Lockheed Martin Corporation

views updated May 17 2018

Lockheed Martin Corporation

6801 Rockledge Drive
Bethesda, Maryland 20817
U.S.A.
Telephone: (301) 897-6000
Toll Free: (800) 568-9758
Fax: (301) 897-6704
Web site: http://www.lockheedmartin.com

Public Company
Incorporated: 1995
Employees: 140,000
Sales: $39.62 billion (2006)
Stock Exchanges: New York
Ticker Symbol: LMT
NAIC: 334511 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334290 Other Communication Equipment Manufacturing; 336411 Aircraft Manufacturing; 336413 Other Aircraft Part and Auxiliary Equipment Manufacturing; 336414 Guided Missile and Space Vehicle Manufacturing; 541710 Research and Development in the Physical, Engineering, and Life Sciences; 551112 Offices of Other Holding Companies

THE MARTIN STORY

MERGER WITH MARIETTA

FORMATION OF LOCKHEED MARTIN: 1995

STILL AN AERONAUTICS GIANT

SERVING CIVIL SERVANTS

GROWTH IN THE FACE OF CHALLENGES

PRINCIPAL SUBSIDIARIES

PRINCIPAL OPERATING UNITS

PRINCIPAL COMPETITORS

THE MARTIN STORY

In 1905 a youthful Glenn Martin moved with his family to California. In the hills of Santa Ana, Martin built and flew his first experimental gliders. Not long afterward Martin started a small airplane factory while working as a salesman for Ford and Maxwell cars. Martin applied his earnings from the auto sales, as well as money from barnstorming performances, to finance an airplane business. During this time he hired a man named Donald Douglas to help him develop new airplanes. Soon thereafter, Douglas and Martin collaborated to produce a small flight trainer called a Model TT which was sold to the U.S. Army and the Dutch government.

On the eve of World War I, Douglas was summoned to Washington to help the Army develop its aerial capabilities. Less than a year later, he became frustrated with the slow-moving bureaucracy in Washington and returned to work for Martin, who had relocated to Cleveland. While there, Douglas directed the development of Martin’s unnamed twin-engine bomber. Neither he nor Martin was willing to compromise or shorten the period of time needed for the development of their airplane. For that reason the “Martin” bomber arrived too late to see action in World War I. When Martin moved to Baltimore in 1929, Douglas left the company to start his own aircraft company in California.

Martin continued to impress the military with his aircraft demonstrations even after the war. In July 1921, off the Virginia Capes, seven Martin MB-2 bombers under the command of General Billy Mitchell sank the captured German battleship Ostfreisland. Continued interest from the War Department led Martin’s company to develop its next generation of airplanes, culminating with the B-10 bomber. The B-10 was a durable bomber, able to carry heavy payloads and cruise 100 miles per hour faster than conventional bombers of the day. Martin’s work on the B-10 bomber earned him the Collier Trophy in 1932.

Although Martin continued to manufacture bombers throughout the 1930s, he also began to branch out into commercial passenger aircraft. With substantial financial backing from Pan Am’s Juan Trippe, Martin developed the M-130 “China Clipper,” the first of which was delivered in 1932. The clipper weighed 26 tons, carried up to 32 passengers, and was capable of flying the entire 2,500 miles between San Francisco and Honolulu. Pan Am flew Martin’s planes to a variety of Asian destinations, including Manila and Hong Kong.

However, Martin’s consistent development of military aircraft through the decade prepared it well for the start of World War II. The company produced thousands of airplanes for the Allied war effort, including the A-30 Baltimore, the B-26 and B-29 bombers, the PBM Mariner flying boat, and the 70-ton amphibious Mars air freighter. Martin invited some criticism in 1942 when he suggested that the United States could dispense with its costly two-ocean navy and defense of the Panama Canal if it had enough airplanes like the Mars.

After the war ended Martin continued to manufacture what few airplanes the Army and Navy were still ordering. In 1947 the company reentered the highly competitive commercial airliner market with a model called the M-202. The development of later aircraft, the M-303 (which was never built) and the M-404, was a severe drain on company finances. Despite loans from the Reconstruction Finance Corporation, the Mellon Bank of Pittsburgh, and a number of other sources, the Martin Company was unable to generate an operating profit.

In July 1949 Chester C. Pearson was hired as president and general manager of the company. Glenn Martin, at the age of 63, was moved up to the position of chairman. Despite the new management and an increase in orders as a result of the Korean War, the Martin Company was still losing money. There were two reasons: first, production of the 404 was interrupted, which, in turn, halted delivery and therefore payment for the aircraft. Second, the company hired hundreds of new but unskilled workers, which lowered productivity.

By the end of 1951 George M. Bunker and J. Bradford Wharton, Jr., were asked to take over the management of the company. As part of a refinancing plan Glenn Martin was given the title of honorary chairman and his 275,000 shares in the company were placed in a voting trust. Martin resigned his position in the company in May 1953, but remained as a company director until his death. George Bunker succeeded Martin as president and chairman and directed the company for the next 20 years. Pearson, who was demoted to vice-president, later resigned. Bunker and Wharton were successful in arresting the company’s losses and by the end of 1954 declared the company out of debt. Martin, who never married, died of a stroke in 1955 at the age of 69.

Under its new leadership, Martin substantially re-engineered a version of the English Electric Canberra bomber for the U.S. Air Force. Known as the M-272, the bomber was given the Air Force designation B-57. Martin built a number of scout and patrol planes, including the P5-M and P6-M flying boats, and expanded its interest in the development of rockets and missiles. One of Martin’s first projects in this area was the Viking high-altitude research rocket, followed by the Vanguard missile. By the 1960s the company was a leader in the manufacture of second-generation rockets including the Titan II.

COMPANY PERSPECTIVES

We at Lockheed Martin are privileged to serve those who serve, delivering products and services that support some of the most significant programs to advance freedom and promote progress for people worldwide.

Despite the company’s return to profitability after the Korean War, the larger airplane manufacturers such as Boeing, Douglas, and Lockheed had the advantage of size, which allowed them to compete more effectively with smaller companies including Martin, Vought, and Grumman. These smaller companies, however, retained very different kinds of engineering teams which allowed them to continue developing unique aeronautic equipment and weapons systems.

