XCOR Lost ULA Engine Contract

Lynx engine hot fire. (Credit: XCOR)

Despite laying off its 21 remaining employees, XCOR Aerospace isn’t dead yet. But, it’s not in real good shape, either.

It turns out that a major blow to the company was the loss of a contract with United Launch Alliance (ULA) to develop an upper stage for the Vulcan booster.

The primary impetus for the layoffs, Acting CEO and XCOR Board member Michael Blum told me, is the loss of a contract for engine development that the company had with United Launch Alliance. “The proceeds should have been enough to fund the prototype of Lynx [the company’s planned spacecraft], but ULA decided they’re not going to continue funding the contract. So we find ourselves in a difficult financial situation where we need to raise money or find joint developments to continue.” ULA declined to comment.

Blum is quick to add, though, that the company is still a going concern. “Committed, early investors of the company are making resources available to have a core team on a contract basis to see through business development, joint venture, and fundraising opportunities.”

Blum says that XCOR has two basic lines of business – building rocket engines and components, and the development of its Lynx spacecraft. “Most of the interest I’m seeing right now is in the Lynx project,” he says.

The engine development work was part of ULA’s ACES upper stage, which will replace the current Centaur. Blue Origin and Aerojet Rocketdyne are also competing to develop engines to power the reusable stage.

XCOR Acting CEO Michael Blum said the company laid off 11 employees in Mojave, Calif., and 10 employees in Midland, Texas. Some of the laid off workers will be hired back on a contract basis while the company explores options.

Last week’s layoffs were the second major round of staff cuts for the struggling space company. XCOR laid off about half its staff — including many employees working on the suborbital Lynx spacecraft — back in May 2016 for financial reasons.

Down in the heart of the West Texas oil country, officials in Midland are evaluating where the most recent layoffs leave them. Midland and XCOR signed a $10 million deal in 2012 for the company to relocate from Mojave to the Texas city, a move that was never completed.

XCOR Aerospace thus far has met its obligations as required by the economic development agreement signed nearly five years ago with the Midland Development Corp. and has collected $9 million in performance incentives, relocation payments and renovations. Still, the space industry company faces payroll, capital investment and rent obligations that officials said will be a challenge considering its financial status.

The economic development agreement with MDC shows XCOR must meet obligations of $8 million in total salaries and wages this year and $12 million next year….

The contract with the MDC says should the company (XCOR) fail to pay the recapture payment within 30 days of MDC written notice or notify the MDC that they cannot make the recapture payment, the company shall be considered in default, unless alternative arrangements have been made.

An XCOR timeline provided by the MDC shows the last of the incentive payments made to XCOR took place in September 2014 and that the company has met the terms of the contract in the following areas — job creation, total annual compensation, capital assets and cumulative investment in capital assets. The company even met those requirements in 2016 as the contract allowed for previous year salary amounts above requirements to be rolled over. To meet compensation requirements in 2016, more than $3.7 million was rolled over from 2014 and 2015.

XCOR’s financial problems are a blow to Midland’s effort to diversify its economy away from the boom-and-bust oil and gas industry that dominates the Permian Basin.