Ronald D. Sugar
Chairman and Chief Executive Officer,
Northrop Grumman Corporation
On Wednesday, October 24, 2007, Northrop Grumman Chairman and Chief Executive Officer Ronald Sugar appeared on CNBC's "Street Signs" to discuss the company’s 2007 third quarter financial results. Below is a transcript of the interview.
ERIN BURNETT, Anchor: Northrop Grumman earnings, now we're saying they soared last quarter and hey look, they're a defense contractor, up 2.5 percent, profits were up 62 percent for Northrop Grumman. They make some stealth bombers, a lot of ships. Chairman and CEO Ron Sugar joins us from Los Angeles. Mr. Sugar, it's a great pleasure. We appreciate your joining us today. And what was it you would say powered earnings? Was it primarily on the aerospace side or more on the ship side?
RONALD SUGAR, Chairman and CEO, Northrop Grumman: Well, thanks, Erin. Glad to be here. It was across the board, Erin, but we did have some particular strong resurgence in our ships business this quarter. As you know, we've been hammered by the effects of Hurricane Katrina over the last couple of years. Information Technology, Aerospace and Electronics all did well, as well.
BURNETT: So here's the question people have, though, today. They're saying, “Look, why is it that we're not getting a forecast for next year?” Is that just because you don't do it as a practice, or is that because you're uncertain as to how the year will look?
SUGAR: Well, certainly, we have a process internal to the company. We do not yet have an '08 defense budget passed, I would point out. We're on a continuing resolution. We typically will either do it at this point or sometimes at the end of the fourth quarter. At this point in time, we're planning for the end of the fourth quarter. However, we do see the defense budget shaping up pretty well for the company and we're very positive about our prospects going forward.
BURNETT: The defense budget – Can you just explain for all of us the role of Iraq? I mean, if we were to see a large-scale pullout, a draw down of troops in Iraq, would that have any impact on your business?
SUGAR: Actually, our company does not participate very substantially in the Iraq costs. We're largely involved in providing advanced technology systems, which will be utilized over the next five, 10, 15 years for the next fight – stealth bombers, advanced ships, advanced radars, electronics. So, quite frankly, the expenditures in Iraq don't directly affect us as much as they do some other companies. We do believe, though, that we're positioned well for the kinds of systems that we are going to need longer term, and that's where we've put most of our investment.
BURNETT: All right. So civilian demand as opposed to government demand – you know, that you would get through these defense bills – I mean, how important is civilian aeronautics to you right now?
SUGAR: Well, at this point in time, Erin, we are largely a defense company; however, we've made some very significant expansions into other civilian areas. Not so much civilian aeronautics – we're not building airliners – but we have done an awful lot in information technology, healthcare information technology, state and local, we're putting in a wireless emergency responding system in the City of New York. We see a whole variety of other opportunities which take core competencies that we're technologically capable of doing, and taking them to civilian markets.
BURNETT: And is that going to be a market you focus on more and more as you go forward?
SUGAR: I think so.
BURNETT: I mean, if you had to choose defense versus civilian, you'd go that way?
SUGAR: Well, no, certainly defense is our core. It's what we are. It generates the technology, the capability of the company. But on the margins and increasingly importantly is the opportunity to expand.
By the way, one example I would give you is in the fire situation, we have probably 3,000 or 4,000 employees in the affected [San Diego fire] areas, and we're doing everything we can to assist them. The Global Hawk unmanned surveillance plane, which has actually been designed in the San Diego area that's been hit by the fires, has now been ordered by the Air Force into action, and is now flying high level surveillance activity to determine locations of new hot spots. So, here's an example of a wonderful military technology that can be applied for a civilian application when needed.
BURNETT: And that’s very interesting because Jane Wells was just reporting on that unmanned surveillance that they were going to be using and how unprecedented that was, in a sense, in a populated area. Two more questions for you, Mr. Sugar. First – I know obviously you're focused on defense, so maybe your answer to this is different to this than some folks might give – but the economy – How is it from your vantage point?
SUGAR: Well, you're absolutely right; we are focused on the defense side, so in some ways the defense industry and companies such as mine operate more on the basis of the threat that's perceived to the nation, and therefore the spending that's used to support the response to that threat than the actual economy. We tend not to be as concerned about things like interest rates and home starts and oil prices as other companies are.
BURNETT: Right. Talk about a defense play, shall we say – pun intended—globally. Obviously, the U.S. government would be customer number one, but overseas governments – Who's the most important, whether it's a country or a region, for you?
SUGAR: Well, we're certainly looking overseas and we have over time participated with allies of the United States -- the UK, key Middle Eastern allies, Japan, other countries that are friendly to the United States – that the United States will allow to have some of its very best technologies, which is the kind of technology we provide.
BURNETT: All right, Mr. Sugar. Thank you so much. We appreciate it. And, best of luck as you work with your employees through the fire situation.