The company was largely unsuccessful in achieving diversification in anything but its number of government customers. Martin aircraft was subject to the whims of the Department of Defense with its unstable pattern of purchases. By December 1960 Martin’s last airplane, a Navy P5M-2 antisubmarine patrol plane, rolled off the production line. From this point forward the company produced only missiles, including the Bull-pup, Matador, Titan, and Pershing among them.

MERGER WITH MARIETTA

The Martin Company diversified through a merger with the American-Marietta Corporation, a manufacturer of chemical products, paints, inks, household products, and construction materials, in 1961. After convincing the government that the merger would not reduce competition in any of either company’s industries, the two companies formed Martin Marietta. The diversification continued in 1968 with the purchase of Harvey Aluminum. The name of the subsidiary was changed to Martin Marietta Aluminum in 1971.

Martin Marietta became known for its space projects, but remained a major producer of aluminum and construction materials during the late 1960s and early 1970s. In 1969 the company’s aerospace unit was selected to lead construction of the two Viking capsules that landed on Mars in 1976. In 1973 the company was awarded a contract to build the external fuel tank for NASA’s space shuttles.

Thomas G. Pownall advanced to the presidency of Martin Marietta in 1977 and chief executive officer in 1982, succeeding J. Donald Rauth. The same year Martin Marietta faced the most significant challenge to its existence in its history: a hostile takeover bid from the Bendix Corporation. Bendix, which had earlier abandoned an attempt to take over RCA, was led at the time by Bill Agee. For several years Agee had been divesting Bendix of its residual businesses, accumulating a $500 million “war chest” in the process. In 1982, he leveraged that fund into a $1.5 billion bid for Martin Marietta.

Martin Marietta responded with a surprising turnabout. CEO Pownall invited a friend, Harry Gray of United Technologies, to assist with a takeover strategy of their own. Pownall and Gray agreed to divide Bendix among them in the event that either Martin Marietta or United Technologies was successful in taking over Bendix. The takeover was stalemated until a three-way deal was arranged wherein the Allied Corporation agreed to purchase Martin Marietta’s holdings in Bendix on the condition that Bendix abandon its bid for Martin Marietta. The deal left Allied with a 39 percent ownership of Martin Marietta, but it was agreed that Allied’s voting share would be directed by Martin’s board until such time that Allied could sell its interest in Martin. Bill Agee joined Allied’s board of directors but later left the company. In the meantime, Martin Marietta went $1.34 billion into debt as a result of its takeover defense.

In order to reduce the company’s debt load, Pownall divested its cement, chemical, and aluminum operations, and accelerated a reorganization begun before the takeover crisis. By 1986 debt was down to $220 million, giving Martin Marietta a comfortable debt-to-total capitalization ratio of 24 percent. In retrospect, Tom Pownall acknowledged that his company had emerged from Bendix’s takeover attempt as a more tightly managed and efficient business.

KEY DATES

1929:: Glenn Martin launches aircraft company in California.
1961:: Martin Company merges with American-Marietta Corporation.
1991:: Lockheed Martin wins bid to build the U.S.Air Force’s fifth-generation fighter, the F-22 Raptor.
1992:: General Electric Co.’s aerospace operations are acquired.
1995:: Martin Marietta merges with Lockheed Corporation, forming world’s largest defense company.
1996:: Loral Corp.’s Defense Electronics and Systems Integration business are acquired.
2001:: Lockheed Martin is chosen to build the next-generation Joint Strike Fighter (F-35) for the United States, United Kingdom, and other nations.
2005:: Lockheed Martin joins Boeing in United Launch Alliance.

In the late 1980s, the company became active in the design, manufacture, and management of energy, electronics communication, and information systems, including the highly sophisticated level of computer technology known as artificial intelligence. Even with this diversification, 80 percent of Martin Marietta’s revenues continued to be generated via U.S. government contracts. The company supplied the Pentagon with a number of weapons systems, including the Pershing II missile, a major part of the MX missile; the Patriot missile, designed for air defense of field armies; and the Copperhead, a “smart,” or guided, cannon shell. Martin Marietta also developed a series of night vision devices for combat aircraft.

The company continued to build external fuel tanks for NASA’s space shuttle program, despite the temporary suspension of that program following the Challenger tragedy. Martin Marietta was also a major contractor for the International space station. In another public project, the company was working on a new air traffic management system for the Federal Aviation Administration.

Norman R. Augustine, Tom Pownall’s handpicked successor, succeeded his mentor as chairman and CEO upon the latter’s mid-1980s retirement. Augustine proved an auspicious choice. Anticipating the impending reductions in the U.S. defense budget, which slid from a high of $96 billion in 1987 down to $75 billion by 1992, the new leader and his executive team developed a three-pronged plan to survive the shakeout. Dubbed the “Peace Dividend Strategy,” the blueprint called for growth through acquisition, diversification into civil and commercial infrastructure markets, and maintaining financial health. Under Augustine, Martin Marietta dived into the wave of consolidation that swept over the American defense industry in the early 1990s. He guided the $3 billion acquisition of General Electric Co.’s aerospace operations in 1992. The merger, which added about $6 billion in annual sales, boosted Martin Marietta’s capabilities in digital processing, artificial intelligence, and electronics. Two years later, Martin Marietta expanded its capabilities in the wireless communications and commercial aviation markets with the acquisition of Grumman Corp. for $1.9 billion.

FORMATION OF LOCKHEED MARTIN: 1995

However, Augustine’s most dramatic move came in 1994, when Martin Marietta and Lockheed Corporation announced a “merger of equals.” It took the Federal Trade Commission several months to approve the union, which created the world’s largest defense company. While the federal government typically discouraged such massive combinations within the same business area, it regarded this consolidation in the defense industry with favor, since, according to one statement, it “boosts the industry’s efficiency and lowers costs for the government, which in turn benefits taxpayers, shareholders and employees.”

The spring 1995 exchange of stock created an advanced technology conglomerate with interests in the defense, space, energy, and government sectors serving the commercial, civil, and international markets. Daniel M. Tellep, chairman and CEO of Lockheed, held those same positions at the new company. Martin Marietta leader Augustine stepped into the office of president with the promise that he would advance into the top spots upon Tellep’s retirement.

