Lockheed Martin
The budget deal reached between both parties this summer forced the military to swallow $350 billion in cuts over the next decade. The cuts, which will go into effect in fiscal 2012, lower the annual military budget by around $35 billion to $50 billion a year – or around 6% to 8% of the military’s $570 billion projected budget for fiscal 2013. . . And that might just be the beginning. Last week, the budget-cutting “super committee” of six Democrats and six Republicans from the House and Senate held its first meeting. They are tasked to find $1.2 trillion in savings over the next decade. If they fail to do so by Thanksgiving, which seems likely given how partisan Congress has become these days, automatic spending cuts of at least $1.2 trillion would be set in motion, $600 billion of which will come right off the defense budget. This would potentially lower the projected 2013 defense budget by 16% to $472 billion.
Profits at the big five U.S.-based defense contractors — Lockheed Martin (LMT), Boeing (BA), Northrop Grumman (NOC), General Dynamics (GD) and Raytheon (RTN) — grew from $6.7 billion in 2001 to $24.8 billion in 2010. Profits grew twice as fast as revenue. Defense companies in the S&P 500 have seen their stock prices soar 67% in the last decade, while most other industries are flat or up just a few percentage points. FOR MORE details see http://features.blogs.fortune.cnn.com/2011/09/12/harsh-new-realities-for-the-military-industrial-complex/
Lockheed Martin’s stock is down 10% since July and it has cut nearly 4,000 jobs this year in anticipation of the budget cuts.
UPDATE THIS– Market cap of $24.99B. During the current quarter, institutional investors have sold 2.2M shares (net), which represents .82% of the 267.56M share float.
http://www.lockheedmartin.com/news/press_releases/2011/110630ae_emp-reductions.html Lockheed Martin currently has about 28,000 employees at its principal Aeronautics sites in Texas, Georgia and California and at six smaller locations in as many states. Reductions may occur across the enterprise, with the greatest impacts occurring at the larger sites. An organizational assessment will determine how to trim the organization with a target reduction of approximately 1,500 employees . . .Ralph D. Heath, executive vice president, Lockheed Martin Aeronautics, said, “Bold and responsible action is necessary to meet customer expectations and reduce our costs. We are realigning the organization to be more efficient and agile, and a reduction in force will enable us to meet the requirements of our changing business environment.” . . . Lockheed Martin will offer eligible salaried employees an opportunity for a voluntary layoff to minimize the number of involuntary layoffs. We will use a disciplined process to review every organization and position, considering all factors rather than making arbitrary reductions. We expect the greatest impact to be on employees in higher level labor grades. . . Lockheed Martin Aeronautics is a world leader in the design, research and development, systems integration, production and sustainment of advanced military aircraft and related technologies. Its customers include the military services of the United States and allied nations throughout the world. Company products include the F-35 Lighting II Joint Strike Fighter, F-22 Raptor, F-16, C-130, C-5, P-3, U-2 aircraft and advanced development programs.
Headquartered in Bethesda, Md., Lockheed Martin is a global security company that employs about 126,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation’s 2010 sales from continuing operations were $45.8 billion.
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http://www.bizjournals.com/dallas/news/2011/09/14/lockheeds-fort-worth-layoffs-pending.html “When there’s lower production rates, obviously, you need to rescale the overhead structure because otherwise that same cost would be applied to a lower quantity of the product.”
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http://www.govexec.com/dailyfed/0811/082411cc1.htm
Doug Graham, vice president of advanced programs and strategic and missile defense systems at Lockheed Martin.
But Lockheed Martin has begun belt-tightening, Cavin said, for example, cutting staff travel to trade shows such as the Paris Air Show. “We reduced our footprint by a third, saving $2.5 million,” he said. He also mentioned the recent offer of voluntary executive buyouts (the application period has now closed and the volunteers’ offers are under review), which should save the company $350 million over five years, and $105 million each year thereafter, he said.
That cutback follows this summer’s announced reductions of up to 1,500 employees in the company’s aeronautics business and 1,200 employees in its space systems business.
Another strategic cost-cutting tool Cavin cited is international partnerships. He said the fact that the Patriot Advanced Capability-3 missile system has been executed and sold to such partners as Taiwan, Germany, United Arab Emirates, Netherlands and Japan has saved or deferred $482 million since 2006.
But he cautioned that Lockheed Martin must continue to invest in independent research and development.
