Lockheed Martin Looking Into Cutting 2 Core Plants
Lockheed Martin Corp., beset by plunging profit and problems across its product lines, said Friday it is conducting an internal review that could result in selling or shrinking its core satellite and aircraft manufacturing facilities in order to cut costs.
Potential targets in the review include the company’s satellite production plant in Sunnyvale, Calif., and its aircraft plant in Marietta, Ga., two of its oldest operations.
“Everything is on the table,’ said corporate spokesman Hugh Burns. “The guidance has been to everybody that businesses are going to have to measure up.”
Burns cautioned that executives had not yet decided whether to sell, close or reconfigure any of Lockheed’s core operations.
But pressure on the company to improve its financial performance is rising rapidly. Lockheed Martin President Peter Teets and another top executive announced their departures from the Bethesda, Md., firm last month as it reported a 43% drop in its third-quarter operating profit.
Many analysts say the company’s woes stem from its failure to integrate scores of small firms it had acquired as part of the defense industry’s post-Cold War consolidation. The top-to-bottom review of its operations may throw that merger wave into reverse.
Some analysts view Lockheed’s expanded review as a test of Capitol Hill opposition to a major plant closure. Political resistance to major cutbacks at the Marietta facility, for example, may have weakened in recent years as the Georgia delegation’s clout slipped with the departures of Sen. Sam Nunn and Rep. Newt Gingrich.
“If you really look at what’s happened to the industry, there have been very few major plants closed, and that’s purely political,” said Paul Nisbet of JSA Research Inc. “If [Lockheed executives] think they can get away with it, they’ll do it.”
In the company’s search for possible cutbacks, even long-standing businesses such as its commercial satellite and military aircraft plants, are expected to come under close scrutiny because much of the blame for Lockheed Martin’s recent financial performance lies with the space and aeronautics units.
Lockheed Martin slashed its earnings estimate for 2000 from $2.15 per share to $1 per share, attributing much of the drop-off to problems in its space systems business, which is suffering from delays in rocket deliveries. And in June, the company had scaled back its profit outlook because of delays in its C-130J military transport plane program.
“Everybody’s under the microscope,” said a spokesman for the 8,600-employee Marietta unit that manufactures the plane. “But we’re still building and testing airplanes. There’s nothing else you can do.”
Jan Wrather, a spokeswoman for the Missiles and Space division in Sunnyvale, which employs 8,000 people, said workers were trying to “concentrate on performing and meeting our customers’ expectations” amid a flurry of rumors about the unit’s fate.
Sale or closure of any of the core units would follow what is already proving to be an exhaustive overhaul of the company’s operations. Chief Executive Vance Coffman--whose own job appears to be in jeopardy in some analysts’ eyes--had announced in September that the firm would condense its five main business sectors into four: aeronautics, space, systems integration and technology services.
Moreover, the firm said it put eight businesses with combined annual sales of about $1.4 billion on the auction block. As it eliminates jobs in those units, Lockheed will move its employees to common payroll and personnel systems to reduce overhead, Coffman said. The company also is expected to spin off its new telecommunications subsidiary, which it is forming with the purchase of Comsat, a satellite service company.
Lockheed Martin’s stock closed at $19 Friday on the New York Stock Exchange, down 81 cents for the day and off 55% for the year.
