Posted on 7/24/2003, 5:28:45 PM by boris
Boeing Satellite Systems is facing renewed questions about the quality of its satellites and manufacturing processes following a new set of in-orbit failures and the disclosure that work on several current programs has taken an expensive turn for the worse.
In Boeing's latest setback, two Boeing 601HP satellites owned by PanAmSat Corp. could be prematurely forced from service following the failure within the last month of their next-generation propulsion systems, which were designed to increase efficiency by replacing traditional chemical systems with lightweight xenon-ion gas technology.
The affected satellites, PAS-6B and Galaxy 4R, were built by Hughes Space and Communications Co. before the El Segundo, Calif., satellite builder was sold to Boeing in late 2000.
PAS-6B, launched in December 1998, and Galaxy 4R, deployed in April 2000, are among five 601HP satellites in PanAmSat's fleet equipped with Boeing's xenon-ion propulsion system, or XIPS.
Engineers are studying the XIPS breakdowns and have not yet determined whether the equipment can be repaired, Jim Frownfelter, PanAmSat's chief operating officer, said in a July 15 conference call with financial analysts.
The problem has not affected service, PanAmSat said, but each satellite will lose at least several years of life if its XIPS equipment cannot be recovered. Both satellites have backup chemical propellant, but only enough for three or four years of operations, according to the company.
Problems with Boeing's XIPS system are not new. Two other PanAmSat 601HP satellites, Galaxy 8i and PAS-5, both launched in 1997, have been taken from service because of XIPS trouble.
Boeing Satellite Systems' continuing woes are becoming a growing irritant to its corporate bosses. Boeing Co., based in Chicago, said July 15 it is recording a $265 million second-quarter loss at its satellite manufacturing division, primarily due to difficulties on four projects.
David L. Ryan, vice president and general manager of Boeing Satellite Systems, identified the troubled programs as: the Spaceway project for Hughes Electronics Corp.; Telesat Canada's Anik F2 satellite; the U.S. military's Wideband Gapfiller communications system; and the U.S. government's Geostationary Operational Environmental Satellite (GOES) system.
Ryan said Boeing encountered difficulty with contamination and components used for Earthorientation on GOES-N, the first of three weather satellites Boeing is building for the U.S. National Oceanic and Atmospheric Administration.
The issues on the Spaceway and Telesat satellites have to do with their complex communications payloads, which took longer to develop than expected, said Richard Esposito, a Boeing spokesman.
Esposito declined to comment on the three-satellite Wideband Gapfiller program, which is slated to start launching in February 2005.
While the launch of Spaceway's first satellite has been moved from this year to early 2004, the broadband service will not be seriously impacted by the delay, said Richard Dore, a spokesman for Hughes of El Segundo.
Marilynn Wright, a spokeswoman for Ottawa-based Telesat, said the company is in talks with Boeing to speed up the delivery of Anik F2. The satellite is slated for launch in early 2004, several months later than originally planned.
The Spaceway and Anik F2 satellites are based on Boeing's 702 platform, which also uses XIPS technology. Ryan said the XIPS system on Boeing's 702 satellites is different from the 601HP XIPS equipment and has not experienced any in-orbit problems. Boeing Satellite Systems has notified its 702 platform customers in writing of that fact, he said.
An insurance industry source said the continuing in-orbit problems with Boeing satellites, which date back to 1998, have severely compromised the company's credibility. The source said insurance underwriters likely will exclude XIPS coverage from new policies or renewals of existing policies for Boeing satellites.
The source expressed skepticism that the latest version of the XIPS technology will fare any better than its predecessors. "This is costing Boeing dearly. Their credibility is shot," the source said.
Ryan said Boeing takes pains to inform its customers of problems that could affect their satellites, and insisted that the company's financial and technical woes do not reflect a management breakdown. He reiterated that Boeing intends to remain in the commercial satellite business.
The first Boeing 601HP satellite with the latest XIPS variant, AsiaSat 4, was delayed one year to give engineers time to perfect the system. It was launched in April and so far has not experienced any problems.
The AsiaSat 4 satellite belongs to Hong Kong-based Asia Satellite Telecommunications Co. Ltd.
Joe Wright, PanAmSat's president and chief executive officer, said the company intends to proceed with the launch later this year of another Boeing 601HP satellite, Galaxy 13, that also is equipped with third-generation XIPS hardware. But the company intends to fill that satellite's tanks with enough chemical fuel for more than 12 years of operations, he said.
FOR THE RECORD
Excerpts of remarks made by Jim Albaugh, president, Boeing Integrated Defense Systems, during a July 15 conference call with financial analysts on the difficulties at Boeing Satellite Systems (BSS).
We've been experiencing in-process production issues over the last two years at BSS. Each quarter we adjust our estimates to reflect the expected outcome of each contract in the backlog. Historically, we have used past performance to estimate future costs.
What we found this quarter is that performance on four of our most advanced systems had deteriorated from our previous estimate. This was due to the increased complexity of the satellites being produced during the period that incorporate state-of-the-art technologies and subsystems.
As a result, we increased our cost estimates this quarter to reflect the performance we've seen over the past several months, and not over the past couple of years. We also took a comprehensive look at risks and anomalies going forward, and included those in our estimate. This resulted in a $195 million writedown in the Launch and Orbital Systems reporting segment, and a $70 million writedown in Network Systems.
We expect to complete and deliver these complex systems by the end of 2005. None of the changes in this quarter are related to default terminations. We have made progress to significantly reduce our termination-for-default risk by completing and delivering satellites as well as negotiating new delivery dates with many of our customers.
What happened was, we started to get into the manufacturing and testing of some of these very complex satellites. There are four, specifically.
We found a lot of contamination in a lot of the satellites' electronic components that caused extensive rework. We had impacts to schedule. We had a number of unique phased-array antennas that, in the second quarter, started to consume a lot more manufacturing time than predicted. This also forced us to push the schedule out on those satellites. And then we had some material-quality issues in the power components.
Looking at all of those things as we did building of our EACs [estimated costs at completion] in the June time frame, it became a large number. But we also did a couple more things. We sat down and took a look at how we performed to date. The EACs that we had put into place back in the last quarter of 2002 assumed that we would perform on those programs in the way we had performed in that factory over the past couple of years. And indeed, looking at the numbers in the second quarter, we had not. The EACs going forward assume that we are going to continue to perform, not the way we had in the past couple of years, but the way we have over the last several months - which is worse performance.
We also took a comprehensive look at the risks and anomalies going forward, and tried to take a conservative view of those. We want to make sure that we have swept everything into these EACs as we go forward on these programs.
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