Payment stems from Goodrich's 2002 TRW acquisition, while additional action over Aeronautical Systems also looms
Northrop Grumman has paid out $99 million to cover liabilities related to Goodrich's acquisition of TRW Aeronautical Systems in October 2002. The payment covers warranty and other contract claims, but excludes any Goodrich claims against Northrop relating to cost overruns of the Airbus A380 actuation system.
After Goodrich acquired the former Lucas Aerospace, TRW retained certain post-closing liabilities. These were subsequently assumed by Northrop when it acquired TRW in December 2002. While Northrop says the settlement will result in a $10 million fourth quarter after tax charge, Goodrich says it will record a pre-tax charge of $20-30 million to cover future liabilities it has assumed under the settlement.
In its statement on the settlement, Goodrich alludes to the possibility of additional contractual disputes with Northrop related to the purchase of Aeronautical Systems and development of the A380 flight-control actuation system. In November, Goodrich warned analysts it would have to cover the cost of retrofitting improved motor drive electronics to the A380's electro-hydraulic actuators before entry into service.
The A380 actuation programme was in "serious trouble" when Goodrich bought Aeronautical Systems, says John Grisik, Airframe Systems segment president. "The size, scope and difficulty of the programme were underestimated by TRW," he says. "We have put a tremendous amount of effort and cost into fixing it." At Goodrich's cost, improved motor drive electronics will be retrofitted to aircraft before delivery. This will lower the company's long-term costs, Grisik says, but reduce 2005 earnings.
GRAHAM WARWICK / WASHINGTON DC
Source: Flight International
