Business & Real Estate

Sacramento rocket-engine maker Aerojet to pay $50 million over explosion

A rocket propelled by an engine refurbished by Aerojet Rocketdyne explodes moments after launch last year.
A rocket propelled by an engine refurbished by Aerojet Rocketdyne explodes moments after launch last year. The Associated Press

Aerojet Rocketdyne Holdings Inc. said Thursday it will pay a major customer $50 million to settle a dispute over a spectacular launchpad explosion last fall, the latest in a series of setbacks for the Rancho Cordova rocket-engine maker.

Aerojet announced the settlement with Orbital ATK Inc. in a short statement filed with the Securities and Exchange Commission. The manufacturer also said the two companies “mutually agreed” to sever their contract about midway through the deal. Orbital won’t take delivery of the 10 remaining engines Aerojet was scheduled to supply.

The dispute arose after an unmanned Orbital Antares rocket, propelled by a 1960s-era Soviet engine refurbished by Aerojet, exploded 15 seconds after liftoff from a NASA launchpad at Wallops Island, Va., last Oct. 28. The rocket was scheduled to deliver cargo to the International Space Station.

Earlier this year, an Orbital executive placed the blame squarely on the engine, saying the excessive wear in the engine bearings caused the explosion. Aerojet officials immediately disputed the charge, saying their company’s in-house investigation suggested the bearings were damaged by “foreign object debris” that might have come from the propellant system.

Aerojet spokesman Glenn Mahone said Thursday that both companies submitted independent investigative reports to NASA and the Federal Aviation Administration, but the reports are proprietary and “there’s nothing meaningful we can disclose about the findings.”

A spokesman for Orbital, based in Dulles, Va., couldn’t be reached for comment.

In its SEC filing, Aerojet said it will pay Orbital by Wednesday and plans to seek reimbursement from its insurers for “a portion of the settlement costs.”

The cancellation of the rest of the contract wasn’t a surprise. Shortly after the Virginia explosion, Orbital said it expected to stop using the engines supplied by Aerojet. In a private letter last November to Aerojet, the company “directed us to stop work on the AJ-26 supply contract,” according to an Aerojet filing with the SEC earlier this year.

The Orbital Antares contract generated $34 million in revenue for Aerojet in 2013 but only $7.9 million last year, according to Aerojet regulatory filings.

All told last year, Aerojet reported a $53 million loss on revenue of $1.6 billion.

Aerojet and Orbital have other contracts, which Mahone said will remain intact. The contracts include a deal signed in February in which Aerojet is supplying propulsion systems to Orbital communications satellites.

In an SEC filing in 2013, the Rancho Cordova company listed Orbital as one of its “principal customers.”

The settlement caps a difficult two weeks for Aerojet. On Sept. 16, it was disclosed that Aerojet was rebuffed in its $2 billion bid to buy United Launch Alliance from its two owners, Boeing Co. and Lockheed Martin Corp. Colorado-based ULA is a top supplier of rockets to the Pentagon.

And just two days ago, ULA announced it would no longer buy rocket boosters from Aerojet.

ULA’s new supplier: Orbital. Officials with ULA said the Orbital boosters would be cheaper.

Aerojet is also in the midst of a cost-cutting program in an effort to boost profit margins. The company plans to eliminate 250 of its 1,600 jobs in Rancho Cordova and a total of 500 jobs nationwide.

The company’s stock closed Thursday at $17.44, down 11 cents, on the New York Stock Exchange.

Dale Kasler: 916-321-1066, @dakasler

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