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ALL RISK IN THE CASE OF PROTON AND LONG MARCH LAUNCH
VEHICLES. THE UNITED STATES MUST REMAIN ALERT TO FOREIGN
COMPETITION THAT, THROUGH GOVERNMENT SUBSIDIES, THREATENS
TO DESTROY OUR DESIGN AND MANUFACTURING INFRASTRUCTURE.
SECTION 5 OF THE AMENDMENT PROVIDES CERTAIN LAUNCH
INCENTIVES FOR SATELLITES WHICH HAD AN UNPERFORMED LAUNCH
SERVICE AGREEMENT WITH NASA AS OF AUGUST 15, 1986. As
WRITTEN, THIS LANGUAGE MAY EXCLUDE SATELLITES WHICH HAD
BEEN COMPLETED, BUT NOT LAUNCHED, AS OF THAT DATE. THE
WORDING SHOULD BE CLARIFIED TO INCLUDE THESE SATELLITES.
IN SUMMARY, LET ME SAY THAT THE NEW ASTRO SPACE DIVISION OF THE GENERAL ELECTRIC COMPANY IS FIRMLY COMMITTED TO BEING A MAJOR SUPPLIER OF SPACECRAFT IN EVERY SEGMENT OF THE MARKET. WE BELIEVE OUR COMMITMENT
WILL BENEFIT THE COUNTRY BY HELPING TO ASSURE THAT OUR PAST INVESTMENT
IN SPACE TECHNOLOGY WILL PROVIDE FOREIGN EXPORTS, SUSTAINED DOMESTIC
EMPLOYMENT, AND HELP SUBSTANTIALLY TO MAINTAIN OUR NATIONAL TECHNOLOGY BASE IN THE FUTURE. THE CURRENT STATE OF THE U.S. LAUNCH INDUSTRY,
THE UNPREDICTABLE CHARACTER OF FUTURE INSURANCE COVERAGE, AND THE
EXISTENCE OF SEVERAL FOREIGN GOVERNMENT SUBSIDIZED LAUNCH SUPPLIERS
AND SPACECRAFT COMPETITORS TOGETHER ARGUE FOR SUPPORT OF THE AMENDMENT UNDER CONSIDERATION HERE. I AGAIN THANK YOU FOR THIS OPPORTUNITY
TO STATE OUR VIEWS ON THIS MATTER WHICH IS SO IMPORTANT TO OUR FUTURE
FEB 15 88 19:01 SCU-VF
JAMES H. FREY
Valley Forge, Pennsylvania
Jim was born in Baltimore, Maryland on March 6, 1938 and was raised in Towson, Maryland. He attended Duke University where he received his BSEE degree in 1960. He subsequently joined General Electric Company on the Engineering and Science program and had program assignments in Pittsfield (Distribution Transformer Department), Lynn, Massachusetts (Aircraft Engine Department), Salem, Virginia (Industrial Controls Department), and Philadelphia (Missile and Space Vehicle Department). He graduated from the GE "A" courses and BMC course and has done graduate work at Penn State and Brooklyn Polytechnic Institute.
He has held a number of positions in Engineering Management and Program Management in the Spacecraft and Data System businesses. He was the Program General Manager of Defense Communication Programs and the Manager of Engineering for Spacecraft Operations before assuming his current position as General Manager, Spacecraft Opertaions in Valley Forge in the new Astro Space Division.
Mr. NELSON. Thank you, Mr. Frey.
Let's turn to our members for their questions. Mr. Skaggs.
I appreciate the testimony from all of you gentlemen. I'm sorry I missed Mr. Roberts' presentation. I did notice in your prepared testimony the point that essentially you believe the United States Government should make whole-I think were your words-those firms such as your own that was harmed by the delays inherent since the shuttle disaster.
Do you mean that literally, in terms of a Government responsibility to put the company in the position that it would have been in had nothing happened in the last two years?
