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Carroll School of Management

Ronald D. Sugar

president & ceo, northrop grumman corp.

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Ronald Sugar addresses the Chief Executives’ Club of Boston.

Northrop says security focus pays off

Northrop Grumman Corp.'s ambitions to adapt military surveillance systems like the Global Hawk unmanned aircraft for domestic security are starting to pay off, said Ronald D. Sugar, chief executive of the California defense contractor, during a speech at the Boston College Chief Executives' Club.

Sugar also mentioned the civil liberties concerns stemming from the use of high-tech monitoring systems on civilians. But in an interview after his speech, Sugar said such issues haven't been of much interest to the federal agencies that are starting to buy the new technologies.

These include the Coast Guard, which may use Global Hawk to monitor the coastline, and the Department of Homeland Security, which recently agreed to pay Northrop $337 million to develop and run a classified computer network to link federal, state and local law-enforcement agencies.

That system and others make use of technologies that were originally developed for the battlefield, as part of what the Pentagon calls "network-centric warfare." Now it is time to use similar networks of sensors, cameras, and data-sifting software to gather and analyze far-flung bits of information to prevent terrorism. "We need a fullscale project to integrate databases," Sugar said during his speech, located at the Boston Harbor Hotel.

Like other large defense contractors, Northrop hopes homeland-security spending will boost sales. It expects $500 million in revenue in the area this year, out of $28 billion total revenue.

Northrop doesn't project homeland-security revenue beyond this year, Sugar said, but in answer to a question from the audience he said he's become more satisfied with the pace of spending this year compared to the years just after the attacks of Sept. 11, 2001. A call to the Department of Homeland Security's press office wasn't returned.

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Luncheon attendees Thomas Menino (Mayor, City of Boston), Thomas Finneran (Speaker of the House, Massachusetts House of Representatives), and Robert Kraft (Owner, New England Patriots), conference before listening to Mr. Sugar's address.

Sugar was introduced by William H. Swanson, chief executive of Raytheon Co. of Waltham, the world's largest missile-maker. The companies compete for some contracts and cooperate on others. For instance, in December Northrop and Raytheon won a $4.5 billion Pentagon contract to develop a defense against ballistic missiles, known as the Kinetic Energy Interception program. As a ground or shipboard system it could be sent to trouble spots.

As a result of that contract, Northrop has heard expressions of interest in the system from US allies in Asia and Europe, Sugar said, though he didn't name them. Deployment of such a system, he said, "will inexorably drive countries toward a regime of mutually assured protection," he said, a play on the Cold War strategy of "mutually assured destruction."

Northrop Grumman has more than 1,300 employees in New England, including facilities in Reading, Canton, and at Hanscom Air Force Base in Bedford, now being reviewed for closure. While Sugar praised the base's work he declined to take a position on its relative value. "If Hanscom closed, we would learn to deal with it," he told reporters.

He also declined to say how the company would fare depending on who wins this fall's presidential election. Although the presumptive Democratic nominee, Massachusetts Senator John Kerry, has opposed much of the spending on missile defense that President Bush has planned, Sugar noted that spending makes up a small piece of the company's revenue and cuts by Kerry would likely be made up elsewhere.

"You don't hear either one of them talking about cutting defense," Sugar said.

Article mostly by Ross Kerber
Boston Globe
Friday, June 11th, 2004