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Lockheed Workers Agree to New Contract Will Aid in Lowering Costs for Company

Most people do not realize that the large defense contractors in the United States have a unionized workforce. It is more then just their manufacturing related employees but often includes engineers and support staff as well. Boeing (BA), Lockheed Martin (LMT) and Northrop Grumman (NOC) who make aircraft and ships especially have this as one of their considerations because it does effect costs.

One of the advantages that EADS North America (EADS:P) was going to offer with their tanker program was a non-unionized workforce in Alabama that should have been a lower cost then Boeing’s unionized one in Washington state. Boeing though was able to get their costs in line and propose a cheaper solution to the KC-X mission.

While labor relations in the defense industry have tended to be fairly stable there have been strikes in the recent past. Both Sikorsky (UTX) and Boeing faced labor stoppages that did have some effect on their production of aircraft for the military and other defense customers. As with many recent contract negotiations the issues had more to do with benefits and health care costs rather then wages and work rules.

Now Lockheed Martin’s workers represented by the machinists union have signed a new deal rather then go on strike as recommended by the union. These workers are primarily in Georgia and are involved in C-130 production and other work. The major dispute in this negotiation was the company’s plan to have new employees get a much less generous pension plan then existing ones.

Lockheed’s goal was to reduce their costs and with most companies their labor is their biggest expense. They face extreme pressure from the Defense Department to control costs on the F-35 program and this type of contract with a sizable portion of their workforce will aid them in doing that. The problem though is that whether in the long run the company can reduce benefits and maintain their experienced, effective workforce who are key to production of systems on time and to meet the military’s needs.

Photo from Beige Alert’s flickr photostream.

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