Lockheed to streamline, lay off 2,800

Defense giant seeks to trim debt, restore investor confidence

`Not a big surprise'

New aeronautic, space units to absorb several operations

Aerospace industry

January 28, 2000|By Robert Little | Robert Little,SUN STAFF

Lockheed Martin Corp. announced yesterday that it will lay off 2,800 workers and streamline its aircraft and space systems businesses, the latest step in an effort to trim debt and restore investor confidence in the struggling defense giant.

Yesterday's announcement brings the number of jobs cut by the Bethesda-based corporation to more than 4,500 in recent months, nearly all of them from the company's aircraft design and manufacturing plants in Georgia, Texas and California.

Lockheed Martin, which employs about 140,000 worldwide, also will cut as many as 45 jobs from its 1,500-employee headquarters in Bethesda, company officials said.

For stock analysts, who have watched the company's value drop 58 percent since May, yesterday's announcement was welcomed and long anticipated.

"This is not a big surprise, really," said Cai von Rumohr, an analyst for SG Cowan Securities Corp. "They've hinted for some time that their restructuring was still a work in progress."

"I think they're still trying to find their feet," said Byron K. Callan, an analyst with Merrill Lynch & Co. Inc.

"They've got large facilities that probably don't support the business activity looking forward."

With less and less of the federal budget spent on defense over the last decade, production of Lockheed's primary aircraft product -- the F-16 Fighting Falcon -- has tapered from its 1987 peak and become almost entirely dependant on foreign sales. And the company's next fighter program, the F-22 Raptor, has been attacked in Congress, and could produce fewer than half the 750 aircraft once expected.

The future of the entire fighter aircraft business in the United States is uncertain, and won't be determined until next year when the Department of Defense selects a company to develop and produce a new aircraft for the Air Force, Navy and Marines. Lockheed Martin and Seattle-based Boeing Co. are competing for the 3,000-plane Joint Strike Fighter contract -- expected to be the largest defense program in history.

"The company needs to get things in order, because it still has huge debt, huge interest costs and low levels of earnings," said Paul H. Nisbet, an analyst with JSA Research Inc. in Newport, R.I. "And about the only way to improve that is to sell off properties and streamline operations."

Lockheed Martin has announced its intention to sell more than $1 billion in "noncore" operations, such as its defense electronics business. The company's commercial satellite business and its division responsible for state and local governments also have been rumored to be for sale.

Also last year, the company announced 2,000 layoffs at its aircraft manufacturing plant in Marietta, Ga., where it builds C-130 cargo planes and the F-22.

With yesterday's announcement, the Marietta plant, the company's "Skunk Works" design facility in Palmdale, Calif., and the Fort Worth, Texas, facility where Lockheed builds the F-16, will be consolidated into a new division called Lockheed Martin Aeronautics Co. The division's 25,000 employees will be reduced by about 2,500 workers, divided equally among the three plants.

A second new division, called Lockheed Martin Space Systems, will oversee the company's consolidated space-vehicle operations, including the Atlas, Titan and Athena rockets, programs exploring new reusable launch vehicles, and the Space Based Laser and Peacekeeper missile programs. The division employs about 22,000 people, and will be cut by 300 to 400 jobs, company officials said.

The layoffs and streamlining are expected to save Lockheed Martin about $200 million a year, but are also designed to improve performance and restore confidence in programs that have weathered a series of embarrassing failures in recent years.

The company ordered a management review during the summer, after production delays and cost overruns cut into the C-130J cargo plane program, and failed rocket launches destroyed or crippled $2 billion in military and private satellites.

Besides operating similar programs under one management structure, yesterday's changes also will place key executives closer to the programs they oversee. The head of the Aeronautics division, Dain Hancock, will move to the division's new headquarters in Fort Worth, and Albert Smith will head the space programs from Denver.

"Given the market situation, it's no longer prudent to maintain separate management and infrastructure for that many different companies that are in the same business," said Lockheed spokesman James Fetig.

Lockheed Martin's shares on the New York Stock Exchange fell 62 cents yesterday to close at $19.44. The company's stock has risen from a low of $16.38 in October, but traded as high as $46 less than a year ago.

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