Headquartered in Bethesda, Maryland, Lockheed Martin began a process of consolidation and reorganization even before the merger was completed in March 1995. An organizational consolidation grouped operations around four major business sectors: space and strategic missiles, aeronautics, electronics, and information technology services. The plan merged and eliminated dozens of offices and functions, rendering thousands of jobs redundant in the process. In fact, Lockheed Martin slashed its workforce from a combined total of 170,000 people to 130,000 by mid-1995 and expected to furlough another 12,000 by 1999.

The unified company was involved in a number of well-publicized projects, including the Hubble Space Telescope, Motorola’s Iridium satellite telecommunications system, the F-22 Stealth fighter, Titan and Atlas space launch vehicles, the space shuttle program, and the space station Freedom.

The January 1996 acquisition of Loral Corp.’s Defense Electronics and Systems Integration business made it clear that Lockheed Martin would not soon relinquish its number one status. Established in 1948, the Loral division was a $6.8 billion operation and a global leader in defense electronics, communications, space, and systems integration. The acquisition was initially categorized as a sixth division, Tactical Systems, at Lockheed Martin. Anthony L. Velocci, Jr., an analyst with Aviation Week and Space Technology, predicted that Lockheed Martin would encounter difficulty in consolidating the Loral operations into its own recently reorganized divisions, but that the acquisition would bring economies of scale and boost electronics, tactical systems, and information technology.

Loral Chairman and CEO Bernard Schwartz held those same positions at the newly formed Lockheed Martin subsidiary and was invited to join the latter company’s board of directors. Schwartz, Tellep, and Augustine became the first members of Lockheed Martin’s three-man office of the chairman as a result of the acquisition. Augustine retired in 1997 to teach at Princeton. His successor, Vance D. Coffman, had been an executive at Martin Marietta before the merger.

Lockheed Martin was a member of the United Space Alliance, which had been handling launch operations for the space shuttle since 1995. In 1998 the U.S. Air Force selected Lockheed Martin to build the Evolved Expendable Launch Vehicle (EELV), or Atlas V. It was first launched in 2002, three years before the final flight of the Titan IV, which had been in service for a half-century.

The company’s Mars Odyssey reached Mars in 2001, while the Spitzer Space Telescope was launched in 2003. Lockheed Martin joined the Boeing Company in a joint venture called the United Launch Alliance in 2005. The next year, it was chosen to build NASA’s Orion Crew Exploration Vehicle, the successor to the space shuttle.

STILL AN AERONAUTICS GIANT

Lockheed Martin aircraft continued to be a mainstay of NATO air fleets. The company was bringing out new versions of designs dating back to the 1950s, such as the C-130 Hercules transport and U-2 spy plane. At the same time, it was successful in landing contracts to develop the next generation of fighter aircraft. The company’s candidate won the Joint Strike Fighter competition in 2001. This aircraft, dubbed the F-35 Lightning II, first flew in 2006. Several countries, led by the United States and United Kingdom, were involved in the program. The United States expected to pay more than $200 billion for its first 3,000 planes. Lockheed Martin’s aeronautics division was working on an unmanned variant of the F-35.

The F-22 Raptor, the Lockheed Martin/Boeing fifth-generation replacement for the F-15 fighter, entered flight testing in 1997 after a decade and a half in development. Lockheed Martin delivered 74 of the planes to the Air Force by mid-2006 although Congress had nearly killed the program several years earlier. Lockheed Martin was also the prime contractor for a helicopter that was chosen as the new Marine One, the helicopter dedicated to transporting the U.S. president, in 2005.

SERVING CIVIL SERVANTS

In the late 1990s, Lockheed Martin designed a number of systems for the U.S. Postal Service. Its corporate information technology business was growing with the addition of clients such as NIKE, Inc., as well as federal agencies.

Lockheed Martin systems were used to process forms for the U.S. census in 2000 and the U.K. census in 2001. A 2004 contract extended Lockheed Martin’s relationship with the Social Security Administration, begun in 1989, through to 2011. The company was chosen to handle the National Archives’ electronic records in 2005.

After the September 11, 2001, terrorist attacks on the United States, Lockheed Martin trained tens of thousands of screeners for the newly formed Transportation Security Administration. In 2002, the company won a contract to modernize air traffic control systems for the Federal Aviation Administration.

The company was also performing complicated systems integration services for the military. In 2000 it won a bid to coordinate warfare systems for the Navy’s new CVN-77 aircraft carrier. It was also updating command and control systems for the U.S. Air Force.

GROWTH IN THE FACE OF CHALLENGES

Lockheed Martin had revenues approaching $40 billion in 2006. There were 140,000 employees. The U.S. government accounted for 84 percent of net sales. There had been some stumbles along the way. The company had ended the millennium with a couple of rocket failures and some Congressional opposition to its capable but very expensive fifth-generation fighter programs. Saddled with $12 billion in debt from acquisitions, Lockheed Martin began to miss earnings targets until a new chief financial officer was hired. Staff cuts and more than $1 billion worth of divestments followed.

The company continued to expand its capabilities through acquisitions, however. It bought Comsat Corp., the U.S. representative on international communications satellite networks, for $2.1 billion in 2001. Other purchases included records management specialist Aspen Systems, Savi Technology, Pacific Architects and Engineers, and the United Kingdom’s HMT Vehicles Ltd.

The company bought OAO Corporation in 2001. Two more information technology providers, ACS and Orincon, were acquired a couple of years later, and a third, SYTEX Group Inc., was added in 2004. In 2005 Lockheed Martin bought Coherent Technologies, provider of laser-based remote sensing systems. Lockheed Martin bought Sippican Holdings Inc., which supplied technology for naval warfare applications, in 2004. U.K. firms STASY Ltd. and INSYS Group Ltd. were acquired the next year.

Updated, Jeffrey L. Covell
April Dougal Gasbarre
Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

Advanced Technologies Laboratories; Center for Innovation; LMC Properties, Inc.; Lockheed Martin UK; United Space Alliance, LLC.

PRINCIPAL OPERATING UNITS

Aeronautics, Electronic Systems; Information Systems & Global Services; Space Systems.

PRINCIPAL COMPETITORS

Boeing Company; EADS; Northrop Grumman Corp.; Raytheon Co.

