Lockheed Martin Space Systems Plans Layoffs

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WASHINGTON — Lockheed Martin Space Systems is planning to lay off an unspecified number of its 16,000 workers this year as several of its major space hardware contracts move from development to production mode, the company’s top official said May 24.

The reductions come as Denver-based Lockheed Martin Space Systems begins placing increased emphasis on affordability, which will require building things differently than it has for at least the past five years, Joanne Maguire, the company’s executive vice president, said at a media event here.

The parent company, Lockheed Martin Corp. of Bethesda, Md., is the United States’ largest defense contractor and has been buoyed by a Pentagon budget that has steadily risen for the past decade. But defense spending is expected to flatten and even decline in the coming years as the nation focuses on debt and deficit reduction, and Lockheed Martin has been taking steps to prepare for a more austere environment, Robert J. Stevens, the company’s chairman and chief executive, said.

Over the last two years, Lockheed Martin has reduced its global work force by 20,000 people, Stevens said. In the past year the company has divested two businesses, consolidated facilities, frozen senior executive salaries and instituted a voluntary executive separation program that has reduced its leadership ranks by about 600 people, he said.

“Two years ago we had 146,000 employees,” Stevens said. “We now have 126,000 employees. And that number may well continue to decline. And I will tell you this kind of contraction is very painful for us, and one of the worst things I have to do is tell good people that we no longer have work for them. But these are extraordinarily difficult times and we cannot fail to take action.”

Lockheed Martin Space Systems during the past decade has emerged as the United States’ pre-eminent space hardware firm. The company in recent years has won contracts to develop the Orion crew capsule for NASA, geostationary weather satellites for the National Oceanic and Atmospheric Administration and the next generation of GPS navigation spacecraft for the Air Force.

The company has entered production mode for other key programs including the Air Force’s Space Based Infrared System for missile warning, the Advanced Extremely High Frequency constellation for secure communications and the Navy’s Mobile User Objective System. Through the height of development for those three systems, Lockheed Martin maintained a dedicated engineering staff for each, at the request of the customer, Maguire said.

“We’re now going to be moving back to more of a matrix organization where you’ve got specialists in each of the disciplines that are shared amongst the programs on a sustaining basis,” Maguire said. “I think for us it’s one of the ways we’re hoping to attack affordability, to just move away from these large dedicated staffs … toward what we call a ‘buy by the drink’ model.”

Lockheed Martin Space Systems maintains a large presence in Denver, Sunnyvale, Calif., Huntsville, Ala., and Newtown, Pa. During the past decade it has expanded its footprint at these locations by leasing facilities, Maguire said.

“We’re not looking at any major facility closures,” she said. “We’re looking at places where we have in the past decade expanded beyond the perimeter of the facility, especially in California, into some leased spaces and [determine if we can] exit those leases and pull those spaces back into the perimeter.”

Better management of its supply chain is another way Lockheed Martin can address affordability, which is why the company is enthused to see the Pentagon moving toward block buys of satellites, Maguire said. The Pentagon has asked Congress for permission to contract with Lockheed Martin in 2012 for the fifth and sixth Advanced Extremely High Frequency satellites on a fixed-price basis and plans to do the same in 2013 for the fifth and sixth Space Based Infrared System craft.

“We have real interesting times ahead of us if you think about some of these follow-on contracts that will be fixed-price,” Maguire said. “It’s going to engender discipline that will be a challenge for our customers, ourselves and our suppliers. The trick, of course, is to do all that without missing a beat on mission success.”