Graham Warwick/WASHINGTON DC
Lockheed Martin is considering major aircraft and spacecraft plant closures in a move to improve its poor financial performance. Falling earnings have already led to the departure of two top executives and the launch of a divestment programme.
Consolidation of the aircraft factories at Fort Worth, Texas, and Marietta, Georgia, and spacecraft plants at Denver, Colorado, and Sunnyvale, California, are on the agenda as the company seeks to save costs and generate cash.
Lockheed Martin declines to comment, but company sources say that the future of Sunnyvale is under review. The plant produces missiles and satellites, while Denver manufactures launchers and satellites. The company's space business has been hit hard by poor sales of satellites, launch delays and failures, and heavy investment in launcher development and commercial satellite ventures.
The sources also say Lockheed Martin is under pressure from the US Department of Defense (DoD) to consolidate its aircraft manufacturing in one plant. A team from the office of Pentagon acquisition chief Jacques Gansler has visited Fort Worth and Marietta to assess their "industrial viability".
The future of the Marietta plant depends heavily on securing US Air Force orders for the C-130J transport. Lockheed Martin has delivered a proposal under which the USAF would get a discount on the aircraft's price in return for placing a long-lead contract next year and agreeing to order a minimum number of C-130Js annually over the following five years.
The "economic order quantity" offer is based on an annual production rate of 19 aircraft, down from the 24 originally planned. The discount would increase if international orders boosted production to above 22 a year.
Lockheed Martin says early USAF orders are vital to keep the C-130J line open beyond 2002. The USAF says it is evaluating the offer "in conjunction with the office of the Secretary of Defense" - an indication of the high-level DoD concern over the company's financial problems.
Marietta's prospects may have been set back by the early retirement of Micky Blackwell as executive vice-president of Lockheed Martin's aeronautical systems business. Blackwell, former president of the Marietta plant, was blamed for cost overruns and delays on the private-venture C-130J programme. He has been replaced by Dain Hancock, previously president of the financially successful Fort Worth F-16 plant.
The two plants share Lockheed Martin's two-thirds stake in the F-22 fighter programme. Marietta is the lead site, and Blackwell had argued that it would be too costly to move the final assembly and test facilities. One option rumoured within the company, however, is to move F-22 final assembly to Fort Worth and the C-130J line to Lockheed Martin's Palmdale, California, plant.
With the departure of Blackwell and Lockheed Martin's president Peter Teets, no further major management changes are expected (Flight International, 3-9 November). Teets accepted blame for the company's poor financial performance after it announced that earnings for next year would be less that half that originally forecast.
Free cashflow next year is expected to be less than this year's $500 million, and the company has announced that it will begin managing the business "for cash". The sources say this means the firm will have to rein in its capital expenditure. This is likely to affect new ventures such as Lockheed Martin Global Telecommunications, which is having to invest heavily to enter the commercial satellite communication services business.
US credit rating agency Moody's Investors Service, which downrated the company's debt rating on 3 November, says Lockheed Martin's satellite communications strategy "entails significant business risks". Overall, the " timing of management's corrective action and its degree of success remain uncertain", it says.
The company is selling its Sanders, Fairchild Systems, control systems and infrared imaging systems businesses. The operations are expected to generate over $1 billion, to be used to pay debts.
• Another blow struck Lockheed Martin on 2 November, when a composite liquid hydrogen tank for the X-33 reusable launch vehicle technology demonstrator leaked during ground testing. The failure could delay launch of the X-33, set for the third quarter of next year, and is likely to increase Lockheed Martin's costs, as NASA has capped its investment.
Source: Flight International
