5/10/03

Dr. Ronald Sugar
President & COO of Northrup Grumman Corp.
Episode #302 Transcript

The following is an edited version of Ronald Sugar's remarks at the Town Hall Los Angeles luncheon on March 13, 2003.

Introduction

Dr. Ronald Sugar, President and COO of Northrop Grumman Corporation, says big changes are underway in defense technology and homeland security. Northrop Grumman, the second largest military company, is leading the way in military computer networks, outer space capabilities and the application of these new technologies to homeland security.


The Future of Defense Technology and Homeland Security

The present Northrop Grumman is not the Northrop Grumman your father or grandfather knew. We began life in 1939 in Hawthorne as Northrop Corporation founded by the legendary aircraft designer, Jack Northrop. Over most of our history, we’ve been known as an innovative airframe manufacturer associated since the 1980’s in particular with the pioneering B2 Stealth bomber. In the 1990’s, however, we did have to change our direction. Adjusting to the reality of the shrinking market for military aircraft, we began building strength in new technologies that we thought would be central to America’s defense needs in the twenty-first century. We now produce nuclear aircraft carriers, attack submarines, destroyers, unmanned surveillance vehicles, airborne lasers and even the next generation’s satellite telescope that will replace Hubble.

Now as I said, the reason our company has undergone such significant changes is to anticipate the future needs of our nation to be militarily prepared. Unfortunately, the world is a dangerous place. Scholars tell us that, out of the last 3,500 years of recorded history, only 270 years have been free from a major war. Today, global tensions are projected to continue rising because of such factors as increasing population, competition for scarce resources, disparities in wealth and religious and cultural polarization. Nobody likes war, but it has, unfortunately, been the state of mankind and, as a nation, we must deal with it or else we will not survive.

For as long as humans have been on the planet, they have given primacy to defending themselves against the hostile intentions of others and, for almost as long, they have probably fantasized about having capabilities that would ensure an insuperable advantage over these foes. Consider the mythology of the ancient Greeks, two images above all standing out. Argus standing guard with his hundred eyes, half of which are always open, and Bellerophon riding his flying horse, Pegasus, to slay the Chimaera. These might be taken to epitomize the two key fantasies of all military commanders today. Having superhuman ability to see the enemy and having superhuman effectiveness to strike him.

As history proceeded, such seeing and striking fantasies drove technologists to create even more powerful weapons of war. First in time came advances in the weapons used to strike the enemy. For example, progress from spears of the Roman Centurions, to longbows, to crossbows, to rifles, to artillery and now guided missiles. Many of these strike technologies involved such breakthroughs that they enabled shifts in military doctrine of their time and led to fundamental changes in the very way wars were fought.

But technologies for improving our ability to see the enemy also figured in these fundamental changes. From the dawn of organized warfare, commanders have recognized that their perception of the battlefield or their situational awareness determines their ability to influence what happens there. It was not until the twentieth century, however, that military commanders could exploit ever-improving devices for sensoring battle space as well as for extending that sensoring capability through telecommunications. Such devices as observation balloons, radar, sonar, surveillance aircraft and, more recently, satellites, just to name a few.

By the early 19990’s, a major new development emerged that in this history of military technology that I’m sketching comes into play. Instead of improving sensors and strike systems independently of each other, the new approach was to improve them both at once by tying them together through a third technology, a battle management system based upon a distributed network of computers. Our company’s Washington-based think tank recently did a study on the three major American campaigns of the last decade, the Gulf War, the Serbian conflict and the operation in Afghanistan. They identified a number of technologies that played key roles in all of these very different wars, technology that we believe will characterize future warfare for at least the next decade. The study noted the critical importance of precision munitions, of unmanned aircraft and of planes used to electronically jam enemy air defenses, but the main focus was on the computer network technology used for battle management, for this is what is driving the new revolution in military affairs and is giving America a sizeable advantage over our adversaries.

