Lockheed to Lay Off About 400 in Palmdale, Burbank

Lockheed will lay off about 400 workers at its Skunk Works facilities in Palmdale and Burbank over the next three months, cutting roughly 10% from what was expected to be among the few stable aerospace work forces in Southern California, the company disclosed Friday.

The Skunk Works, officially called the Lockheed Advanced Development Co., said the layoffs were required to hold down costs amid a drop in business during the first six months of this year and the dimming prospects for the new Navy AFX attack jet program.

Lockheed said layoff notices would be issued by mid-June, with salaried workers absorbing about two-thirds of the job cuts and hourly workers the rest. The unit currently has 4,330 employees, about half of which are in Palmdale and half in Burbank.

Although Lockheed drastically cut its local aircraft work force in the late 1980s, the Skunk Works was thought to have reached a stable plateau. At the firm’s annual shareholders meeting earlier this month, Lockheed Chairman Daniel Tellep said that prospects for the operation were “great.”

But “realities of the short-term business situation” forced the firm to make the cutbacks or risk becoming uncompetitive in bidding for new contracts, according to Skunk Works President Sherman Mullin. Most of the unit’s work is cloaked in government secrecy, making financial predictions unreliable.

The Skunk Works is probably among the most unique aircraft development and production companies in the United States, accountable for the highest performance and most innovative aircraft designs over the past several decades. Its products have included the F-117 stealth jet, the SR-71 spy jet and the U-2 spy jet.

Although overcapacity in the U.S. aircraft industry is forcing a tough consolidation, few experts expect the Skunk Works to be consumed because of its unique position in U.S. aircraft technology.

Tellep has said that while the Skunk Works does not have an existing production program, it is involved in early development work of secret aircraft. In addition, Skunk Works spokesman James Ragsdale said Friday that the firm plans to bid on several secret programs this year that “could turn long term into major pieces of business.”

The unit is also working on three industry teams bidding for the AFX aircraft, but recent Pentagon efforts to cut costs have raised the serious possibility that the program will be either canceled or delayed.

In addition, Mullin cited a drop in funding for the existing programs and a lower rate of “new business sign-ups” so far in 1993.

Without cost cutting, the unit’s overhead rates would rise so much that it would be uncompetitive in future bidding competitions, a company spokesman said. In the defense business, overhead rates are negotiated with the government on an annual basis and then incorporated into future contracts. Although the government pays for overhead, a company will lose competitively issued contracts as its costs rise.

Three years ago, Lockheed employed about 14,000 people in the area. But in a major restructuring, the company has shifted nearly all of its aerospace production lines that were in Burbank to its facilities in Marietta, Ga.

Increasingly in recent years, Lockheed has also pursued commercial business as its defense-related contract work dries up. It has focused on markets where the technologies it has employed in its aerospace operations can be transferred.

For instance, Lockheed has worked as a subcontractor to Motorola Inc. on a proposed global portable telephone network called Iridium, a complex system that would use 77 satellites and cost more than $3 billion to deploy.