Rocket Industry's Fall: PE Deal Exposes America's Decline in Space Propulsion
For those familiar with the history of space exploration, or who followed the rocket industry before the influx of billionaire-backed ventures, the name Rocketdyne resonates with a legacy of innovation. For half a century, Rocketdyne was the dominant force in American large liquid-fueled rocket engine manufacturing. The engines powering the Saturn V rocket that carried astronauts to the Moon, the Space Shuttle, and numerous military ballistic missiles all bore the Rocketdyne stamp. However, a recent private equity deal highlights a concerning trend: the decline of American leadership in space propulsion, and the shifting landscape of the industry.
The Heyday of Rocketdyne: A Legacy of Innovation
Founded in 1955 as a division of North American Aviation, Rocketdyne quickly established itself as a critical component of the US space program. Through the 1950s to the 1980s, the company consistently designed and tested groundbreaking rocket engines. The company evolved through Rockwell International and eventually Boeing, but its core competency remained the same: building powerful engines. However, after the RS-68 engine, qualified in the late 90s, Rocketdyne struggled to develop a completely new large engine design, with the RS-68 being retired in 2024.
The Rise of Commercial Space and Rocketdyne's Decline
The end of the Cold War marked the beginning of Rocketdyne’s erosion of dominance. The shift towards a more commercially driven space industry accelerated this decline. In 2005, Boeing sold the Rocketdyne division to Pratt & Whitney for $700 million (approximately $1.2 billion adjusted for inflation). This sale occurred just before SpaceX launched its first rocket and as NASA began winding down the Space Shuttle program. This timing proved crucial, as it signaled a fundamental shift in the industry.
The Vertical Integration Revolution
While Rocketdyne’s ownership changed hands, competitors like SpaceX and Blue Origin, fueled by private investment, adopted a radically different approach. They embraced vertical integration, bringing engine design and manufacturing in-house to reduce costs and minimize reliance on external suppliers. These companies weren’t interested in simply buying engines; they wanted to control the entire process. Rocketdyne, on the other hand, remained focused on selling pre-built engines – a business model that would ultimately prove unsustainable in the new space race.
The Insourcing Trend and Rocketdyne's Shrinking Market Share
The success of SpaceX and Blue Origin inspired a wave of startups to follow suit, prioritizing insourcing of engine development. Today, at least nine medium to large liquid-fueled rocket engines are in production or advanced development within the United States. Remarkably, only one of these originates from the company formerly known as Rocketdyne: the RS-25 engine, used in NASA’s Space Launch System (SLS) rocket.
Even United Launch Alliance (ULA), once Rocketdyne’s primary customer, opted for a new booster engine produced by Blue Origin for its Vulcan rocket, further diminishing Rocketdyne’s role in the launch market. This decision underscored the growing preference for innovative, cost-effective solutions over established, but increasingly expensive, technologies.
From Aerojet Rocketdyne to L3Harris and Back to…Rocketdyne?
In 2013, Aerojet purchased Rocketdyne, forming Aerojet Rocketdyne. Then, in 2023, L3Harris acquired Aerojet Rocketdyne, creating a space propulsion and power systems business unit and effectively retiring the historic Rocketdyne name. However, just two and a half years later, L3Harris announced a significant shift: the sale of a 60 percent stake in its propulsion and power business to AE Industrial Partners, a Florida-based private equity firm, while retaining a 40 percent ownership.
AE Industrial Partners plans to revive the Rocketdyne name, recognizing its historical significance and innovation in space propulsion. The transaction values the Rocketdyne enterprise at $845 million. Kirk Konert, managing partner at AE Industrial, stated, “Rocketdyne is more than just a company; it is the birthplace of US rocket propulsion.” The firm aims to modernize the business and foster a collaborative model combining the stability of a national defense prime with the agility of a specialized investor.
What Does AE Industrial Acquire?
The deal doesn’t include the RS-25 engine, which will remain under L3Harris’s control. The RS-25, originally the Space Shuttle Main Engine, is currently used on NASA’s Artemis Moon program. However, these engines are incredibly expensive, costing approximately $100 million each – significantly more than the cost of an entire SpaceX Falcon 9 launch. The contract structure is a cost-plus arrangement, meaning L3Harris is reimbursed for costs plus awarded fees.
The SLS rocket’s high cost has fueled calls for its cancellation, although Congress has signaled continued support through at least Artemis V. Beyond 2030, the rocket’s future remains uncertain. Aerojet Rocketdyne’s work on solid-fueled propulsion, ballistic missile interceptors, and other military munitions will also remain with L3Harris.
AE Industrial’s acquisition focuses on the liquid-fueled RL10 upper stage engine, used on ULA’s Vulcan rocket, as well as legacy work in nuclear propulsion, electric propulsion, and smaller in-space maneuvering thrusters. The firm plans to modernize manufacturing processes at the RL10 factory in West Palm Beach, Florida, aiming to reduce costs associated with the engine’s historically labor-intensive production.
Modernizing Manufacturing and Scaling Space Systems
Jon Lusczakoski, principal at AE Industrial, emphasized the firm’s strategy of identifying critical technologies and building them into world-class companies. He believes Rocketdyne’s heritage provides the “perfect foundation” for this mission, and sees an opportunity to leverage their experience in scaling space systems to ensure Rocketdyne remains a vital component of national security while adapting to future demands.
AE Industrial's Track Record: Firefly Aerospace and York Space Systems
AE Industrial has a proven track record of investing in and revitalizing space companies. In 2022, the firm became the primary shareholder in both Firefly Aerospace and York Space Systems, providing crucial funding during critical periods. While Firefly’s original Alpha rocket faced challenges, the company achieved a historic milestone as the first to successfully land commercially on the Moon. Firefly also has a strategic partnership with Northrop Grumman to develop a new medium-lift rocket.
York Space Systems has secured over $1 billion in contracts with the US military’s Space Development Agency to build more than 100 satellites for the Pentagon’s missile tracking and data relay constellation in low-Earth orbit. AE Industrial also established Redwire in 2020, further demonstrating its commitment to the space and defense sectors.
The Broader Implications: America's Declining Leadership in Space
The sale and restructuring of Rocketdyne, coupled with the rise of commercially driven competitors, highlights a broader concern: the potential decline of American leadership in space propulsion. The reliance on a single, expensive engine like the RS-25, and the outsourcing of critical engine development, raises questions about the long-term sustainability of the US space program. The success of companies like SpaceX and Blue Origin, which prioritize vertical integration and innovation, serves as a model for the future. The revival of the Rocketdyne name under AE Industrial Partners offers a glimmer of hope, but the company faces significant challenges in regaining its former prominence in a rapidly evolving industry. The future of American space exploration may depend on its ability to foster innovation, embrace new technologies, and reclaim its position as a global leader in rocket propulsion. The GearTech industry will be watching closely.
Sources:
- GearTech
- SpaceNews
- NASA