WASHINGTON -- Workers at Lockheed Martin's thrust reverser plant in Middle River have wondered why the company would tout them as a success story, and then sell them to General Electric Co.
Yesterday, corporate President and Chief Operating Officer Peter B. Teets gave an answer: The aeronautics side of the company didn't want to sell Middle River, but corporate leaders insisted in the name of shareholder value.
"Given the choice, I think [aeronautics executives] would have preferred not to see it a part of the deal we made with GE," Teets acknowledged during an appearance at the National Press Club.
"On the other hand, we at Lockheed Martin, as at any large public corporation, have to be conscious of shareholder value," he said.
The company said last week that the historic Middle River plant -- where the Martin Marietta portion of the gigantic aerospace company got its start -- was part of a package of assets and cash that Lockheed Martin would trade to GE in return for a large block of its own stock.
GE got the preferred stock in 1993 when it sold its aerospace division to Martin Marietta. Converted to common shares, the block would amount to more than 11 percent of Lockheed Martin's outstanding stock and have a value of about $2.8 billion.
Teets, answering reporters' questions at a company-sponsored technology symposium, said reclaiming that block was a priority because it would boost equity value for other shareholders. And Middle River was an especially attractive form of compensation for GE.
"GE has a strong business in commercial jet engines, and these thrust reversers in Baltimore serve that market well," he said.
GE is the world's leading maker of jet engines. Middle River -- officially called Lockheed Martin Aerostructures -- makes thrust reversers for GE's CF6 line of engines, which power the Boeing 747 and other widebody jets. A thrust reverser makes engines blow forward to slow a plane on landing.
The Aeronautics Sector of Lockheed Martin had said Middle River was the centerpiece in a major new effort to build parts for commercial aircraft. But not everyone saw it that way.
William E. Ballhaus Jr., a former general manager at Middle River who now is Lockheed Martin's vice president for science and engineering, pointed out yesterday that Aerostructures fits in much better to the core missions of GE. At Lockheed Martin, he said, "Aerostructures was kind of a singularity."
For a corporation that wants to be at the top of each market it enters, Lockheed Martin's thrust reverser business was too small of a niche, Ballhaus said.
The company also concluded that its pending purchase of Northrop Grumman Corp. -- expected to close during early 1998 -- would not boost Middle River's fortunes as much as anticipated.
Northrop Grumman has a huge business building airplane parts for Boeing, but its thrust reverser portion turned out to be quite small, said Lockheed Martin spokesman Charles Manor. So while the company initially predicted great cooperation between Northrop Grumman and Middle River, he said, "as you get closer and closer to melding the two it becomes obvious there are minimal synergies."
GE is expected to complete the purchase of Middle River by the end of the year. As part of the transaction, the Connecticut-based company also has an option to buy the commercial thrust reverser business of Northrop Grumman.
Teets said yesterday that the Northrop Grumman deal marks the end of the dramatic buying spree that made Lockheed Martin the world's biggest defense contractor. "I don't think you're going to see any extremely large acquisition or divestiture types of actions involving Lockheed Martin," said Teets.
With some $36 billion in annual revenue once the Northrop Grumman deal is complete, "the time to build [on what we have] is upon us," Teets said.
Pub Date: 11/13/97