October 24, 2005
Brilliant

Reading the SpaceX lawsuit makes me wonder if Elon Musk isn't more clever than people give him credit for.

Musk has often stated that he expected to invest $100M from his personal fortune into starting up SpaceX. Given that the company's focus has now grown to include the concurrent development of three vehicles based on certain common elements, and that first launch has been delayed nearly two years (and counting), it is not unreasonable to expect the company to spend half again as much as originally intended to start up operations and bring all three product lines to market, say $150M. (I will in fact be surprised if it doesn't end up being far more than that, but let's give SpaceX the benefit of the doubt.)

The company's recently-announced Falcon IX is intended to be an EELV-class launcher. In its largest configuration it will have a GTO payload of 9,650kg and sell for $78M per flight. This is comparable to the Delta IV Heavy EELV, which has a GTO payload of 10,843kg and a launch price of $254M per launch. Assuming these prices include the same costs and normalizing the figures to the Falcon IX payload capacity gives an identical-capability EELV a launch cost of $226,053,662, for a difference of a bit over $148M per launch.

The lawsuit argues that EELV manufacturers Boeing and Lockheed Martin colluded to prevent competition from entering the market for EELV payloads, and that collusion and other anticompetetive actions prevented SpaceX from obtaining EELV launch contracts. In the suit, SpaceX asks for real, exemplary, and treble damages, along with the legal costs associated with the suit.

A specific monetary damage figure is not stated. However, assuming that the suit goes to trial, a finding that SpaceX was denied even one EELV-class launch contract as a result of the alleged anticompetetive actions of Boeing and Lockheed Martin, could be very lucrative. If SpaceX's Falcon IX could provide an EELV-class launch for $148M less than what the federal government is willing to pay the competition, even being awarded one full-price launch contract as compensation could pay off the development costs of Falcon I, Falcon IV, and Falcon IX.

So, SpaceX could turn a profit on the Falcon IX without ever having built it. Not bad. Not bad at all.

Posted by T.L. James on October 24, 2005 08:57 PM

Comments

I'll be curious to see how the case is made that LM and Boeing stopped him from bidding on the EELV Buy 3 contract. (Request for Proposals out in April 05 according to this: http://programs.regweb.com/extrasres/smcindustrydays05/assets/18%20EV.ppt)

I guess he could say he approached government officials saying he'd like to bid, but was told "no thanks" and assumes the ULA is the cause.



Posted by: Tom at October 25, 2005 08:02 AM

Sorry, guess no html pages allowed in a post. Here's the text of what I said, url deleted:

I'll be curious to see how the case is made that LM and Boeing stopped him from bidding on the EELV Buy 3 contract. (Request for Proposals out in April 05 according to this: [deleted])

I guess he could say he approached government officials saying he'd like to bid, but was told "no thanks" and assumes the ULA is the cause.



Posted by: Tom at October 25, 2005 08:05 AM

"So, SpaceX could turn a profit on the Falcon IX without ever having built it. Not bad. Not bad at all."

I don't think that could possibly be the case. To be able to win a lawsuit where you're alleging that you would have been able to compete, but for the collusionary actions of the competition, you need to be able to prove that you would have been able to provide said services. If you claim that the Falcon IX would have been able to provide the service you're suing over, but never build a Falcon IX... need I say more?



Posted by: John Breen III at October 25, 2005 12:29 PM

No, reading it over this is more of what SpaceX did when NASA tossed Kistler Aerospace Corp. $227MILLION out of nowhere. What SpaceX, on the legal front has been pushing is the idea of a Level Playing Field for all companies.

As for the damages they put it, that's SOP for anything you file. Weither they get it or not is up to the Judge based on the merits of the complaint *and* the facts of the behavior of the Defendents.



Posted by: J. Michael Antoniewicz II at October 26, 2005 12:20 PM

Or is this a very cleaver approach to make SpaceX enough of a financial/legal threat that someone buys him out. An exit strategy for an increasingly costly dent in Elon's personnal fortune?



Posted by: Will at October 28, 2005 11:38 AM

You should also consider that the damages in a successful civil antitrust suit are tripled.



Posted by: Paul Dietz at October 28, 2005 01:58 PM