Ronald D. Sugar
Chairman and Chief Executive Officer,
Northrop Grumman Corporation
On Thursday, January 24, 2008, Northrop Grumman Chairman and CEO Ronald D. Sugar appeared on Bloomberg Television’s “Bloomberg on the Economy” to discuss the company’s 2007 fourth quarter and year-end financial results. Below is a transcript of the interview.
Kathleen Hays, anchor: Now something else very timely today – fourth-quarter earnings up at Northrop Grumman, but only barely; profit increased less than 1 percent as sales rose by 10 percent. The company sold more computer services to the U.S. government, helping the bottom line, as well. CEO Ron Sugar joins us from Los Angeles to go over the quarter.
But, Ron, I have to start by getting your response. You've been in business a long time. Your business is heavily dependent on government spending. So, is the stimulus package good for you because it revs things up or bad for you because maybe the deficit gets bigger and there's less to spend on things from defense contractors?
Ronald Sugar: Kathleen, there is no immediate effect on the company. Obviously to have a strong national defense you need a strong economy. A strong economy is good for everybody. The stronger the economy, the better the Treasury will be to make sure we can pay for the things we need to defend ourselves.
So, obviously whatever is important for the economy is good for us. But, short term, you won't see any significant impact on our sales or earnings.
Hays: Let's talk about your sales and earnings because shipyards reported strong sales and profit gains of 19 percent and 18 percent in the quarter. Can that continue, or will it slow?
Sugar: Well, Kathleen, we are in the process of a two-year recovery from one of the most devastating storms in history, Katrina. We suffered about a billion dollars of damage to our shipyards.
We’ve made a massive reinvestment and retraining program there and we're beginning to see the real fruits of that. We've produced six warships since we had the hurricane. The Navy is getting some good ships. And we're making great progress. We're going to continue to see improvement there on the bottom line.
Hays: I want to ask you about a contract that you're competing for with Boeing. It's a $40 billion US Air Force refueling tanker contract. How do you expect your company to do in that?
Sugar: Well, as you know, Kathleen, this is a very well-publicized competition. It's a very, very large competition for 179 aircraft. It's worth billions of dollars. We are in the final throes of that competition.
We would expect sometime next month, perhaps later in the month, the United States Air Force will announce its selection. We certainly have an extraordinarily competitive airplane offering in this competition and we'll see what the Air Force would like to do.
Hays: Tough to beat Boeing, though. They're kind of the incumbent. They sort of have a monopoly on planes. How do you beat them?
Sugar: Well, I think one of the great things about our nation and about our Defense Department is that competition is something which is encouraged. And competition creates innovation. And competition creates better products for our war fighters. And we're just really privileged to be a part of this competition.
Hays: Can you give us any specifics on your plan that is going to better beat Boeing?
Sugar: Well, our plan is based on a more modern aircraft. It's a more capable aircraft. It's larger and carries more fuel. And we think it really does fill the bill for what the Air Force needs.
But, as I said, the Air Force will be the final determiner of that and we'll see how it comes out next month.
Hays: You had information services up double digits in sales and profits. What's driving that?
Sugar: We have a lot of good work going on for not only our traditional defense and intelligence community customers but also increasing work for our state and local customers, and we're seeing some benefit of that coming through on the bottom line. This is our largest business, information and services. And it's growing fastest.
Hays: All right. Ron Sugar, thanks for joining us. Thanks for sticking around while we heard from Treasury Secretary Paulson. We appreciate it very much.
And of course Ron Sugar is the CEO of Northrop Grumman.
