Lock­heed to cut jobs as de­fense work slows

Weapons sup­plier will lay off 4,000

The Washington Times Daily - - Business - BY TIM DE­VANEY THE WASH­ING­TON TIMES

Lock­heed Martin is cut­ting 4,000 jobs — 3.5 per­cent of its work­force — and clos­ing or down­siz­ing sev­eral fa­cil­i­ties around the coun­try as it grap­ples with the pres­sure of de­clin­ing de­fense bud­gets and the re­cent gov­ern­ment se­ques­tra­tion, the com­pany an­nounced Thurs­day.

Bethesda-based Lock­heed, the na­tion’s top weapons sup­plier, said it was mak­ing the move in re­sponse to slump­ing de­mand from its big­gest cus­tomer, the Depart­ment of De­fense.

Down­siz­ing at Lock­heed could be a sign of things to come, an­a­lysts say, as other de­fense con­trac­tors con­sider how to deal with the long-term ef­fects of se­ques­tra­tion.

“Re­duc­ing our work­force of ded­i­cated em­ploy­ees and clos­ing fa­cil­i­ties are among the most dif­fi­cult de­ci­sions we make,” Lock­heed Martin Corp. Pres­i­dent and CEO Marillyn Hew­son said in a state­ment. “In the face of gov­ern­ment bud­get cuts and an in­creas­ingly com­plex global se­cu­rity land­scape, th­ese ac­tions are nec­es­sary for the fu­ture of our busi­ness and will po­si­tion Lock­heed Martin to bet­ter serve our cus­tomers.”

Lock­heed Martin builds ev­ery­thing from F-35 fighter jets and satel­lites to mis­sile-de­fense equip­ment and war­ships for the De­fense Depart­ment.

But like many other de­fense con­trac­tors, the com­pany has felt the pres­sure this year of se­ques­tra­tion, the au­to­matic cuts that have fallen par­tic­u­larly heav­ily on the Pen­tagon. Un­der the bi­par­ti­san bud­get deal, Pen­tagon spend­ing over the next 10 years will be $500 bil­lion less than pre­vi­ously pro­jected, di­rectly im­pact­ing con­trac­tors.

In 2012, Lock­heed Martin’s fed­eral con­tracts to­taled $39 bil­lion — more than 80 per­cent of its busi­ness, ac­cord­ing to the com­pany’s fil­ings.

Other top de­fense con­trac­tors who could be af­fected by the cuts in­clude Boe­ing Co., Northrop Grum­man Corp., Gen­eral Dy­nam­ics Corp. and Raytheon Co.

“We, along with oth­ers in the in­dus­try, con­tinue to urge Congress and the ad­min­is­tra­tion to deal with our fis­cal chal­lenges through mea­sures other than the in­dis­crim­i­nate cuts of se­ques­tra­tion,” Lock­heed said in a state­ment. “It’s pre­ma­ture to say what the im­me­di­ate im­pacts of full se­ques­tra­tion could mean, but long-term, we’ll have to ad­just our busi­ness to deal with any (U.S. gov­ern­ment) bud­get cuts.”

Lock­heed Martin plans to close fa­cil­i­ties in New­town, Pa.; Akron, Ohio; Goodyear, Ariz.; Hori­zon City, Texas; and Sun­ny­vale, Calif., by mid-2015. Clos­ing the fa­cil­i­ties will elim­i­nate 2,000 po­si­tions.

The con­trac­tor will cut another 2,000 jobs in the com­pany’s in­for­ma­tion, mis­sion and train­ing, and space sys­tems di­vi­sions by the end of next year.

Since 2008, Lock­heed Martin has trimmed its work­force by 30,000 em­ploy­ees to 116,000, ev­i­dence of an on­go­ing tran­si­tion un­der Pres­i­dent Obama as wars in Afghanistan and Iraq end. The lat­est cuts will re­duce the Lock­heed work­force to 112,000.

“It’s in­evitable that when you have lower de­fense spend­ing, you’re go­ing to have some lost jobs,” said Ben­jamin Fried­man, a re­search fel­low in de­fense stud­ies at the Cato In­sti­tute. “I don’t think we should be sur­prised by that. To me, it’s a good thing, be­cause I think we spend too much on our mil­i­tary, and there’s a lot of sav­ings to be had.”

Wall Street took the news in stride. Lock­heed Martin’s stock closed Thurs­day up less than 1 per­cent at 138.29 — but much more sig­nif­i­cant is the fact that shares of the com­pany have jumped 57 per­cent in the past year from $88 in mid-Novem­ber 2012, as Wall Street feared the then-up­com­ing se­ques­tra­tion, which had been ru­mored for months.

Lock­heed Martin’s re­cent suc­cess on Wall Street is in line with other top de­fense con­trac­tors.

De­spite the ef­fect se­ques­tra­tion has had on work­forces, the com­pa­nies have more than weath­ered the storm.

Boe­ing closed Thurs­day at 135.09, up 90 per­cent from $71 a year ago. Northrop Grum­man closed Thurs­day at 110.10, up 73 per­cent from $63 a year ago. Gen­eral Dy­nam­ics closed Thurs­day at $87.94, up 41 per­cent from $62 a year ago. Raytheon closed Thurs­day at $85.68, up 57 per­cent from $54 a year ago.

Gas prices at the pump are fall­ing markedly all around the coun­try, and the Wash­ing­ton area could soon join the grow­ing num­ber of states where the av­er­age price of gas is less than $3 a gal­lon, a level not seen in two years.

