Loral Corporation

Loral Corporation was an American defense and aerospace contractor established in New York in 1948 as Loral Electronics Corporation by William Lorenz and Leon Alpert. The name was formed from the opening syllables of the founders' surnames. The company initially concentrated on radar and sonar equipment for the United States Navy, then expanded into a wider range of military electronics, communications, telemetry, navigation, surveillance, and space systems. Loral became a public company in 1959, issuing 250,000 shares at $12 per share. The offering helped finance a new headquarters on a 10-acre site at 825 Bronx River Avenue in the Soundview section of The Bronx. That same period marked the beginning of an acquisition-led diversification strategy. Loral purchased companies including Willor Manufacturing, American Beryllium, Arco Electronics, and several plastics businesses. The acquisitions broadened its industrial base and helped it compete for additional military work, but they also created financial and managerial strain because several targets were outside the company's core competencies or performed poorly. In 1961, Loral created a communications and space-navigation division focused on satellite-related systems. During the 1960s it won contracts for Doppler navigation radar, advanced electronics for the General Dynamics F-111, and airborne electronic countermeasures for the RF-4C Phantom II. By the end of that decade, radar receivers and electronic-warfare equipment had become important specialties. Loral's systems were designed to identify the signatures of hostile radar systems associated with missiles and antiaircraft weapons. Rapid expansion was financed partly through borrowing, including a $15 million loan from Massachusetts Mutual Life Insurance Company in 1965. By 1971, acquisition costs, unprofitable operations, and debt-service problems had pushed the company into serious financial difficulty. Loral lost $3 million that year and was at times unable to meet loan payments. In 1972, Bernard L. Schwartz acquired a 12 percent interest and became chief executive officer. Under Schwartz, Loral was rebuilt through tighter strategic control and a further series of acquisitions. Over the next two decades, the company assembled a substantial portfolio of defense, aerospace, electronics, and space businesses, including Goodyear Aerospace, Ford Aerospace, IBM's Federal Systems Division, and Paramax. The resulting group was a major supplier to the United States defense and aerospace sectors. In 1995, Loral reported $5.5 billion in revenue, reflecting the scale reached under Schwartz's leadership. The company's strategic direction changed in 1996 when Lockheed Martin agreed to acquire Loral's defense-electronics and systems-integration businesses for $9.1 billion. After the transaction, the remaining organization became Loral Space & Communications, marking the end of Loral Corporation as a diversified defense contractor. Several former Loral units were later spun out of Lockheed Martin in 1997 and became part of the foundation of L-3 Communications. The Loral name continued in space communications through Loral Space & Communications, but that later company should be distinguished from the original Loral Corporation. The original corporation's legacy lies in its transformation from a New York radar manufacturer into a large acquisition-based defense and aerospace enterprise, and in the subsequent redistribution of its businesses among Lockheed Martin, L-3 Communications, and Loral's space-communications successor.

Loral Electronics Corporation was founded in New York in 1948 by William Lorenz and Leon Alpert. Its original business was the development of radar and sonar equipment, particularly for the United States Navy. The company adopted the shorter Loral name from the first syllables of its founders' surnames. Loral went public in 1959 through an offering of 250,000 shares priced at $12 each. It used part of the proceeds to construct a headquarters at 825 Bronx River Avenue in The Bronx. The company also began an acquisition program, purchasing Willor Manufacturing, American Beryllium, Arco Electronics, and plastics companies. These deals were intended to diversify operations and strengthen Loral's ability to win military contracts, but they also introduced businesses that were not consistently profitable or closely connected to its central defense-electronics activities. In 1961, Loral established a division for satellite communications, telemetry, and space navigation. Its military business expanded during the 1960s through contracts that included Doppler navigation radar for the Navy, advanced electronics for the Air Force F-111 program, and airborne countermeasures for the RF-4C Phantom II. Loral increasingly specialized in radar receivers and electronic-warfare equipment capable of recognizing hostile radar signatures. Expansion required substantial borrowing; in 1965, the company borrowed $15 million from Massachusetts Mutual Life Insurance Company. The acquisition strategy eventually produced a financial crisis. By 1971, Loral had lost $3 million, had difficulty meeting some loan payments, and faced pressure from unprofitable acquisitions. In 1972, Bernard L. Schwartz purchased a 12 percent stake and became chief executive. He reorganized and expanded the company, using acquisitions to build a much larger defense and aerospace group. Loral bought Goodyear Aerospace in 1987, acquired Ford Aerospace in 1990, began the Globalstar project with Qualcomm in 1991, acquired IBM's Federal Systems Division in 1994, and purchased Paramax, Unisys's defense business, in 1995 for $862 million. By 1995, Loral's reported revenue had reached $5.5 billion. In January 1996, Lockheed Martin agreed to acquire the company's defense-electronics and systems-integration businesses for $9.1 billion. Loral thereafter became associated with Loral Space & Communications, while the transferred defense operations were integrated into Lockheed Martin. Several former Loral businesses were later spun off and helped form L-3 Communications. The original diversified Loral Corporation therefore ceased to operate as a standalone defense contractor, although the Loral name remained active in space communications. A later controversy concerned allegations that technical information had been transferred to China following the failure of the Intelsat 708 launch, involving a satellite built by Space Systems/Loral. In 2002, the relevant Loral organization reached an agreement with the State Department and Justice Department that included a $20 million payment and improved compliance procedures. Company officials neither admitted nor denied the allegations, while Bernard Schwartz publicly accepted responsibility for the matter and characterized it as an error involving one employee.

