Lockheed tries to pull out of dive

Coffman on spot as successor to charismatic Augustine

Series of problems

Signs of hope include the deal that flew forth from Paris Air Show

Defense industry

June 20, 1999|By Greg Schneider | Greg Schneider,SUN STAFF

The most powerful man at the most powerful defense company in the world was on the phone with his employees two weeks ago, and what some of them wanted to know was this: Why did he deserve a bonus when the company was on its knees?

Vance D. Coffman, the chairman and chief executive officer of Lockheed Martin Corp., bristled but did not snap at the question. Go read the board of directors' report on executive pay, he replied on the corporate-wide conference call.

Then Coffman assured the employees that he took blame for a disastrous slide in prestige and profit in which Lockheed Martin stock has sunk to $34 a share from $64 a share in just over a year. If he didn't turn things around, Coffman said, he would be personally accountable -- an executive's way of saying that he could lose his job.

It was the kind of restrained, almost painfully honest response that insiders say typifies Coffman's leadership.

But while those qualities build confidence in the Iowa farm boy's integrity, they do nothing to stem doubt among Lockheed Martin employees, investors and observers that Coffman can pull the company out of its deepening slump.

"We really need to get some sort of transformational leader" who can bring change through charisma, said one Lockheed Martin source who spoke on condition of anonymity. "Vance is not like that."

Two years ago, the Bethesda-based company had such a leader in Norman R. Augustine. An author and presidential adviser who turned down more than one chance to be secretary of defense, Augustine transformed the defense industry by merging 17 companies into the Lockheed Martin colossus.

His retirement as CEO in 1997 and as chairman last year was akin to a TV star walking away from a hit series. Stylistically, Coffman was a doomed replacement, an engineer who had spent as much time on secret satellite programs as Augustine had spent granting interviews and wooing politicians.

Corporate handlers have struggled to make Coffman behave more like a titan of industry and less like an engineer. Last year, Lockheed Martin tried to get a videotape of General Electric's charismatic Jack Welch so Bethesda executives could see what such leadership is like.

As if to prove the doubters right, the company's current troubles date neatly to Coffman's rise to the top, starting with the Pentagon's surprising refusal last spring to let Lockheed Martin buy Northrop Grumman Corp.

Origins of problems

But even critics say the origins of many of those problems lie not with Coffman, but with Augustine. It was Augustine who misread the Pentagon and thought Lockheed Martin could get away with buying Northrop Grumman, said Tom Burnett of Merger Insight. "I don't think there's really anybody else you can lay that blame on, and that was really the start of the sub-par performance," he said.

The company's relations with the Department of Defense have not been the same since then. Sources say the company no longer feels in step with the Pentagon leadership, which can hurt Lockheed Martin as it chases contracts and pushes its programs.

A similar blow -- and one beyond anyone's control -- was the resignation last year of House Speaker Newt Gingrich, who had been a friend to the giant Lockheed Martin airplane factory next to his home district in Georgia.

Lockheed Martin's public image has suffered because of some high-profile program failures, such as two costly Titan rocket launches that went awry in April and several THAAD tests in which the anti-missile missile failed to strike its target.

With military, political and public relations all wobbling, the company then managed to infuriate Wall Street. Since fall, Lockheed Martin has had to confess three times that its financial performance was going to be worse than expected.

This month, the company said that earnings for 1999 are likely to fall short of already lowered expectations by almost half, and by almost one-third for 2000. The company's credibility has been wounded, and many stock analysts are cautious about accepting what management tells them.

"I don't think anybody feels the latest numbers they've given us are locked in concrete," said Paul Nisbet of JSA Research Inc.

Inside the company, workers do not tend to blame Coffman for creating the predicament. "All the problems unveiled last week, I think he inherited," one Lockheed Martin source said. The source added that there is not universal fondness within the company for Augustine, whom some saw as excessively slick and political.

"It may be that Norm was held up to be such a demigod outside that people inside resent it," the source said.

A number of workers interviewed said Coffman is actually more approachable. Memos to Augustine were always addressed to "Mr. Augustine," one said; Coffman is simply "Vance."

And while Coffman remains a poor speaker to large audiences, some said that he can be excellent with small groups -- genuinely listening, raising fair questions and responding stiffly but sincerely.

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