Lockheed sells Middle River factory to GE All 1,500 employees are reassured by new owner

Glenn L. Martin's legacy

November 04, 1997|By Greg Schneider | Greg Schneider,SUN STAFF

Lockheed Martin Corp. yesterday sold its historic Middle River airplane parts factory to General Electric Co., ending almost 70 years of Martin aviation heritage in Baltimore.

The plant is among several assets that Bethesda-based Lockheed Martin will transfer to GE to regain a huge chunk of its own stock.

Managers and GE officials met yesterday with all 1,500 Middle River employees to assure them that their jobs are secure and that their new parent intends to continue expanding the business. The plant already does most of its work for GE, building thrust reversers that help jet engines slow a plane on landing.

Workers have endured years of uncertainty as the plant -- which employed 53,000 during World War II -- dwindled to fewer than 1,000 workers in recent times. This year, though, the factory made a dramatic turnaround and Lockheed Martin officials touted it as a success story.

But while the company's aeronautics sector counted on Middle River as a linchpin in a new effort to win commercial aircraft work, corporate executives were concluding that it was a noncore business.

"The transfer of businesses to GE advances Lockheed Martin's ongoing portfolio-shaping activities and accomplishes a significant reduction in outstanding common shares, thereby enhancing shareholder value," corporate Chief Executive Officer Vance D. Coffman said.

Yesterday, Ray Roquemore, a former Lockheed executive who came out of retirement to manage the plant's turnaround, told workers that they may be better off with their new owners.

"Our business, and each member of our team, will have an even more promising future under GE ownership, as our aerostructures business joins with one of the world's leading aircraft engine producers," Roquemore wrote in a letter distributed to workers yesterday morning. He said in an interview that, though he took over the plant as a favor to an old friend at Lockheed Martin -- Aeronautics Sector President James A. "Micky" Blackwell -- he intends to stay "because I have a personal objective to see the company grow and because I'm enjoying it."

GE Executive Robert G. Stiber issued his own letter to the workers, saying that "the potential for our organizations is limitless." The challenge will be to leverage Middle River's expertise with GE's "technical depth and leading-edge manufacturing processes," wrote Stiber, vice president and general manager of GE Aircraft Engines' Production and Procurement Division.

Workers coming out of the meetings said they were generally encouraged and glad that weeks of rumors about the deal had ended.

"Everybody feels relieved because it's been back and forth and we've been hanging in the air," said Lorraine Buddemeyer, who has been at the plant more than 30 years. "But I feel a little depressed. After being at Lockheed Martin all these years, it's kind of hard to think that [the name] is going to be gone."

The main Middle River plant dates back almost to the infancy of aviation, founded by aircraft pioneer Glenn L. Martin in 1929. It put the Martin in Lockheed Martin, and generations of Marylanders grew up working there, going to Glenmar Elementary School, shopping at Martin Plaza, driving on Martin Boulevard or living in Mars Estates, which was named for a Martin aircraft.

Lockheed Martin will retain ownership of the factory buildings at Middle River and lease them to GE for a five-year term with two five-year options.

Lockheed Martin's Vertical Launch Systems business, which employs about 300 people at an adjacent facility making Navy missile launchers, is unaffected by the deal and will continue reporting to its corporate parent in New Jersey. There are no current plans to move that facility, the company said.

In addition to Middle River, yesterday's transaction gives GE a Colorado subsidiary that sells computer hardware and Lockheed Martin's stake in the Globalstar telecommunications partnership, along with about $1.5 billion in cash.

The package allows Lockheed Martin to regain a chunk of preferred stock equivalent to about 11 percent -- or 29 million shares -- of its common stock, and worth about $2.8 billion. GE obtained the stock when it sold its aerospace division to the old Martin Marietta Corp. in 1993.

Industry experts expressed surprise that the company would abandon the old factory, not because of its heritage but because of its recent success in helping Lockheed Martin venture into a new direction.

"This is a blow to Lockheed Martin's efforts to get involved in the commercial sector," said Richard Aboulafia, an expert with the Teal Group consulting firm. Combined with the jetliner work done by Northrop Grumman Corp., a company Lockheed Martin is in the midst of buying, Middle River would have "given them over half the market for engine-related aerostructures," he said.

Another analyst marveled at the mix of assets Lockheed Martin will deliver to GE in return for the stock. "The three pieces are so dissimilar that it suggests that Lockheed Martin was simply cherry-picking its operations, looking for things that added up to a certain dollar value that would enable them to do a clean swap of the shares," said Stuart McCutchan, who publishes a newsletter called Defense Mergers & Acquisitions.

Lockheed Martin said it would come out of the deal with a net gain of $300 million, which is the difference between the value of the assets and the stock. GE said it would see a gain of $1.3 billion. The deal is expected to close by the end of the year.

"I think this will ensure the long-term viability of the Middle River plant," said Sen. Barbara A. Mikulski, who added that she had been talking with Lockheed Martin Chief Executive Officer Vance B. Coffman about the situation for several weeks.

Pub Date: 11/04/97

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