry, which was projected to have combined revenues of $20 billion in 1986, up sharply from $17.9 billion in 1985.

More than two-thirds of the nation’s space-oriented industrial base is concentrated on the West Coast, and the reaction at plants and offices throughout Southern California was particularly painful. Because radios are banned at most aerospace industrial sites, news of the tragedy was spread by word of mouth.

‘Deep Emptiness’ Felt

“I found out about it from two secretaries who were crying,” said Howard Laitin, a chief scientist at a division of Hughes Aircraft. “The feeling was a deep emptiness in the pit of your stomach.”

Two of the seven astronauts killed in the crash Tuesday had close ties to Hughes. Gregory Jarvis was an engineer at Hughes Aircraft’s space and communications division. Ronald McNair was a former scientist at Hughes Aircraft’s Malibu research labs.

George Smith, director of Hughes’ Malibu labs, described McNair as a well trained scientist and a space enthusiast. Albert Wheelon, president of Hughes Space and Communications Group, said of Jarvis: “We lost an outstanding person, a fine American and a good friend.”

Most aerospace executives said it was premature to evaluate the effects of the crash on the space program, but the enormity of the setback left them grasping for words.

Huge Potential Costs

“The industry is in a state of shock,” said Wolfgang Demisch, an aerospace analyst at First Boston Corp. “We won’t know until the pain dulls a little bit how badly we were hurt. But the potential costs are very great.”

Indeed, Wall Street reacted to the accident with a sharp sell-off of shares of aerospace contractors with major roles in the shuttle program.

Morton-Thiokol, the Chicago company that manufactures the shuttle’s solid-fuel rocket boosters, fell the most in heaviest trading. Morton fell $3.875, to $33. The stock was briefly suspended from trading because of an imbalance of orders. Early speculation suggested that a malfunction in the boosters may have set off the explosion.

Also losing ground during the day were shares of Rockwell International, prime contractor for the shuttle orbiter, which fell $1 to close at $34.25; Lockheed, which refurbishes the orbiters after missions, lost $.875 to close at $45.875; and Martin Marietta, which builds the shuttle’s large liquid-fuel tanks, fell $1.125 to close at $33.50.

Experts Disagree on Impact

Financial analysts and space experts disagreed over how great an effect the disaster will have on the U.S. space industry.

“Psychologically, it is particularly significant that they had that teacher on there,” said Sam Pike, director of space policy at the Federation of American Scientists. “The point this mission was supposed to make was that space is a normal place, and it turned around and bit us.”

Pike said the loss of the shuttle fleet for six months will not deal a serious blow to the industry, but a one-year grounding could seriously delay many of the expensive military, commercial and scientific payloads destined for space.

There is currently a glut of communications satellites in orbit, so any delays in launching new satellites will not cause major problems. But the military had planned to launch late this year a KH12 observation satellite, which can be carried only on the shuttle.

Wall Street analysts argued that any fears that the companies faced financial liabilities from the accident are groundless, for NASA specifically indemnifies all manufacturers against liability in the case of in-flight accidents.

But investment specialists said the explosion throws the course of the entire U.S. space program into uncertainty. Among other questions will be whether too much of America’s space program relies on manned vehicles.

“People are going to look at the missions the shuttle is performing and question whether they might not be more efficiently performed by unmanned rockets,” said Howard A. Rubel, aerospace analyst for Cyrus J. Lawrence Inc.

Fifth Shuttle Possible

Because a full schedule of launchings cannot be maintained with only three working spacecraft, “that means we’ll have to build a fourth and maybe a fifth new shuttle,” Alan Benasuli, an aerospace analyst at Drexel Burnham Lambert, suggested.

Under a half-billion-dollar program, Rockwell and its subcontractors already have built a complete set of structural spare parts for the shuttle, including a fuselage, wings and tail assembly. These could be quickly pressed into production.

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