Mr. ROBERTS. We are exploring every avenue toward that goal. Part of our concern is that we've been in the business of supplying corporate and Government telecommunications via satellite for over 10 years, and we turned profitable in 1983, and we did our business planning on an ongoing basis based on contractual agreements that we had with the U.S. Government. When we look at our business planning now and, say, substitute the existing launch price today for what we had as a committed price from the U.S. Government then, the business would not be viable. And so what we're saying is we relied on that heavily and somebody, you know, did not fulfill their obligations and we're looking for some relief, yes.
Mr. SKAGGS. Does that strike you at all as inconsistent with the whole shared risk approach, of apportioning risk and liability among those that were participating with NASA in the shuttle program as a launch vehicle?
Mr. ROBERTS. Well, I think if you know or can predict the risks going forward, that's a normal part of your business, of running a business. And we are not risk averse, obviously, because we're in a risky business. But what you try to do is you try to eliminate as many risks as you can, and the way you do that is go to contract with somebody. If somebody does not meet their contractual obligations, then there should be some kind of—some kind of solution to that.
Mr. SKAGGS. Mr. Hollis, I believe in your statement you said you felt there were more appropriate means of relief than the launch incentive provisions that are included in the bill. I'm wondering if you could elaborate on some of those more appropriate means for
Mr. HOLLIS. My background doesn't include a lot of judicial training, sir, so I'll have to put that out first. I think that possibly going to the agency itself, and if that didn't work, then the Federal district court. But I really do not know what those best sources of relief might be. Our concern primarily is one that this bill might be bogged down because of controversy concerning that.
Mr. SKAGGS. So you're really looking at legal remedies outside of anything that might be included in this legislation?
Mr. HOLLIS. That certainly is one of the suggestions, or possibly even other legislation. But this particular bill is so important that we really just don't want to see it get bogged down over that type of discussion or argument.
Mr. SKAGGS. I'm assuming you all wouldn't want to see this sort of legislation get bogged down by a controversy over a third party liability cap such as included in the administration's proposal.
Mr. HOLLIS. I feel that there is a level of cap. There has to be a maximum risk some way defined. I think-Is your question aimed at where the relief comes from the administration proposal as opposed to this bill?
Mr. SKAGGS. No, no, that as you wish to see this bill cleaned of anything that might bog it down in this relief provision, I assume you also would rather not see the issue of tort reform liability caps being introduced as a complicating issue, as the administration's proposal announced recently would have us do.
Mr. HOLLIS. I'm not really prepared to state how much bogged down or delay might be introduced by tort reform legislation. I do believe that relief is so important that, either in the administration's approach or in this bill, we must have that form of relief-or cap. I guess that's not a popular word. But anyway, some form of balanced approach to the liability.
If the tort reform should, indeed, bog down the bill or delay the action, then I would certainly be opposed to going that route.
Mr. SKAGGS. Thank you.
Mr. Frey, just one point I would like to clarify—and I may not be reading the bill correctly. But you made the point that the Secretary should be authorized to lower the maximum financial responsibility or insurance caps that are mentioned. It seems to me the bill provides that they are maximums and that, by implication, anyway, there is discretion to require less than the maximum stated in the bill. Am I misreading that?
Mr. FREY. Well, perhaps I am, sir. We did not read it that way. It appeared to be a minimum cap, one which we think is adequate at this time; but future developments in the insurance industry may make those amounts inappropriate and we think the Secretary ought to have the opportunity and the flexibility to modify those caps.
Mr. SKAGGS. Well, in both instances it reads "in no event shall a licensee be required to obtain liability insurance or demonstrate responsibility" et cetera, "in an amount which exceeds 500 million dollars." So that seems to me already address the point. But perhaps we need to look at that further.
Thank you very much, Mr. Chairman.
Mr. NELSON. Thank you, Mr. Skaggs.
Mr. Walker, we will insert in the record your opening statement. Mr. WALKER. Thank you, Mr. Chairman.
There seems to be some disagreement on the panel with regard to section 5 of the bill. Mr. Roberts, as I understand your position, you're for section 5 because you have a satellite that would bethat has been delayed as a result of the Challenger accident, and because of the administration's decision not to fly satellites aboard the shuttle, you have a problem.
Is there anybody else on the panel that has that same problem? I gather not. So, in other words, the position of the other companies is that that priority assigned to those types of satellites would, in fact, give you a problem with regard to future business that you