Raytheon CFO: Too soon to mull financial consequences for failed missile test

Reuters News
Posted: Jul 25, 2013 7:58 PM

WASHINGTON (Reuters) - Raytheon Co's chief financial officer said on Thursday that it was too soon to discuss whether the company would have to take any charges for a failed U.S. missile-defense test this month, when its interceptor failed to separate from the rest of the rocket.

If government investigators determine the test, which cost $240 million, was caused by a quality control issue or manufacturing problem, that could result in financial consequences for the responsible manufacturer.

"No one knows the facts, and we need to wait for the results of the failure review board," Raytheon CFO David Wajsgras told Reuters amid growing signs that the test failure was linked to a faulty battery.

Reuters, citing an industry source familiar with the probe, reported on July 12 that a faulty battery may have prevented the interceptor's separation from the rocket.

On Thursday, Loren Thompson, a defense consultant with close ties to industry, said the investigation was clearly focused on the battery, but it was unclear exactly what went wrong.

"So far, the government seems to be signaling that the problem with the test was caused by a malfunctioning battery," he told Reuters.

Thompson said the issue of corporate responsibility would be determined once the investigation was completed.

It was not immediately clear which company manufactured the battery involved, which was part of the interceptor made by Raytheon.

Wajsgras said Raytheon was supporting the Missile Defense Agency in the analysis of the July 5 test failure, but could not comment further until the analysis was complete.

Raytheon spokesman Jonathan Kasle said the company has not faced financial charges related to problems with previous missile defense tests.

Despite the test failure, U.S. defense officials affirmed their commitment last week to the ground-based missile defense system, which is integrated by Boeing Co, but called for more regular testing to get a grip on quality control issues.

James Miller, U.S. undersecretary of defense for policy, said the test failure, the third consecutive failure of the rocket to intercept a dummy rocket, was surprising and involved an "unusual anomaly." He declined comment when asked about the faulty battery.

He confirmed that the Raytheon interceptor, which is designed to hit and destroy the target warhead outside the Earth's atmosphere, failed to separate from the third stage of the rocket, but gave no further details.

Republican lawmakers have seized on the test failure to argue against reductions in spending on missile defense by the Obama administration, while the failure has sharpened concerns about the program voiced over the years by Democrats.

The New York Times weighed in with an editorial on Thursday, saying "it doesn't make sense to keep throwing money at a flawed system without correcting the problems first."

A spokesman for the Pentagon's Missile Defense Agency had no comment on any insights gleaned by the failure review board, saying only that such investigations often took months to complete.

(Reporting by Andrea Shalal-Esa; Editing by Lisa Von Ahn and Tim Dobbyn)