Lockheed to cut 2,000 jobs in Ga.

Marietta plane factory paring payroll by 20% to pep up anemic profits

Part of `big housecleaning'

Defense industry

June 04, 1999|By Greg Schneider | Greg Schneider,SUN STAFF

One of the nation's biggest defense contractors got a little smaller yesterday as Lockheed Martin Corp. announced plans to cut 2,000 jobs -- or 20 percent of the work force -- at its airplane factory in Marietta, Ga.

Based in Bethesda, Lockheed Martin is locked in a corporate-wide struggle to become more efficient to stem three consecutive quarters of sagging profits.

The Georgia plant, called Lockheed Martin Aeronautical Systems, makes two of the company's highest-profile products: the C-130J military transport plane and the new F-22 fighter jet.

Yesterday's job cuts are aimed at relieving cost problems on those programs and positioning the factory to win more work, said Aeronautical Systems President C. T. "Tom" Burbage.

"This will be a fundamental change in the way we're organized and the way we operate and should line us up more effectively to compete for the opportunities that are out there," Burbage said.

The cuts are to take place over the next 12 months and come on top of 300 job eliminations there earlier this year. The facility -- which includes a 3 million-square-foot factory along with testing buildings and offices -- employs about 9,550 workers.

Shrinking Marietta is just part of a "big housecleaning job" that Lockheed Martin must undertake because of the recent acquisitions binge that created a behemoth with 165,000 employees worldwide and $26 billion in annual sales, said Renee Gentry, who studies defense companies for the Teal Group consulting firm in Fairfax, Va.

"They've been having some significant problems since about the end of the third quarter last year," she said. "They really sort of lost a bit of the confidence of Wall Street, and they need to get it back. They need to become leaner and more efficient."

Lockheed Martin has disappointed investors with such events as the delay in a major sale of F-16 fighter jets to the United Arab Emirates, several rocket launch failures and slow deliveries of the C-130J to foreign customers.

The company's political status even seems to have suffered. The Air Force has been resisting pleas to accelerate planned purchases of the C-130J transport plane, but last year Congress helped out by adding six planes to the budget -- led by then-House Speaker Newt Gingrich, whose Georgia district adjoined the Marietta plant.

This year, with Gingrich gone, the House version of the budget includes only four C-130Js and the Senate's version only two.

The company has warned that without more sales of the transport plane, huge overhead costs could shift over to the expensive F-22 program and break spending caps imposed by Congress two years ago.

Meanwhile, cost pressures have been mounting on both the C-130J -- which has a list price of about $55 million a copy -- and the F-22, which is expected to cost $97.7 million each.

All of which made yesterday's announcement of job cuts no surprise to many analysts.

"It seems like kind of an inevitable thing," said Todd B. Ernst of Prudential Securities in New York, who said the cuts are a step in the right direction.

It is part of a trend in the defense industry. Fellow giants Boeing and Raytheon have announced job cuts in recent months, and Lockheed Martin cut 1,200 positions from its Astronautics business in Colorado in March.

Burbage said about 40 percent of the jobs lost in Georgia will be pared through retirement, attrition or transfer. He added that the company still expects to deliver about 30 C-130Js to customers this year, and that if orders increase, some of the laid-off workers may be asked back.

Analyst Ernst said the streamlining sends a message that "the company is trying to take out as much cost as they possibly can," and that it could provide a slight boost to earnings.

Lockheed Martin shares fell $1 to $40.50 yesterday. Ernst said investors remain worried about pending news of how much profit the company stands to lose on the April failure of a Titan rocket launch.

Pub Date: 6/04/99

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