Lockheed Martin Corporation

views updated Jun 27 2018

Lockheed Martin Corporation

6801 Rockledge Drive
Bethesda, Maryland 20817
U.S.A.
(301) 897-6000
Fax: (301) 897-6252

Public Company
Incorporated: 1961
Employees: 69,000
Sales: $22.85 billion (1995)
Stock Exchanges: New York
SICs: 3761 Guided Missiles And Space Vehicles; 3812 Search And Navigation Equipment; 3764 Space Propulsion Units And Parts; 7370 Computer And Data Processing Services; 3579 Office Machines, Not Elsewhere Classified; 1442 Construction Sand and Gravel

Formed in 1995 via the union of the nation’s second- and third-ranking defense contractors, Lockheed Corporation and Martin Marietta Corporation, Lockheed Martin Corporation is the world’s largest defense contractor. Lockheed Martin further broadened its lead over second ranking McDonnell Douglas with the January 1996 acquisition of Loral Corporation’s Defense Electronics and Systems Integration for $9.1 billion and $2.1 billion of assumed debt. Both Lockheed and Martin Marietta had evolved from relatively small aerospace manufacturers into titans of the global defense industry. A thorough treatment of Lockheed’s history appears elsewhere in this series, while the Martin Marietta saga is recounted here.

In 1905 a youthful Glenn Martin moved with his family to California. In the hills of Santa Ana, Martin built and flew his first experimental gliders. Not long afterwards Martin started a small airplane factory while working as a salesman for Ford and Maxwell cars. Martin applied his earnings from the auto sales, as well as money from barnstorming performances, to finance an airplane business. During this time he hired a man named Donald Douglas to help him develop new airplanes. Soon thereafter, Douglas and Martin collaborated to produce a small flight trainer called a Model TT which was sold to the U.S. Army and the Dutch government.

On the eve of World War I, Douglas was summoned to Washington to help the Army develop its aerial capabilities. Less than a year later, he became frustrated with the slow moving bureaucracy in Washington and returned to work for Martin, who had relocated to Cleveland. While there, Douglas directed the development of Martin’s unnamed twin-engine bomber. Neither he nor Martin was willing to compromise or shorten the period of time needed for the development of their airplane. For that reason the “Martin” bomber, arrived too late to see action in World War I. When Martin moved to Baltimore in 1929, Douglas left the company to start his own aircraft company in California.

Martin continued to impress the military with his aircraft demonstrations even after the war. In July of 1921, off the Virginia Capes, seven Martin MB-2 bombers under the command of General Billy Mitchell sank the captured German battleship Ostfreisland. Continued interest from the War Department led Martin’s company to develop its next generation of airplanes, culminating with the B-10 bomber. The B-10 was a durable bomber, able to carry heavy payloads and cruise 100 miles per hour faster than conventional bombers of the day. Martin’s work on the B-10 bomber earned him the Collier Trophy in 1932.

Although Martin continued to manufacture bombers throughout the 1930s, he also began to branch out into commercial passenger aircraft. With substantial financial backing from Pan Am’s Juan Trippe, Martin developed the M-130 “China Clipper,” the first of which was delivered in 1932. The clipper weighed 26 tons, carried up to 32 passengers and was capable of flying the entire 2,500 miles between San Francisco and Honolulu. Pan Am flew Martin’s planes to a variety of Asian destinations, including Manila and Hong Kong.

But Martin’s consistent development of military aircraft through the decade prepared it well for the start of World War II. The company produced thousands of airplanes for the Allied war effort, including the A-30 Baltimore, the B-26 and B-29 bombers, the PBM Mariner flying boat, and the 70-ton amphibious Mars air freighter. Martin invited some criticism in 1942 when he suggested that the United States could dispense with its costly two-ocean navy and defense of the Panama Canal if it had enough airplanes like the Mars.

After the war ended Martin continued to manufacture what few airplanes the Army and Navy were still ordering. In 1947 the company re-entered the highly competitive commercial airliner market with a model called the M-202. The development of later aircraft, the M-303 (which was never built) and the M-404, was a severe drain on company finances. Despite loans from the Reconstruction Finance Corporation, the Mellon Bank of Pittsburgh, and a number of other sources, the Martin Company was unable to generate an operating profit.

In July 1949 Chester C. Pearson was hired as president and general manager of the company. Glenn Martin, at the age of 63, was moved up to the position of chairman. Despite the new management and an increase in orders as a result of the Korean War, the Martin Company was still losing money. There were two reasons: first, production of the 404 was interrupted which, in turn, halted delivery and therefore payment for the aircraft. Second, the company hired hundreds of new but unskilled workers, which lowered productivity.

By the end of 1951 George M. Bunker and J. Bradford Wharton, Jr. were asked to take over the management of the company. As part of a refinancing plan Glenn Martin was given the title of honorary chairman and his 275,000 shares in the company were placed in a voting trust. Glenn Martin resigned his position in the company in May of 1953, but remained as a company director until his death. George Bunker succeeded Martin as president and chairman and directed the company for the next 20 years. Pearson, who was demoted to vice-president, later resigned. Bunker and Wharton were successful in arresting the company’s losses and by the end of 1954 declared the company out of debt. Martin, who never married, died of a stroke in 1955 at the age of 69.

Under its new leadership, Martin substantially reengineered a version of the English Electric Canberra bomber for the United States Air Force. Known as the M-272, the bomber was given the Air Force designation B-57. Martin built a number of scout and patrol planes, including the P5-M and P6-M flying boats, and expanded its interest in the development of rockets and missiles. One of Martin’s first projects in this area was the Viking high-altitude research rocket, followed by the Vanguard missile. By the 1960s the company was a leader in the manufacture of second generation rockets like the Titan II.

Despite the company’s return to profitability after the Korean War, the larger airplane manufacturers such as Boeing, Douglas and Lockheed had the advantage of size, which allowed them to compete more effectively with smaller companies like Martin, Vought and Grumman. These smaller companies, however, retained very different kinds of engineering teams which allowed them to continue developing unique aeronautic equipment and weapons systems.

The company was largely unsuccessful in achieving diversification in anything but its number of government customers. Martin aircraft was subject to the whims of the Department of Defense with its unstable pattern of purchases. By December of 1960 Martin’s last airplane, a Navy P5M-2 antisubmarine patrol plane, rolled off the production line. From this point forward the company produced only missiles, including the Bullpup, Matador, Titan and Pershing among them.

The Martin Company diversified through a merger with the American-Marietta Corporation, a manufacturer of chemical products, paints, inks, household products and construction materials, in 1961. After convincing the government that the merger would not reduce competition in any of either company’s industries, the two companies formed Martin Marietta. The diversification continued in 1968 with the purchase of Harvey Aluminum. The name of the subsidiary was changed to Martin Marietta Aluminum in 1971.