Let’s take an example. Say one of our surveillance aircraft senses an enemy Scud missile launcher on the ground by electronically monitoring either a short communication burst or a signal from the missile launcher’s radar. This approximate location data is automatically then fed to a computer on another nearby surveillance aircraft which tasks that plane’s radar to make a very high resolution radar image picture of the location. Such a radar picture can be taken in any weather, day or night. The picture then is automatically processed to the target coordinates that are fed directly to a weapon on board a B2 Stealth bomber flying near the missile launcher.

The pilot can see the computer’s targeting recommendation on his radar display and, if he chooses -- and he has to make sure that it’s exactly the right target because we don’t want to hit the wrong target and we don’t want to hurt anybody that should not be involved in the battle -- then the pilot will then release his weapon at a position where it will strike the launcher. This whole process requires just a few seconds if the sensor and the strike aircraft are in the right positions. So we’ve gone from a period where battle between sensing and actually striking was done in months and weeks, days, hours, and now we’re looking at minutes and seconds.

Now the third benefit of today’s military technology results from the use of the command and control network that incorporates all the platforms in the theater of operations. This advancement in technology is fortunately timed because it equips America to deal with challenging new circumstances in military operations very different from those often encountered in the past. In traditional warfare, a known military doctrine, or order of battle as it’s called, sometimes made prediction possible, but today’s enemies may surprise us at any time and any place with ambushes, forays, sabotage or terror. They may use high-tech or low-tech conventional armaments, cyber warfare systems, even weapons of mass destruction. As Secretary Rumsfeld has summarized the case, today we must be prepared to war against -- and I quote -- “the unknown, the uncertain, the unseen and the unexpected.” What makes it possible to contend with this unpredictability is our battle management technology that enables instant adaptability to unexpected events. The computer-based network permits selective use of whichever sensing or striking platforms are most appropriate for the given situation as it emerges.

In the future, this effectiveness will depend increasingly on operations in a sphere rapidly growing in importance to DOD, the domain of second major topic today, military space. Today the main military use of space is to support the network centric war-fighting operations I’ve just discussed. Surveillance satellites collect imagery of enemy targets or they can eavesdrop on enemy electronic signals and communications. All this data is fed into command and control networks carried in large part by communication satellites and the targeting instructions developed are carried out by platforms and munitions that derive data from the GPS navigation satellite.

But perhaps the most urgent space mission that America is now committed to is missile defense. Here the actual target is not on earth, but an enemy ballistic missile high above the earth. The mission is to destroy this missile either in its boost phase immediately after it’s launched or at some later point along its trajectory, certainly before it reaches us. The missile defense system now being developed consists of constellations of infrared sensor satellites networked with strike platforms which will be located initially on earth and later most likely in space. One constellation is made up of high orbiting satellites that can detect missile launches and pass their launch times and locations immediately to battlefield commanders. The other constellation incorporates low orbiting satellites that will detect the missiles, discriminate them from decoys, track them throughout their trajectories and pass on their locations to battle commanders.

The missile defense program is now experimenting with both kinetic energy and laser energy to destroy dangerous missiles before they reach us. We’ve already been successful testing kinetic energy kill vehicles. These are basically small vehicles that move at very high speed. They don’t explode. They just actually hit a bullet with a bullet. And we are now in the process of developing and getting ready to test a high-energy laser which will operate aboard a 747 aircraft to be able to fly hundreds of miles off from where a missile is being launched and destroy it early in its boost phase. I predict that, at some point in the future, we will see the emergence of space-based lasers mounted on remote controlled satellites.

Missile defense is not a system America will want to be without, given the virtual certainty that future adversaries will be confronting us with ballistic weapons of mass destruction. But Americans have recently been concerned with a very different theater of conflict, our own homeland. The effort to defend ourselves against such invasions is my final subject today which I’d like to touch on just briefly.

Homeland security is now a full-fledged defense mission, as was underlined by the unforgettable image of our F15 fighter planes circling over ground zero immediately after the second World Trade Tower fell on 9/11. The mission of homeland security is to prevent a terrorist attack and, when this fails, to respond to the attack. For these functions, network-based military technology is very useful because we have seen that it enables extensive data collection, sophisticated information processing and great speed of response.

