Lockheed Names Its Missiles Unit Chief as CEO Designate

Lockheed Corp. on Monday appointed the head of its missile and space systems division--the company’s largest--to succeed Lawrence O. Kitchen as chairman and chief executive officer of the giant defense contractor.

The selection of Daniel M. Tellep--a 33-year veteran of the company--to head Lockheed comes as defense contractors prepare for leaner times after benefiting from one of the largest military buildups in history.

“It’s a very difficult defense environment right now,” said Phil Friedman, an aerospace industry analyst at Drexel Burnham Lambert Inc. “You’re looking at a flattening defense budget.”

Tellep, 56, will become chairman at the end of the year, when Kitchen steps down after two years as chairman. Kitchen, who has reached the company’s mandatory retirement age of 65, will remain as a director.

Until Kitchen steps down, Tellep will serve as president of Lockheed, replacing Robert A. Fuhrman, who will become a vice chairman and the company’s chief operating officer. Analysts said that Fuhrman, who is two years away from mandatory retirement, was not a serious contender to replace Kitchen.

Executive vice president Vincent N. Marafino, 58, was also promoted to vice chairman and will remain the company’s chief financial and administrative officer.

Replacing Tellep as president of the missile and space systems group is John N. McMahon, 59, who has served as the division’s executive vice president. McMahon served as deputy director of the Central Intelligence Agency for four years before joining Lockheed in 1986.

The missile and space systems group is Lockheed’s largest division, employing 39,000 workers and accounting for nearly 50% of approximately $11 billion in annual revenue.

“It consists of a wide variety of programs--that’s why it’s such a good training ground for a chief executive,” said Lawrence M. Harris, an aerospace industry analyst at Bateman Eichler, Hill Richards.

Analysts were generally pleased with Tellep. The executive apparently impressed many when he recently addressed a meeting of aerospace and defense industry analysts in New York. “He came across as a rather capable individual,” said Harris. “I think he is an excellent choice.”

Tellep will have his hands full dealing with slower-growing military budgets, analysts said. Lockheed must also find a way to offset the production of the C-5B cargo jet--the largest aircraft in the U.S. military--which is expected to be completed early next year, analysts said. Lockheed is also a major contractor on the Strategic Defense Initiative--or Star Wars--program that is increasingly under attack.

However, analysts agreed that two of Lockheed’s key programs--its Trident submarine-launched missiles and its military satellites--have a good chance of avoiding any major military cutbacks. Lockheed is also the leader of a team of contractors bidding on a new advanced tactical fighter that would replace the F-15. That contract, which is being pursued by another team led by Northrop, could be worth $10 billion, analysts estimate.

In a telephone interview Monday, Tellep said he is confident that the company’s defense business will weather the anticipated slowdown in military spending, adding that he does not see Lockheed entering the commercial aerospace market. “We have a very strong base of high-priority national programs,” Tellep said. “We are not adverse to the commercial sector, but our strengths are dominantly in the defense sector.”

Tellep said he will continue efforts begun under Kitchen to move into the military electronic equipment and service business. “We will see some selective broadening,” Tellep said. “Those are things we will continue to think about and build upon in the future.”

Lockheed will soon make an announcement related to any new directions the company plans to follow, said Tellep, who declined to provide details.

Tellep, who built model airplanes in his childhood, described himself as an “activist” manager. “I have the ability to modulate (between) paying attention to detail and at other times at being strategic and being rather global.”

In response to a question, Tellep said Lockheed does not expect to be involved in any legal proceedings related to the Pentagon procurement scandal. The Securities and Exchange Commission on Monday reminded companies they must disclose any anticipated legal matters connected to the scandal.

Tellep said the scandal has hurt efforts “toward building more confidence in the defense industry.” But Tellep said he believes the scandal is limited to individual cases and is not a symptom of “systemwide negligence or fraud.”