A company spokesperson said that defense contractor Lockheed Martin (LMT.N) will cut 1% of its jobs over the year to cut costs and streamline operations. The reductions will impact positions across its business and enterprise operations, including functional organizations such as Business Operations, Legal, Human Resources, Operations, and Information Technology. The cuts will be evenly spread between layoffs, normal attrition, and placements in other company areas.
The cuts come as defense contractors brace for a decline in government spending. Across-the-board budget cuts that started earlier this year have slashed Pentagon and domestic agency spending. As a result, defense companies have shed noncore divisions and cut jobs in recent years.
Lockheed Martin has cut its workforce by 30,000 employees since 2008. The company expects revenue to decline slightly next year due to reduced government spending, but thanks to cost-cutting actions, it expects to grow earnings.
In one example, the company is combining systems that manage different aspects of production lines in its facilities so that teams spend less time planning and more time building. The company is also streamlining processes and implementing tools to make collaborating easier for teams.
The company is also changing the way it recruits and hires new employees. It is expanding its virtual recruiting efforts to attract students with higher education degrees and entice graduates who might need the right background or experience for some of the company’s programs. It also focuses on scholarships, well-paid internships for students with STEM degrees, and a student loan repayment program.
The reorganization also includes moving work to facilities where it is more cost-effective. For instance, Lockheed is consolidating its Missiles and Fire Control (MFC) business area into two new business areas to create operational efficiencies and reduce costs. MFC includes the Terminal High Altitude Area Defense System, Joint Light Tactical Vehicle, and PAC-3 missiles.
Those consolidations and other cost-cutting initiatives are expected to save the company about $50 million annually. Lockheed is also making additional cash contributions to its pension plans. In the fourth quarter, it will contribute $2.5 billion to its underfunded pension funds, up from $0.4 billion in the previous quarter. It has contributed $3.6 billion to its pension funds in the past three years. The company has been forced to make significant cash contributions because of historically low interest rates that have lowered returns on the assets in its pension plan. Those lower returns have led to significant unfunded liabilities.