Northrop Grumman, for example, is already supporting the homeland security mission with this kind of technology. For example, we’re developing an IT system used by the Center for Disease Control in Atlanta to identify bioterrorist attacks and rapidly correlate outbreaks of information around the country and determine if we are under attack. We make emergency management systems, the E-911 systems used by law enforcement for computerized dispatching. We provide sensor systems that detect anthrax and other biotoxins for the United States Postal Service; automated systems that identify fingerprints for the State of Ohio and other municipalities, and systems that can scan and track shipping containers throughout the world.

The Homeland Security Department is just beginning to get organized. There are many issues of policy and budgeting that still need to be worked out before it fully meets the President’s stated goal, which is -- and I quote -- “harnessing the energy and ingenuity of the private sector to deliver the devices and systems needed for homeland security.”

In concluding, I’d like to take us back to where we began, underscoring the reality of our need for a strong defense. There is a parable that goes “When God made the oyster, He gave it a strong shell that provided much protection, but caused it great confinement. But when God made the eagle, He gave it wings and said, ‘The blue sky is your limit. Fly wherever you will, but build your own shelter’.” We Americans who aspire to the freedom of the eagle must accept the responsibility of building our own shelter, building our own security. We must realistically face the growing danger of our times and know that a strong defense is our only means of protecting all we hold dear.

The men and women of Northrop Grumman are committed to creating the most innovative and effective defense technologies conceivable. We embrace this responsibility with dedication and pride and, more than ever at this time when our world has changed so profoundly, we hold this very important. We can think of no greater privilege than to help equip our nation to preserve the heritage of freedom that is America’s fortress and a beacon throughout the world. Thank you very much.

Town Hall Los Angeles invited students from these organizations and schools to attend the speech and question the speaker afterwards.

Q: Commonly, law enforcement officials unlawfully use technology to invade the privacy of citizens. How can we be sure that this technology will not be used for the same purpose?

A: Technology by itself can be used for good and it can be used for evil. I think that really gets to the question of the society we have or the way we want to conduct ourselves as a country. Do we want to continue to be a democracy? Do we want to continue to allow -- or do we have personal freedom with which comes responsibility? Do we want to provide the right oversight to our internal law enforcement functions? Or do we react to the attacks of terrorists and the threats of terrorists and fundamentally change the kind of country we are and the kind of society we are? We’re all struggling with that now as a nation. I think we’re all much more vigilant than we were before, but I think we have to maintain a balance because we don’t want the technology to be used for bad purposes as you described.

Q: My question is, why is it that these security precautions weren’t taken before 9/11?

A: I think the fact that the attack came in a very surprising way, one that was not predictable, reinforces that you cannot predict everything. It’s absolutely infeasible to protect against everything, particularly because we’re a free society. None of us wants to limit our freedoms. None of us wants to be always searched and monitored or frisked. We enjoy our personal freedoms. Any kind of a car or a plane can be used as a weapon, so what we really have to do is be vigilant. We’ve learned a lot since then. We’re not going to prevent everything from happening, but we’re going to prevent more than we might have prevented otherwise. I think the real thing, the point I made in the speech, is that you don’t know what the future is. You can’t predict everything and new things always happen.

Q: In 1990 during the Gulf War when Scud missiles were fired and sent to shoot down the missiles that were fired and the Patriot missiles were pretty ineffective, since then how has technology changed in regards to that and approximately what percent is there that they will be effective now if used?

A: There’s been a tremendous amount of progress since 1991. I think the most amazing lesson learned out of the Gulf War was that it was in fact possible to use missiles to defend us against missiles. The system was not perfect. There was a lot of question about how many missiles were missed and how many were hit. Since then, the nation has been hard at work trying to find ways to improve the hit-kill probability of our anti-missile defenses.