Martin Marietta became known for its space projects, but remained a major producer of aluminum and construction materials, during the late 1960s and early 1970s. In 1969 the company’s aerospace unit was selected to lead construction of the two Viking capsules which landed on Mars in 1976. In 1973 the company was awarded a contract to build the external fuel tank for NASA’s space shuttles.

Thomas G. Pownall advanced to the presidency of Martin Marietta in 1977 and chief executive officer in 1982, succeeding J. Donald Rauth. The same year Martin Marietta faced the most significant challenge to its existence in its history—a hostile takeover bid from the Bendix Corporation. Bendix, which had earlier abandoned an attempt to take over RCA, was led at the time by Bill Agee. For several years Agee had been divesting Bendix of its residual businesses, accumulating a $500 million “war chest” in the process. In 1982, he leveraged that fund into a $1.5 billion bid for Martin Marietta.

In order to reduce the company’s debt load, Pownall divested its cement, chemical and aluminum operations, and accelerated a reorganization begun before the takeover crisis. By 1986 debt was down to $220 million, giving Martin Marietta a comfortable debt-to-total capitalization ratio of 24 percent. In retrospect, Tom Pownall acknowledged that his company had emerged from Bendix’s takeover attempt as a more tightly managed and efficient business.

In the late 1980s, the company became active in the design, manufacture, and management of energy, electronics communication, and information systems, including the highly sophisticated level of computer technology known as artificial intelligence. Even with this diversification, 80 percent of Martin Marietta’s revenues continued to be generated via U.S. government contracts. The company supplies the Pentagon with a number of weapons systems, including the Pershing II missile, a major part of the MX missile; the Patriot missile, designed for air defense of field armies; and the Copperhead, a “smart,” or guided, cannon shell. Martin Marietta also developed a series of night vision devices for combat aircraft.

The company continued to build external fuel tanks for NASA’s space shuttle program, despite the temporary suspension of that program following the Challenger tragedy. Martin Marietta was also a major contractor for the American space station scheduled to be built in 1993. In another public project, the company was working on a new air traffic management system for the Federal Aviation Administration.

Norman R. Augustine, Tom Pownall’s hand-picked successor, succeeded his mentor as chairman and CEO upon the latter’s mid-1980s retirement. Augustine proved an auspicious choice. Anticipating the impending reductions in the U.S. defense budget, which slid from a high of $96 billion in 1987 down to $75 billion by 1992, the new leader and his executive team developed a three-pronged plan to survive the shakeout. Dubbed the “Peace Dividend Strategy,” the blueprint called for growth through acquisition, diversification into civil and commercial infrastructure markets, and maintaining financial health. Under Augustine, Martin Marietta dove into the wave of consolidation that swept over the American defense industry in the early 1990s. He guided the $3 billion acquisition of General Electric Co.’s aerospace operations in 1992. The merger, which added about $6 billion in annual sales, boosted Martin Marietta’s capabilities in digital processing, artificial intelligence, and electronics. Two years later, Martin Marietta expanded its capabilities in the wireless communications and commercial aviation markets with the acquisition of Grumman Corp. for $1.9 billion.

However, Augustine’s most dramatic move came in 1994, when Martin Marietta and Lockheed announced a “merger of equals.” It took the Federal Trade Commission several months to approve the union, which created the world’s largest defense company. While the federal government typically discouraged such massive combinations within the same business area, it regarded this consolidation in the defense industry with favor, since, according to one statement, it “boosts the industry’s efficiency and lowers costs for the government, which in turn benefits taxpayers, shareholders and employees.”

Headquartered in Bethesda, Maryland, Lockheed Martin began a process of consolidation and reorganization even before the merger was completed in March 1995. An organizational consolidation grouped operations around four major business sectors: space and strategic missiles, aeronautics, electronics, and information technology services. The plan merged and eliminated dozens of offices and functions, rendering thousands of jobs redundant in the process. In fact, Lockheed Martin slashed its work force from a combined total of 170,000 people to 130,000 by mid-1995 and expected to furlough another 12,000 by 1999.

The unified company was involved in a number of wellpublicized projects, including the Hubble Space Telescope, Motorola’s Iridium satellite telecommunications system, the F-22 Stealth fighter, Titan and Atlas space launch vehicles, the Space Shuttle program, and the space station Freedom.

The January 1996 acquisition of Loral Corp.’s Defense Electronics and Systems Integration business made it clear that Lockheed Martin would not soon relinquish its number-one status. Established in 1948, the Loral division was a $6.8 billion operation and a global leader in defense electronics, communications, space and systems integration. The acquisition was initially categorized as a sixth division, Tactical Systems, at Lockheed Martin. Anthony L. Velocci Jr., an analyst with Aviation Week and Space Technology, predicted that Lockheed Martin would encounter difficulty in consolidating the Loral operations into its own recently-reorganized divisions, but that the acquisition would bring economies of scale and boost electronics, tactical systems, and information technology.

Loral Chairman and CEO Bernard Schwartz held those same positions at the newly-formed Lockheed Martin subsidiary and was invited to join the latter company’s board of directors. Schwartz, Tellep, and Augustine became the first members of Lockheed Martin’s three-man office of the chairman as a result of the acquisition.

