Lockheed to cut jobs as defense work slows
Weapons supplier will lay off 4,000
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.
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.