Lockheed Martin Corp. (NYSE: LMT) said it will cut about 1,500 jobs at the Aeronautics unit in a move to curb costs and offer better priced products to customers. Added to the costs, President Barack Obama's goal of reducing defense spending by $400 million is also a burden on Lockheed Martin.
The unit employs about 28,000 employees at Texas, Georgia, California and six smaller U.S. locations. The job reductions will likely have the greatest impact at larger sites with those ranked higher, the company said.
Lockheed Martin's Aeronautics segment offers military aircraft, unmanned air vehicles, and related technologies. Products from this business include combat fighters such as the F-35s and the F-16s, and the C-130J tactical transport aircraft.
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, said Ralph Heath, executive vice president, Lockheed Martin Aeronautics.
The Aeronautics unit said some salaried workers would be offered voluntary separations, which will be informed in August to those eligible, to minimize the number of involuntary layoffs that would begin in mid-September, with the greatest impact from the cuts likely to be on workers in higher-level labor grades.
The move illustrated a need to boost U.S. arms exports. The Obama administration should end its blockade of Taiwan's request to purchase new F-16s, Senator John Cornyn of Texas told Reuters.
Taiwan has sought for years to buy 66 F-16C/D models, a sale opposed by China. It deems Taiwan a rogue province subject to unification with the mainland, by force if necessary.
If this administration's highest priority is to jump-start our sluggish economy, it should work aggressively to ensure American companies are top contenders when friendly nations are assessing their defense equipment needs, Cornyn told Reuters.
The job cuts are occurring as budgetary pressures prompt the Obama administration and Congress to limit defense spending. We're taking bold action to respond to changes in the defense business environment, Lockheed spokesman Joe Stout told the Associated Press. Government customers were pressing the company to produce planes at lower costs, he told AP.
Rising costs has prompted Lockheed Martin to curtail costs to improve efficiencies. Earlier this month, Lockheed said it planned to cut about 1,200 jobs by year's end at its space systems unit to address affordability and improve competitiveness. Overall, Lockheed has about 126,000 workers worldwide.
Lockheed, for the recent first quarter, reported a slight decline in earnings as lower margins offset revenue growth. Last month, Lockheed Martin's Chief Executive Officer Bob Stevens said the company has divested two businesses, reduced the senior employee ranks by 26 percent, and frozen salaries of its most senior employees.
Stevens outlined over $500 million in cost reductions from the initiatives, and several hundred million dollars in additional cost savings in 2011 to be built into forward pricing proposals.
As much as one-third of President Barack Obama’s goal of reducing defense spending by $400 billion may be achieved by cutting overhead, putting more risk on contractors and eliminating overlapping and marginal programs, outgoing Defense Secretary Robert Gates told Bloomberg.
Lockheed Martin stock declined 0.02 percent to $80.95 on the NYSE at 9:57 am EDT.