Lockheed CEO: Despite Sequester, Future Is Bright

Lockheed Martin CEO and President Marillyn Hewson, center,
talks with USS Freedom Commander Timothy Wilke, right.
It was only a year ago when Robert J. Stevens — then CEO and president of Lockheed Martin Corp. — described the prospect of draconian cuts to government spending as the equivalent of “blunt force trauma” for defense industry.
Less than three months after sequestration went into effect, Stevens’ successor Marillyn Hewson spoke of Pentagon budget cuts in much more benign terms. As the nation’s largest defense contractor with annual revenues of $47 billion and 9,000 government programs in its portfolio, Lockheed Martin would have preferred a different course of action to reduce the federal deficit. But sequestration is now the law of the land, and Lockheed just wants to move forward, Hewson said May 14 at the company’s annual media day in Arlington, Va.
“We’ve never believed that [sequester] was the right path to take. The alternative, though, cannot be to stand still,” Hewson told reporters. “We’ve all got to find ways to keep moving forward.”
At the same event in June 2012, Stevens had warned of dire consequences if sequester took effect. He said it would result in a talent drain and disruption of military programs from which it could take years to recover.
Hewson said the company has not suffered significant damage from the cuts yet, in part because it has been downsizing since 2008. It reduced its workforce from 146,000 to 118,000 employees, shut down several facilities and shed millions of square feet of leased office space. After the March 1 sequester deadline came and Congress failed to undo it, Lockheed’s leaders started developing their own estimates of the potential impact and concluded — via computer simulations — that the reductions would result in a revenue loss of $825 million in 2013, from a total of $14.5 billion in government contracts.
“We feel confident and optimistic about the future,” Hewson said. “We recognize that we are in a tense budget environment, but we think we can line up well with the [customer’s] priorities.”
Whereas Stevens predicted lasting damage to defense suppliers as a result of sequester, Hewson said Lockheed expects to “continue to excel in this environment.” She noted that, to offset reductions in U.S. government spending, the company will seek to boost sales to foreign countries. Last year, international sales made up 17 percent of Lockheed’s revenues. That share could grow to 20 percent in the next five years, Hewson said. She projects that increase will come from sales of F-35 Joint Strike Fighters and F-16 jets, missile defense systems, C-130J cargo planes and cybersecurity technology.
There is a chance that sequester will depress Lockheed’s defense sales in 2014 and beyond, however, Hewson said. “We are waiting for the customer to come out with details. Then we'll react accordingly.”
Asked whether the defense sector had fought hard enough to defeat sequester, Hewson insisted that Lockheed leaders tried their best.
“We've been vocal about sequester not being good public policy,” she said. “That has been my message to lawmakers and, frankly, every one I talk to agrees. We'll continue to be vocal about it.”
Hewson was named CEO in November and took over Jan. 1 following Stevens’ retirement. A 29-year Lockheed veteran, Hewson had been slated to take over as chief operating officer, but she moved to the top job after CEO-in-waiting Christopher Kubasik was fired for having an inappropriate relationship with an employee.
Photo Credit: Lockheed Martin

Topics: Business Trends, Defense Contracting, Procurement