Principal Subsidiaries

Lockheed Foreign Sales Corp.; Lockheed Leadership Fund; Lockheed Missiles & Space Co.; Lockheed Support Systems Inc.: Lockheed Aircraft Service International; Lockheed Fort Worth International Corp.; Lockheed International Service & Investment Corp.; Lockheed Space Operations Co.; Lockheed Information Management Services Co.; Lockheed Aeronautical Systems Support Co.; Tri Star Parts Ltd.; Lockheed Boeing ATF Partnership; Murdock Engineering Co.; Lockheed Employment Services Co. Inc.; Lockheed Aeronautical Systems Employment Services Co., Inc.; Lockheed Finance Corp.; Lockheed Systems Co. Inc.; Lockheed Engineering & Sciences Co.; Lockheed Aeromod Center, Inc.; Lockheed Materials Processing Co.; Lockheed Aeroparts, Inc.; Formtek, Inc.; Lockheed Commercial Aircraft Center, Inc.; Lockheed International Services Inc.; Lockheed-Hellas, S.A.; Lockheed of Turkey, Inc.; Lockheed Ho-Chin, Inc.; Lockheed Information Technology Co.; Lockheed Commercial Electronics Co.; Lockheed Idaho Technologies Co.; Lockheed Transport Systems Inc.; Lockheed Mercartor Information Co. Inc.; Lockheed Aircraft Ltd. (Australia); Lockheed Canada; Lockheed International (Germany); Lockheed Corporation S.A. (Switzerland); Hellenic Business Development & Investment Co. S.A. (Greece); Lockheed B.V. (Netherlands); Lockheed Investment Holding Co. (Turkey); Lockheed Aircraft Argentina; Lockheed Information Mgmt Service Co.; Mountaingate Data Systems; Lockheed Sanders Inc.; G.E. CFTS (U.S.); G.E. CFTS II (U.S.); EOSAT (U.S.) (50%); GETAC (Taiwan) (50%); KAPL, Inc.; Management Technical Services Co. (MATSCO); Martin Marietta International, Inc.; Martin Marietta International Commercial Sales, Inc.; Martin Marietta Overseas Corp.; Martin Marietta Overseas Services Corp.; MMC Acquisition Corp.; Lockheed Martin Integrated Systems, Inc.; Samdia Corp.; Technology Ventures Corp.; Martin Marietta Technologies, Inc.; Export Products Foreign Sales Corp.; Gamma Monolithics (75%); Innovative Ventures Corp.; International Launch Services, Inc.; International Light Metals Sales Corp.; TI/Javelin Joint Venture (50%); The Martin Co., Martin Marietta Australia Pty. Ltd.; Martin Marietta Canada, Ltd.; Martin Marietta Carbon Inc.; Martin Marietta Commercial Launch Services, Inc.; Martin Marietta Diversified Technologies, Inc.; Lockheed Martin Marietta Energy Systems, Inc.; Martin Marietta Environmental Holdings, Inc.; MMGE Martin Marietta-Gama Electronik ve Enformasyon (60%); Martin Marietta Information Tech., Inc.; Martin Marietta Millimeter Technologies, Inc.; Martin Marietta Ordnance Systems, Inc.; Martin Marietta Services, Inc.; Martin Marietta Spec. Components, Inc.; Martin Marietta Technical Services, Inc.; Martin Marietta Turkish Holdings, Inc.; Lockheed martin Utility Services, Inc.; Martin Metals Co.; Mathematica Pol. Res. Hold. Corp.; Tennessee Innovation Center; Torrance Advanced Metals Corp.

Principal Divisions

Aeronautics, Electronics, Energy & Environment, Information and Technology Services, Space & Strategic Missiles, Tactical Systems.

Lockheed Martin Corporation

views updated May 14 2018

Lockheed Martin Corporation

founded: 1926

Contact Information:

headquarters: 6801 rockledge drive
bethesda, md 20817 phone: (301)897-6000 fax: (301)897-6704 url: http://www.lockheedmartin.com

OVERVIEW

Lockheed Martin Corp. is the largest defense contracting company in the world. It is a major contractor to the U.S. Department of Defense (DoD), civil agencies of the U.S. federal government, foreign governments, and private companies. The U.S. federal government is Lockheed Martin's single largest client—by far. In 2001, it was responsible for over three quarters of all Lockheed's net sales. Lockheed operates a chain of facilities, including plants, laboratories, service centers, administrative centers, and warehouses throughout the world. Most are located in the United States. Lockheed Martin is headquartered in Bethesda, Maryland.

Lockheed Martin is divided into four main corporate segments: Systems Integration, Space Systems, Aeronautics, and Technology Services. Systems Integration manufactures electronic systems for surface, sea, undersea, and air applications. These include radar and other surveillance systems, tactical missile systems, high performance sensor systems, and so-called C4I systems—command, control, communications, computers, and intelligence systems. Systems Integration is based in Bethesda Maryland. The Space Systems segment produces space systems for both the government and civilian sectors. Its products include communications and surveillance satellites, launch vehicles, ground systems for space launches, and space-based missile systems. The segment is involved with various joint ventures, including United Space Alliance, LLC, which manages and operates NASA's space shuttles. The segment is based in Denver, Colorado. Lockheed's Aeronautics segment produces a broad line of combat and transport aircraft, including the F-35 Joint Strike Fighter, the F-16 multi-role fighter, the F-22 Raptor fighter, and the C-130J tactical airlift aircraft. The segment is based in Fort Worth, Texas. The Technology Services segment produces a line of scientific, engineering, and logistic products and services. They include software modernization services, data management, engineering, and scientific consulting for NASA, training, maintenance and logistical support for government and civilian systems, and R&D in connection with government nuclear weapons and reactor programs. Technology Services is headquartered in Cherry Hill, New Jersey. Lockheed Martin had a fifth segment, Global Telecommunications, which it discontinued at the end of 2001.

COMPANY FINANCES

Lockheed Martin reported about $24 billion in net sales in 2001, down 2 percent from 2000. Its largest customer, the U.S. federal government, accounted for about 78 percent of Lockheed's sales in 2001, or about $18.6 billion. In comparison, foreign governments made $3.89 billion in purchases from Lockheed in 2001. The commercial sector brought up the rear, accounting for just under $1.5 billion of Lockheed Martin's net sales that year, primarily space launch services, satellites, and information technology services. Systems Integration accounted for more of Lockheed's net sales than any other segment in 2001 with about $9 billion generated. Space Systems was second in sales with $6.84 billion, 87 percent of sales were to the federal government. The Aeronautics segment made about $5.35 in net sales in 2001; sixty-five percent of those sales were to the U.S. government and 35 percent to foreign governments. Technology Services was responsible for 12 percent of Lockheed's 2001 sales. At the end of 2001, the company had just under $71.3 in backlog, or firm orders from clients, an increase of almost 30 percent from 2000. Most of those orders would not be filled by the end of 2002.

Lockheed's 2001 operating profit was $888 million, down from $1,251 million in 2000 and $1,997 million in 1999. In the end the company reported a net loss of $1.05 billion in 2001, which worked out to a loss of $2.42 per share, almost double the loss in 2000. The loss was attributable in part to the write-off of its discontinued Global Telecommunications segment and to a change in the company's accounting procedures. Lockheed Martin's share price remained relatively stable during 2001, but jumped at year end following the terrorist attacks on the World Trade Center and the Pentagon.

