Lockheed Announces More Layoffs

by: Matthew Potter
July 1, 2011

Category: Editorial | RSS 2.0

The trend among defense contractors of reducing their work forces is accelerating as Lockheed Martin (LMT) announced yesterday that it will layoff a further 1,500 employees. This time from its Aeronautics division. This is one of the largest parts of the company and is responsible for the production of the F-35 Joint Strike Fighter (JSF), the largest acquisition program in the history of the world.

Unlike many of the earlier cuts already made this year this is not related to the end of a contract or a restructuring of work by the Defense Department. This decision along with the recently planned eight percent reduction in headcount at Lockheed’s space systems is an attempt to reduce overhead and costs to make them a leaner, more efficient company. This then will reduce their prices as they bid for more contracts.

The Aeronautics division is quite large with almost thirty thousand employees and is about a fourth of the company’s work force. They are also working on two of the larger programs for Lockheed: the JSF and the C-130J transport. It seems that most of the job losses will be focused on administrative support and management and will be concentrated on the company’s Dallas-Fort Worth headquarters.

These kind of cuts are a reaction to the Pentagon’s new focus on price and lowering costs overall fro acquisition programs. One way for a company to lower its bids is to reduce overhead and most of that is in people. It can also lead to cuts in benefits for employees and this may be the next step as companies increase health insurance premiums, reduce leave and retirement benefits. This may mean negotiations by the larger defense contractors who manufacture systems such as aircraft, helicopters and vehicles and have a union workforce may become harder with the potential for strikes.

The company’s may be avoiding reducing those part of their workforces initially concentrating on salaried managers and support but eventually as there is more price and cost pressure there will have to be attempts to make cuts there as well. The decline in defense spending will also mean the end of contracts which will also cause these kind of cuts.

The next few years may see some labor strife in the defense industry leading to potential disruptions of schedules as well as local economies taking a hit as jobs are eliminated and spending is reduced. This scenario is not necessarily a good one for an already weak U.S. economy.

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