Business

December 14, 2012

Lockheed Martin says its local presence solid

Lockheed Martin’s decision to move hundreds of jobs out of Cobb County, Ga., came under pressure from a lackluster economy and U.S. military budget cuts. But company officials said the company’s seven-decade presence in Marietta is not under threat – at least not for several years.

“It’s about being competitive, it’s about being affordable and efficient,” spokesman Johnny Whitaker said. “And it’s about positioning ourselves today for what we hope will come down the pike tomorrow.”

As the nation’s defense budget is set to keep shrinking, the company’s future includes some unknowns.

The workforce at the Marietta plant is a far cry from when it opened with 25,000 during World War II. As many as 33,000 worked there at the plant’s peak in the mid-1970s.

But Lockheed has slashed more than 26,000 jobs across the entire company in the past three years, including hundreds at the Marietta operation, which is part of the company’s aeronautics division. The Marietta plant is the largest in square feet and employs the second-largest number of workers in the aeronautics unit.

The number of jobs at the start of 2012 was around 7,400, placing Lockheed in metro Atlanta’s top 20 employers, according to the Metro Atlanta Chamber. The company is important to the community because of its high-paying manufacturing jobs and its reliance on several local vendors and suppliers.

So an announcement Dec. 11 that Lockheed was moving about 560 employees elsewhere brought local officials to attention. The Marietta plant already had cut 400 workers this year as production on the C-130 Hercules cargo plane slowed. Another 114 workers lost their jobs, either through voluntary buyouts or involuntary layoffs, in 2011.

Civic and business leaders say that in efforts to retain jobs in Cobb County they will raise awareness about Lockheed’s significance locally and to the nation’s defense.

“I’m not using the word `worry,’ but it’s a high interest to us to make sure we do what we can to support our friends at Lockheed,” said Cobb County Commission Chairman Tim Lee. “We want to make sure everyone – the community and the legislators and the Pentagon – knows just how hard we work together.”

The jobs that are moving are tied to the F-22 Raptor stealth fighter jet. They are going to Lockheed’s Fort Worth, Texas, plant in 2013. The cost-cutting move is in response to Lockheed’s primary customer, the U.S. government’s defense department, slashing its budget by hundreds of millions of dollars.

The Pentagon has initiated $487 billion in cuts over a decade and faces $500 billion more in January unless Congress acts to undo across-the-board cuts. The cuts, along with a bevy of tax hikes and other expiring policy, are known as the “fiscal cliff.”

Many in Congress are concerned about the pending cuts’ impact on the military but it is unclear how they will be felt by contractors. Lockheed has warned of massive layoffs.

“Why this is so terrible is the uncertainty,” said U.S. Rep. David Scott, an Atlanta Democrat whose district is close to the facility and is home to many Lockheed employees. “To be honest with you, nobody knows. There is no plan (of) – `You’re going to cut this; you’re going to cut that; are you going to save this?’”

About 80 percent of Lockheed’s business is the defense industry, said Don Sabbarese, an economics professor at Kennesaw State University. The company’s chief competitor, Boeing, is making similar cuts to operate more efficiently as government spending goes away, he said.

Sabbarese said additional cuts hinge on whether Lockheed is successful in winning future business contracts and whether the nation’s defense budget holds over the next for years.

“The latter doesn’t look too promising,” Sabbarese said.

For now, there’s plenty of work for the Marietta plant, enough that will “easily take us through 2017, 2018,” Whitaker, the Lockheed spokesman, said.

He ticked off examples: C-130 orders, including a backlog of 50, through at least 2014; modifying and installing new engines on the C-5, the U.S.’s second largest cargo jet, so it can operate for another 20 years; doing maintenance work on the F-22 now that the plane itself is no longer being produced. “The plane is going to be around for 20-25-30 years, so it will be modified over time, its system will be upgraded, the software will be upgraded,” Whitaker said.

The plant also houses the center wing assembly for all three variants of the F-35 Lightning II.

Georgia Republican U.S. Sen. Johnny Isakson said he is confident in Lockheed’s long-term presence in Marietta. The facility helps produce both the F-22 and the F-35, or as Isakson called them, “the two fighters of the 21st century.” Isakson pointed out that the facility is government-owned and the proximity of Dobbins Air Force Base is an advantage for Lockheed.

“I think the future of the plant is fine,” Isakson said. “I think we’ve got to recognize the entire defense operation in America is going to see a shrinking in cost.”

As a result, the F-35 program may not be the size that was once expected, but it is likely to be in production for years, said Michael O’Hanlon, a senior fellow with the Brookings Institution, a nonprofit research and policy organization based in Washington.

Two things happened just days ago that illustrate that point: The Pentagon Dec. 13 awarded Lockheed a contract for 32 more F-35s. But some media reports said Canada canceled its intended purchase of 65 of the F-35s Dec. 14.

O’Hanlon said Lockheed is in a “monopoly-like position” with the F-35 and, at the end of the day, will make a lot of money.

“You can always go back and build more F-16s, but I think overall there’s going to be a big market for the F-35,” O’Hanlon said.

Marietta Republican U.S. Rep. Phil Gingrey said in the nearly 40 years he has lived in the area he has seen the Lockheed plant go through cycles along with the economy, and he is not concerned for it long-term.

“I’ve seen ups and downs in layoffs and people get laid off and get called back,” he said. “It’s painful but it’s not doomsday.”

 




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