Na­tion­wide, the price of gas has fallen 16 cents in the past month to $3.19 a gal­lon, ac­cord­ing to AAA, which fore­casts that the price of gas could con­tinue drop­ping to as low as $3.10 on av­er­age around the coun­try by the end of the year. Last year at this time, gas cost an av­er­age of $3.44 a gal­lon.

Missouri, Ok­la­homa, Arkansas, Kansas, Texas, Louisiana, New Mex­ico and Mis­sis­sippi are see­ing some of the most pro­nounced price-cut­ting, with the av­er­age price in all eight of th­ese states less than $3 a gal­lon, ac­cord­ing to the web­site Gas Buddy.

In­side the Belt­way, gas prices have fallen 10 cents to $3.22 in the past month with the cheap­est gas found in the sub­urbs of North­ern Vir­ginia, ac­cord­ing to AAA. Last year at this time, gas was $3.45 a gal­lon in the area.

“We’re see­ing some of the cheap­est gas prices since 2011,” said AAA Mid-At­lanti spokesman John Townsend. “That’s an en­cour­ag­ing sign. I think gas prices will con­tinue to fall even through Christ­mas and Thanks­giv­ing. We’re go­ing to see some re­ally com­pet­i­tive gas prices.”

Mr. Townsend points out that around the coun­try 2012 was the most ex­pen­sive year on record to buy gas in Amer­ica, so in com­par­i­son, the gas prices this year are much cheaper.

Sep­a­rately, the U.S. En­ergy In­for­ma­tion Ad­min­is­tra­tion is pre­dict­ing a more mod­est de­crease — fall­ing from an av­er­age of $3.50 per gal­lon in 2013 to $3.39 per gal­lon in 2014. The high­est gas prices in the coun­try are found in Hawaii at $3.94 a gal­lon, while the high­est pump prices in the con­ti­nen­tal United States are in Cal­i­for­nia at $3.57 a gal­lon.

Part of the rea­son gas prices are down are be­cause Amer­i­cans are driv­ing less, Mr. Townsend ex­plained. “The sum­mer’s over, peo­ple are back to work, kids are back in school, so fam­i­lies aren’t trav­el­ing as much,” he said.

Gas sta­tions are also switch­ing to their win­ter blend of gaso­line, which is cheaper to pro­duce be­cause it doesn’t have as many ad­di­tives that pre­vent pol­lu­tion as the sum­mer mix does. Some U.S. re­fin­ers, view­ing the boom in shale oil in the Mid­west, are pro­duc­ing more diesel fuel for mar­kets abroad, which has the side ef­fect of pro­duc­ing more gaso­line avail­able for the do­mes­tic mar­ket as well.

But the big­gest rea­son may be that 2013 has been one of the slow­est years in decades for hur­ri­canes, and nat­u­ral dis­as­ters tend to take a toll on the sup­ply of crude oil, which raises the price gas.

In the greater Wash­ing­ton mar­ket, gas is the most ex­pen­sive in the Dis­trict, where the av­er­age price has fallen to $3.35 a gal­lon within the city lim­its, well above the na­tional av­er­age.

“Driv­ers in the Dis­trict have the worst gas prices in the re­gion,” Mr. Townsend said.

Still, gas prices have fallen 5 cents in the past week and 14 cents in the past month. Dur­ing this time last year, the price of gas was $3.57 a gal­lon.

Driv­ers hunt­ing for a bar­gain can find the cheap­est gas within the city’s lim­its at the new Costco off New York Av­enue in North­east, where they can fill up their cars for as lit­tle as $3.09 a gal­lon.

Mr. Townsend, who fills up his car at Costco, be­lieves that gas sta­tion may dip be­low $3 within the next few weeks, which could en­cour­age nearby sta­tions to do the same.

“If Costco falls be­low $3 a gal­lon,” he said, “in that area sur­round­ing Costco, you’ll see some other sta­tions sell­ing gas be­low that price.”

Other than Costco, the BP sta­tion in the 2500 block of Penn­syl­va­nia Av­enue South­east is sell­ing gas for $3.15 gal­lon, while along with three other gas sta­tions on that side of town.

The cheap­est gas on the north­west side of town can be found at W Ex­press for $3.16 at the in­ter­sec­tion of 18th and S streets.

In Vir­ginia, the statewide av­er­age for a gal­lon of gas is $3.05, as it con­tin­ues to fall from $3.09 last week, $3.16 a month ago, and $3.26 a year ago. Driv­ers in North­ern Vir­ginia en­joy the low­est prices in­side the Belt­way, but driv­ers in other parts of the state can find gas for even cheaper.

In Roanoke, driv­ers can buy gas for $2.93 a gal­lon; in Rich­mond and Peters­burg, it’s ex­actly $3; in Char­lottesville, gas is $3.01 a gal­lon and in Nor­folk, it is $3.05.

“I think Vir­ginia has a great chance at get­ting be­low $3 a gal­lon,” Mr. Townsend said.

In Mary­land, the av­er­age price for a gal­lon of gas is $3.23, down from $3.26 a week ago, $3.32 last month and $3.45 at the same time last year. Wash­ing­ton-area Mary­land driv­ers pay $3.26 a gal­lon.

AS­SO­CI­ATED PRESS

Lock­heed Martin’s fa­cil­ity in Goodyear, Ariz., is one of five the cor­po­ra­tion plans to close, one of sev­eral moves it an­nounced Thurs­day as it elim­i­nates 4,000 jobs in re­sponse to slump­ing de­mand from its big­gest cus­tomer, the Depart­ment of De­fense.

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