Top player in defense market
Lockheed Martin seeks to expand global partnerships amid budget cuts
By Jung Sung-ki
U.S. defense manufacturers sound alarm for upcoming cuts of $450 billion to defense spending in the face of the declining economy.
So does Lockheed Martin though the aerospace and defense giant remains the world’s largest defense contractor almost for the past two decades.
Many U.S. companies have been cutting jobs while preparing to guard market share, shifting their focus to international marketing.
Still, the Maryland-headquartered defense group is fully prepared for the “draconian defense cuts” by taking adequate steps to reduce costs and diversify businesses, according to Patrick Dewar, senior vice president of corporate strategy and business development for Lockheed Martin.
Key measures to decrease cost include a “volunteer executive separation program,” which removed 26 percent of the company’s senior executives, he added.
Last year, Lockheed Martin earned $45.8 billion in sales, up 1.8 percent from a year earlier. But it experienced all the trials and tribulations of the industry at home, making three layoff announcements in June and July in the face of problems related to the cost of the F-35 Joint Strike Fighter program.
Against that backdrop, Dewar said, Lockheed will also focus more on international sales, including in the Asia-Pacific region, in order to help shore up its defense revenues.
In a written interview, the senior executive said South Korea as a key partner nation for Lockheed Martin, citing the joint development of the T-50 Golden Eagle trainer aircraft, the world’s only supersonic trainer and light attack jet, as one of the most successful overseas partnership program.
The company, which has built the F-35 Lightening II stealth fighter, is competing for Korea’s 10-trillion-won F-X III fighter acquisition program, which is to open early next year.
Dewar expressed hope that his company would be able to expand its growing partnership further with Korean industries.
The following is an excerpt from the interview.
Q) What are the key management strategies of LM, making the company the No.1 defense contractor in the world?
A) At Lockheed Martin we focus on performance, execution and meeting our customer’s needs. If we aren’t doing all three, we cannot be successful. We have a broad range of programs, and it is essential that we perform well on every one of them, not just those that are high profile.
Our management team is continually adapting to deliver the best results for our customers. There’s always room for improvement, and we as a company embrace the idea that we can always do better.
We are trusted partners for our customers throughout the world.
Our programs and partnerships outside of the U.S. are essential for us to remain a top company in our industry.
We hope to be the South Korea's and the broader international community’s company of choice for global security needs.
And, we can do this by performing on current programs, exceeding expectations and continuing to build international partnerships in-country.
Partnership is really the right word for our work in Korea. We are especially proud of to be working together to produce the T-50 Golden Eagle, the world’s only supersonic trainer and light attack aircraft.
The Republic of Korea Air Force plans to order 94 Golden Eagle trainers. Lockheed Martin and KAI are jointly marketing T-50 in the international market and have generated great interest from a number of customers around the world.
Q) Tell us about your company’s corporate values and management philosophy, and their effects on the practical aspects of marketing and sales.
A) At Lockheed Martin, we have a strong set of values focused on delivering innovative solutions, while maintaining our commitment to integrity.
Our values are simple, but essential: Do what’s right. Respect others. Perform with excellence.
We believe that every executive, manager and employee should be held accountable for his or her actions, which ensures we operate with the highest ethical standards.
These values are a part of every program we have within the company, and through these high standards we help our customers meet their most challenging global security needs. I believe these values define who we are as a company.
Q) Global defense manufacturers are suffering budget cuts, and Lockheed Martin would have same problems. What’s the strategy to get over these budget cuts trend?
A)Lockheed Martin is operating in a new reality, which consists of declining defense budgets and a growing need for global security capabilities.
Our strategy is to improve execution on our portfolio, keeping quality high, while reducing overall cost.
As a company, we have taken several steps to decrease cost including our volunteer executive separation program, which removed 26 percent of our senior executives.
We’ve divested businesses to refine our focus. On a more difficult note, we have also taken steps to right-size our business through reductions in force to ensure we remain competitive and affordable.
Lockheed Martin understands that our customers are under increasing budgetary constraints, and we are taking the necessary steps to ensure we can continue to provide them with the highest quality, most advanced capabilities at a cost they can afford.
Q) Tell us about the success factors and challenges of LM businesses during the past decades and in the future.
A) As a company, we have faced challenges and hard times, but we have adjusted and evolved with our customers to remain successful.
We expect that the global security environment across the world will remain challenging and unpredictable, but we will continue to work closely with our customers, both domestically and abroad, to best support their needs.
As always, our commitment to performance and execution is essential to our success. Our diverse portfolio also is critical to our business’ future growth. Part of the strength of that diverse portfolio is our ongoing international partnerships with many countries around the world including the Republic of Korea.
I’d again like to cite the T-50 program as an example of how partnerships are giving us new opportunities to achieve success.
Working with KAI, we’ve designed the T-50 to be the solution that current customers demand.
The T-50 provides its users a total training system, complete with fully integrated classroom instructions and flight training.
The aircraft’s features include superior maneuverability, endurance and avionics systems to prepare pilots to fly next-generation aircraft. The attack version, A-50, can carry out combat roles with minimal configuration changes.
Q) What are LM’s most successful business models and the key strategy behind the success?
A) At Lockheed Martin, we have a strong core business and a diverse portfolio of programs and capabilities that has contributed to our success.
We continually evaluate our business model and adjust it to meet the demands of a rapidly changing global security environment.
For example, while we have divested businesses in the past year, we also recently acquired a company in an adjacent market to help us expand our capabilities. We understand that we can’t remain successful in areas that aren’t performing or where our customers no longer have resources.
However, we are always looking for new opportunities to add value to the customer.
Continually focusing on our customers and their needs has enabled us to adapt, evolve and remain competitive and successful as a business.
Q) Amid the declining U.S. economy and budget problems, U.S. defense contractors are paying key attention to the Asia-Pacific markets, including South Korea.
A) Lockheed Martin has a long and proud partnership with the Republic of Korea, including programs such as the F-16, the P-3 Orion, the Aegis combat system and FPS-117 radars just to name a few.
We look forward to building on this legacy of security cooperation and support in the coming years.
We also look to expand our growing partnership with Korean industries, which is best represented by the successful teaming we engaged in with KAI to produce the T-50.
We also will continue pursuing opportunities around the world. We operate in 75 different countries, and international programs accounted for 15 percent of our total sales last year. We expect that number to increase to 20 percent in the coming years.
We currently have partnerships with many of the Republic of Korea's friends in the region and hope to see them continue to grow by helping our customers meet their global security challenges.