ANALYSTS' OPINIONS

Analysts were confident that 2002 marked a new chapter for Lockheed Martin, and a recovery from its woes of the late 1990s. Value Line predicted an "earnings surge" as the result of new contracts received from the federal government and foreign governments. For example, Lockheed received orders for its new F-35 fighter from Britain, Canada, Turkey, the Netherlands, and Denmark. Value Line predicted a continuing rise in the company's stock price until the mid-2000s.

HISTORY

The company known today as Lockheed Martin was formed by the merger of two smaller firms, each founded in the early 1900s: The Lockheed Company and the Martin Company.

The Lockheed Company grew out of the Alco Hydro-Aeroplane Company founded in 1912 by Allan and Malcolm Loughead, who pronounced their name "Lockheed." In 1916 they established the Loughead Aircraft Manufacturing Company in Santa Barbara, California and were producing flying boats. The company made its first sale to the U.S. Navy in 1918, the same year the firm built the first twin engine bomber, the MB-2. In 1926, the company was reestablished as the Lockheed Aircraft Company, this time spelled phonetically—the brothers were tired of people getting it wrong. The company was sold in 1932 to Detroit Aircraft Company.

In the 1930s, the company manufactured a series of innovative planes, including the model flown by Amelia Earhart in 1932 when she made the first transatlantic flight by a woman. It supplied the Army Air Force with bombers during World War II, and in the 1950s developed, among other products, the U-2 spy plane, the Polaris submarine-launched ballistic missile, and the Titan I rocket used in the U.S. space program. In 1958 Lockheed introduced the flight recorder—the so-called black box—that is now standard equipment on all commercial and military aircraft. After attempting to break into the market for planes for commercial airlines, Lockheed experienced financial problems that almost drove it out of business in 1971. It survived with the aid of guaranteed loans from the federal government. In the later 1970s, Lockheed's relationship with certain foreign governments unleashed a bribery scandal that toppled governments in Japan and Italy. In the 1980s, it did much of the development work on the Hubble Space Telescope and the F-117A stealth fighter jet.

The other half of the organization that would become Lockheed Martin, was founded in 1909. Glenn L. Martin founded a company that supplied training aircraft to the U.S. Army Signal Corporations. It manufactured bombers and flying boats during the First World War. In the 1930s it developed new planes for military and commercial use, including the famous China Clipper, the model Pan Am used to make its first transpacific commercial flights. It supplied the military with bombers during World War II—including the two planes that dropped the atomic bombs on Hiroshima and Nagasaki—and with missiles and nuclear systems in the 1950s. After its merger with American Marietta in 1961 it became Martin Marietta. The company was the target of a hostile takeover by Bendix in 1980, but was able to avert the corporate action. The cost of the takeover defense left the company deep in debt and forced it to sell off a number of holdings.

Lockheed and Martin Marietta merged in 1995, a deal valued at $10 billion. A year later it acquired the defense electronics businesses of the Loral Corporation. With the end of the Cold War defense spending was cut 35 percent between 1985 and 1998. The company purchased the Consat Corporation hoping to break into the commercial telecommunications market and lessen its dependence on government contracts.

In the late 1990s problems emerged. Some of the company's space projects suffered catastrophic failures, including the very public loss of two Mars spacecraft in 1999. The failures were blamed on the lack of management oversight. Lockheed Martin also experienced difficulties during its attempts to integrate the operations of 17 recently acquired companies. An attempt to buy major competitor Northrop Grumman was blocked by government regulators on antitrust grounds. Lockheed's stock price dropped from $49 a share in 1998 to $16.62 in 2000. Profits had dropped 66 percent, and only large orders from the Pentagon, Greece, and the United Arab Emirates saved the firm. Meanwhile CEO Vance Coffman initiated a reorganization of the firm in 1999, which split it into four operating segments. Some of the company's holdings were also sold. A new program was implemented in 2001 to streamline operations. The company was back on the road to profitability in 2001 when it won the Joint Strike Fighter contract from the Department of Defense (DoD). Valued at $200 billion, it was the largest defense contract ever awarded.

FAST FACTS: About Lockheed Martin Corporation

Ownership: Lockheed Martin Corporation is a public company traded on the New York Stock Exchange.

Ticker Symbol: LMT

Officers: Vance D. Coffman, Chmn. and CEO, 2001 base salary $1,409,615; Robert J. Stevens, Pres. and COO, 50, 2001 base salary $766,154; Dain M. Hancock, EVP Aeronautics, 2001 base salary $561,538; Robert B. Coutts, EVP Systems Integration, 2001 base salary $561,538; Albert E. Smith, EVP Space Systems, 2001 base salary $561,538

Employees: 125,000

Principal Subsidiary Companies: In late 2001 Lockheed Martin had facilities in 384 locations in more than 50 countries, although most of them are in the United States. United Space Alliance LLC, which Lockheed Martin owns jointly with Boeing, has been contracted by NASA to manage the Space Shuttle fleet. Lockheed Martin's Technology Services segment runs the federal government's Sandia Laboratories in California.

Chief Competitors: Lockheed Martin has a number of competitors in the aerospace and defense sectors. Some of its most important competitors are: Alliant Techsystems, BAE Systems, DaimlerChrysler, General Dynamics, Northrop Grumman, Raytheon, The Boeing Company, EADS, MBDA, and Honeywell International.

STRATEGY

Lockheed Martin's strategic plan was initiated and implemented by Chairman and CEO Vance D. Coffman as a response to the company's decline in the late 1990s. It called for the company to focus on key areas such as active phased arrays, photonics and optical computing, virtual environments, systems integration, advanced sensors, advanced software technology, advanced structures and materials, and data transmission and communication, which supported advanced military platforms. An important corollary to this was the divestiture of non-core businesses and Lockheed's reorganization into four core areas, with strong lines of accountability and an emphasis on product quality. Lockheed's goal was to realize $3.7 billion in annual savings.

INFLUENCES

The events of September 11, 2001 had a great impact on Lockheed Martin. The resulting focus on civil defense, as well as the war in Afghanistan created a political climate that supported the modernization and expansion of the nation's defense infrastructure. The new political climate resulted in a proposed 2003 federal budget which included increases for defense procurement and research and development. After more than a decade of budget cuts, Lockheed Martin saw itself as the beneficiary of an increase in defense spending. The new emphasis on homeland defense may also spur demand for other Lockheed products, such as air traffic systems, biohazard detection systems, and other security systems.

