Rockwell Loses Its Bid for Key Air Force Contract : Defense industry: The $155.7-million deal for upgrading the electronics of the EF-111A jet was awarded to New York-based Grumman Corp.

ANAHEIM —  In a blow to Rockwell International Corp.’s efforts to drum up new business in a sluggish defense market, the company has lost its bid for a key contract to upgrade the electronics gear for the Air Force’s EF-111A electronic warfare jet.

The Air Force awarded the $155.7-million contract this week to Grumman Corp. in Bethpage, N.Y., said Betsy Wells, an Air Force spokeswoman.

The contract is expected to lead to a total of $500 million in work developing a new electronic jamming system and an early-warning radar receiver for the EF-111A, Wells said.

The loss is a blow to Rockwell’s Autonetics Marine and Aircraft Systems Division in Anaheim, where officials have said the contract was a key part of an effort to develop new markets in a shrinking defense environment. Rockwell employs 6,200 people in Anaheim.

“We’re doing an internal assessment of the impact,” Rockwell spokeswoman Christine Rodriguez said Thursday. “We think it’s premature to comment beyond that.”

While defense spending for new combat aircraft is falling, Rockwell officials have said that the market for avionics upgrade equipment is expected to generate worldwide sales of $2 billion. Growth in that market is the result of many countries’ decision to upgrade existing military planes instead of buying or building new ones.

Rockwell officials consider the avionics upgrade market an important hedge against the Anaheim division’s heavy reliance on politically vulnerable strategic defense programs like the MX missile.

Despite the loss of the EF-111A award, Rockwell has made some headway in the market. The company has a $125-million contract to upgrade avionics gear on the Air Force’s F-111F combat aircraft and a $160-million contract for the Royal Australian Air Force’s F-111C fighter aircraft. In such contracts, the company outfits cockpits with high-tech displays, early-warning alarms and navigation equipment designed to improve the pilot’s ability to respond quickly to multiple enemy attacks.

To increase its chances of winning foreign contracts, Rockwell last November formed an alliance with an Italian defense contractor, Fabbrica Italiana Apparecchiature Radioelettriche S.p.A. The firms will jointly bid on avionics upgrade contracts for F-5 combat aircraft. The alliance has not yet produced any new contracts.