1. 2002Technology-transfer settlement

   Loral reaches a government settlement concerning allegations related to the Intelsat 708 launch investigation, including a $20 million payment and compliance improvements.

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2. 1996Defense businesses sold to Lockheed Martin

   Lockheed Martin agrees to purchase Loral's defense-electronics and systems-integration businesses for $9.1 billion; the remaining organization becomes Loral Space & Communications.

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3. 1995Paramax acquisition

   Loral acquires Paramax, the defense unit of Unisys, for $862 million in cash.

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4. 1994IBM Federal Systems Division is acquired

   Loral purchases IBM's Federal Systems Division, which becomes Loral Federal Systems.

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5. 1991Globalstar project begins

   Loral and Qualcomm begin the Globalstar satellite-communications project, in which Loral later held a substantial interest.

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6. 1990Ford Aerospace is acquired

   Loral acquires Ford Aerospace; its activities are subsequently associated with Space Systems/Loral and Western Development Laboratories.

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7. 1987Goodyear Aerospace is acquired

   Loral purchases Goodyear Aerospace, which becomes Loral Defense Systems.

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8. 1972Bernard L. Schwartz takes control

   After severe financial problems, Schwartz acquires a 12 percent stake and becomes chief executive.

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9. 1961Space and satellite systems division begins

   The company forms a division focused on communications, telemetry, and space navigation for satellites.

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10. 1959Public offering and headquarters expansion

    Loral makes an initial public offering of 250,000 shares at $12 per share and funds construction of a new Bronx headquarters.

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11. 1948Loral Electronics Corporation is founded

    William Lorenz and Leon Alpert establish the company in New York to develop radar and sonar systems.

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A diversified defense and aerospace systems integrator built around military electronics, radar, electronic warfare, communications, and space capabilities.

• Radar and sonar systemsNaval defense electronics1948

  Loral's original product base consisted of radar and sonar equipment developed for military customers, especially the United States Navy. These systems established the company's identity as a defense-electronics specialist before its later diversification into aircraft, electronic-warfare, and space programs.

• Radar receivers and electronic-warfare systemsElectronic warfare

  By the late 1960s, Loral specialized in radar receivers that detected and identified signatures associated with hostile radar systems on missiles and antiaircraft weapons. Related airborne countermeasure systems supported reconnaissance and combat aircraft such as the RF-4C Phantom II.

• Doppler navigation radarAircraft and navigation electronics1965

  Loral supplied Doppler navigation radar under a United States Navy contract. The technology formed part of the company's broader work in aircraft navigation, sensing, and mission electronics.

• Aircraft advanced electronicsAerospace electronics1969

  The company produced advanced electronics for the General Dynamics F-111 program and other military platforms. These activities were later expanded through acquisitions such as Goodyear Aerospace and Ford Aerospace.

• Satellite communications, telemetry, and space-navigation systemsSpace systems1961

  Beginning in 1961, Loral developed communications, telemetry, and navigation technologies for satellites. This capability became the basis for the space-related businesses that remained outside the 1996 Lockheed Martin defense-business sale.

• 1996Sell defense-electronics and systems-integration businessesM&A

  After building a large defense and aerospace portfolio through acquisitions, Loral separated its defense activities from its space-communications interests.

  What changed. Loral agreed to sell its defense-electronics and systems-integration businesses to Lockheed Martin for $9.1 billion. The remaining company became Loral Space & Communications.

  Aftermath. The transaction ended Loral Corporation's existence as a diversified standalone defense contractor. Several former Loral units later became part of L-3 Communications after being spun off by Lockheed Martin.

  announced transaction value. $9.1 billion (1996)

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• 2002Intelsat 708 technology-transfer allegationsControversy

  Following the failure of the Intelsat 708 launch, the United States investigated whether technical information had been transferred to China. In a 2002 agreement with the State Department and Department of Justice, the Loral organization agreed to pay $20 million and improve its compliance procedures. Officials neither admitted nor denied the government's charges; Bernard Schwartz later accepted responsibility for the matter.

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• 1996Lockheed Martin agrees to acquire Loral defense businesses

  Lockheed Martin agreed to purchase Loral's defense-electronics and systems-integration businesses for $9.1 billion. The transaction separated the defense operations from the space-communications activities that continued under the Loral Space & Communications name.

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1. Loral Corporation