CURRENT TRENDS

The defense budgets of foreign governments declined in the late 1990s and the early 2000s. The result was not only fewer contracts, but a general consolidation of the industry, particularly in Europe. The companies that remained were larger and possessed the cream of the talent from the constituent firms. They were also more able competitors. The consolidation of the European defense community signaled less demand for American manufactured products.

PRODUCTS

Lockheed Martin's most significant product, in size and long-term impact, is the Joint Strike Fighter. The Joint Strike Fighter, commissioned by the largest defense contract in history, is an aircraft designed with certain basic features—stealth technology and the capability of supersonic speeds—that can be modified to meet the individual needs of each branch of the military. The Marine version, for example, will be able to land vertically, like a helicopter. The British military is taking part in the specifications for the aircraft as well. The first 14 planes, which cost about $30 million each, are scheduled for completion in 2008. Lockheed Martin is the leading contractor on the Joint Strike Fighter project. Other firms, such as Northrop Grumman and BAE SYSTEMS are working on it as well. Other important Lockheed products include the F-16 multi-role fighter, the F-22 Raptor, and the C-130J tactical airlift aircraft.

CORPORATE CITIZENSHIP

Lockheed Martin Corporation supports a variety of efforts to help minority students in the areas of math, science, and engineering. It sponsors Math, Engineering and Science Achievement (MESA) Grants which are given to African-American, Native American, and Latino students. Similarly the Inroads program helps prepare minority students for roles in their communities and the corporate world. The company provides participating high school graduates with career-related summer jobs for three summer terms. Lockheed Martin provides financial support and volunteers to organizations such as the American Red Cross, the American Cancer Society, and the Multiple Sclerosis Association.

CHRONOLOGY: Key Dates for Lockheed Martin Corporation

1916:: Loughead Aircraft Manufacturing Co. is founded by Loughead brothers in Santa Barbara California
1917:: Glenn L. Martin Co. is founded in Cleveland, Ohio
1926:: Loughead Aircraft Manufacturing becomes Lockheed Aircraft
1929:: Lockheed is acquired by the Detroit Aircraft Company
1945:: Lockheed produces nearly 20,000 aircraft for war effort-9 percent of the total U.S. production
1961:: Martin Company merges with American Marietta
1971:: Lockheed receives government loan to avoid going into bankruptcy
1980:: Martin is the object of a hostile takeover attempt by the Bendix Corporation
1995:: Martin and Lockheed merge
1996:: Lockheed Martin acquires the Loral Corporation's defense electronics business
1998:: The U.S. government blocks a merger with Northrop Grumman
2001:: Lockheed Martin is awarded a DoD contract for the Joint Strike Fighter

Lockheed Martin encourages its employees to volunteer for educational and environmental initiatives in the communities in which they work and live. They tutor disadvantaged or at-risk elementary and high school students, rehabilitate housing for the poor and elderly, organize food drives, work at senior citizens centers, take part in environmental clean-up projects, and support public television.

GLOBAL PRESENCE

Lockheed Martin's international business consists primarily of sales of its products to foreign governments in Europe, the Middle East, and Asia. In late 2001, Israel purchased 52 F-161 fighter jets worth $1.3 billion. Sales are sometimes made directly to foreign governments, but frequently they are mediated by the U.S. government. In 2001 the company was involved in various joint ventures with foreign companies. It worked with Alenia Marconi Systems of Italy, European Aeronautic Defence and Space (EADS), and LFK—Lenkflugkorpersysteme GmbH of Germany—on the development of the Medium Extended Air Defense System for NATO. Its Aeronautics segment was part of a joint U.S.-Japanese venture to produce F-2 jets. Lockheed is the majority owner of Lockheed-Khrunichev-Energia International (LKEI), a joint venture with two space firms owned by the Russian government, to organize and market commercial space launches from sites in Kazakhstan. Lockheed Martin's Aircraft and Logistics Center is a partner in a joint venture with the Chinese government that provides aircraft maintenance engineering. It also provides Lockheed's international customers with aircraft maintenance and other related services.

THE LAST TITAN ROCKETS

In April 2002 Lockheed Martin ended the most successful production program in the history of its work with the U.S. space program—it manufactured its last Titan rocket. The Titan, the most powerful U.S. rocket, was developed in 1959 for intercontinental ballistic missiles (ICBMs). However, it became famous as a vehicle for launching two-man Gemini missions into space in the 1960s, and many of the unmanned Viking and Voyager expeditions in the 1970s. Beginning in 1986, the U.S. Air Force began converting Titans from its ICBMs into rockets for weather satellites and the like. Titans never caught on as launch vehicles for communication satellites and other commercial payloads—they were simply too powerful. Lockheed's smaller Atlas rockets were preferred for such missions. Lockheed produced 528 Titan rockets, and the last Titan-launched mission was scheduled for 2003.

EMPLOYMENT

Lockheed's workforce of 125,000 includes approximately 45,000 of the world's most talented engineers and scientists. Lockheed encourages its employees to supplement their skills through continuing education and training.

SOURCES OF INFORMATION

Bibliography

anselma, joseph c. "vance coffman: with great tenacity, the low-key ceo of lockheed martin guided the defense contractor out of stormy weather and into sunnier skies." washington techway, 7 january 2002.

flight in america 1900-1983: from the wrights to the astronauts. baltimore: the johns hopkins university press, 1984.

guccione, jean. "lockheed settles with residents for $5 million." los angeles times, 18 october 2000.

scott, william b. "lockheed martin hangs onto space science missions." aviation week & space technology, 10 december 2001.

smith, bruce. the sky's the limit. london: macmillan, 1979.

sutton, oliver, and michael taverna. conquest of the skies. boston: little brown, 1979.

For an annual report:

on the internet at: http://www.lockheedmartin.com/investoror write: lockheed martin investor relations, 6801 rockledge drive, bethesda, md 20817

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. lockheed martin corporation's primary sics are:

3721 aircraft

3760 guided missiles & space vehicles & parts

also investigate companies by their north american industrial classification system codes, also known as naics codes. lockheed martin corporation's primary naics codes are:

336411 aircraft manufacturing

336414 guided missile and space vehicle manufacturing

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