Raytheon CEO 'would like certainty' out of L3Harris-Aerojet agreement

Aerojet Rocketdyne would be better off being owned by L3Harris Technologies than on its own, the CEO of Raytheon Technologies, one of the rocket maker’s largest said.

The comments come as the Federal Trade Commission continues to review L3Harris’ proposed acquisition of Aerojet.

“I would like certainty,” Greg Hayes said in an interview last week ahead of the Paris Air Show. “I would like a deal to be done because…the current leadership there has not been able to get it done.”

For months, Hayes has been open about his frustration with Aerojet. In December, he called the rocket maker “the weak link” in Raytheon’s supply chain. 

“It's two steps forward, one step back,” he said last week. “They have not really made a lot of progress.”

Lockheed Martin, which is Aerojet’s largest customer, tried to buy the company, but walked away in 2022 after the FTC said it would block the deal, arguing it would hurt competition. L3Harris, which unlike Lockheed does not build missiles, announced late last year that it had entered an agreement to buy the firm. 

“Do I want L3Harris to own it? Maybe not, but somebody should,” Hayes said. “Right now, we don't really compete with L3Harris in the missile business. Will we in 10 years? Perhaps; it will give them the capabilities. But, I think at least for right now, it would be better in the hands of L3Harris than as a standalone company.”

Raytheon accounts for more than 20 percent of Aerojet’s annual sales.

Hayes was against missile-making rival Lockheed Martin buying Aerojet Rocketdyne.

“I'm not sure what's going to happen with that deal—whether the FTC is going to approve it or not,” he said, echoing comments he made in April.

In March, the FTC asked L3Harris to provide additional information about the deal. L3Harris argues that it would make the proper investments to right the struggling company and improve manufacturing quality.

“I think that's why it's in the best interest of national security and the national defense to get this thing closed quickly,” L3Harris CEO Chris Kubasik said at a June 1 Bernstein investors conference. “I'm hoping those same companies that are concerned about Aerojet's performance are supporting this deal, because it's in their interest for us to own it sooner rather than later so that we can move forward with the execution.”

The Pentagon and its allies are thirsty for munitions, especially following Russia’s invasion of Ukraine. Aerojet’s rocket motors are essential to many weapons, including the Raytheon-made Standard Missile-6 and Javelin and Stinger missiles.

“We're talking about doubling SM-6 production in the next two years,” Hayes said. “We can't do that unless Aerojet Rocketdyne doubles their capabilities as well.”

These weapons are useless without rocket motors and its customers can only do so much to build these weapons without them.

“I'm building SM-6 frames, I’m building the guidance systems, I'm building everything, and I got a whole bunch of inventory sitting there,” Hayes said.

The Pentagon in April gave Aerojet $216 million to modernize and expand manufacturing facilities in three states. But it will take time before more rocket motors are flowing off of its production lines.

“[I]t's going to take them, I would say a year and a half to facilitize, so it doesn't solve the problem this year,” Hayes said. “But at least it helps him in terms of, yes, they have the capital to invest and to meet the demand.”