There’s no question that missiles will become an increasing threat to us here in the United States as well as to our soldiers on the battlefield. We’re making tremendous progress with the missile defense agency in this area. We have had probably a dozen very successful and some not so successful missile tests, but each test we learn more. What we have to have is a national will to defeat the threat of missiles and, to do so, we have to test, we have to try, we have to deploy, we have to test some more and, over a period of five, ten, fifteen or twenty years, we’ll have a very, very effective system. We won’t have anything if we don’t start now.

Q: What are you deciding to prevent collateral damage?

A: Collateral damage is, of course, hitting people or buildings or other things that you don’t intend to hurt. It does happen, unfortunately, in war. The best way to do that is to have precise information on where the very specific enemy that you want to hit is and have the ability to strike that enemy very precisely. If you can use a very precisely targeted smart munition that can take out that person but not destroy a block in a city, that’s very desirable. So that requires an investment in the technology to see better and to be able to strike better. Nothing is perfect, but that is the direction we’ve been headed in as a country and that’s the way we’re going to conduct warfare going forward.

Q: I was wondering about the process that takes place in which a company like yours is able to contract a deal with an organization such as the U.S. military.

A: Most companies in this business have been doing it for many, many years and let me give you an example. In 1903, Orville and Wilbur Wright invented the airplane. Somebody in the -- it was called the War Department then. It was really the Department of the Army -- said wouldn’t it be a good idea if we had one of those to test to see if that might make a difference in use for the Army? So they contacted the Wright brothers and they wrote a contract and they provided some airplane testing. Over time, the Army bought some airplanes from them. Other people got into the business, contacted the Army and began to sell them. The Navy did the same thing.

The Department of Defense is interested in working with as many companies as possible because they want the best technologies that they can find. They also want to have many companies who can do the same thing because competition creates better products and it also reduces cost. But how we’re dealing with the government has special requirements. It’s not the same as just selling commercially. A company has to be committed to dealing with the government. The government does have some bureaucratic processes which you have to adhere. There are security clearances associated with the work you do and, if you’re willing to get into that business and make a commitment to it, then the Department of Defense is usually willing to work with you if you can provide them good products.

Q: Having the airlines targeted as terrorist weapons, commercial aircraft, what are any military measurements taken for the commercial aircrafts?

A: Right now, military aircraft are targets of surface to air missiles. They can be very sophisticated or they can be even held on a shoulder, shoulder-fired. We are producing a product, and other companies do similarly, called an infrared countermeasure and it goes on the airplane and it senses a missile coming at it. It sends energy at it and directs it to go and miss the airplane. This is very important for military airplanes.

We think the same technology could potentially be applied to commercial airliners as well. We hope we’re never going to have to have a situation where commercial airliners are ever attacked, but we have had one case already. As you know, the Israeli airline that was attacked in Africa. We might see a threat of that kind again. If that’s the case, we would have to look at putting these kind of infrared countermeasure systems on large commercial airliners.

Q: My question is concerning the Northrop acquisition plans back in July of 2002. The company came public with their plans with TRW and the plans were completed in December and I’m wondering why such an aggressive move was made.

A: We have, over the years, had a strong reason to join forces with the technical side of TRW, the defense side of TRW. When I was with TRW, and I was actually with TRW a number of years earlier, I had always felt that a combination with Northrop made a lot of sense. The difficulty was that we never had a way to get together that made sense in terms of share price or, frankly, executive leadership compatibility. When the chairman of TRW suddenly resigned in February of last year and the stock took a significant dip, the TRW stock took a dip, we felt that this would be an opportunity to provide an offer to the shareholders of TRW that we would come in and take the company. We would spin off the automotive piece.

It was a called a hostile takeover. It was hostile in the sense that it wasn’t pre-negotiated. We went through a period of probably a month or two of what I would call hostile discussions and then we reached an agreement and then it became friendly. So we moved very quickly there. What took a long time was going through the regulatory approvals, getting the approval of the United States government, but that’s basically the way it happened. The compelling benefit of having the TRW folks together with Northrop folks from a standpoint of our business, our shareholders and the Department of Defense was very clear and is even clearer to us now that we have completed the deal. Thank you.

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