Faced with continuing federal spending cuts, defense contract Lockheed Martin [LMT] yesterday said it plans to cut 4,000 jobs by mid-2015, an action that will result in a pre-tax charge of $175 million in the fourth quarter of 2013.
The company also said the workforce reductions combined with plans to consolidate several of its facilities in the United States will improve operational efficiencies and makes its products and services more affordable.
The after-tax charge related to severance costs will be about $115 million, 35 cents earnings per share, and the company said that depreciation costs related to site closures, equipment and employee relocations will be incurred during the fourth quarter and through the completion of the consolidations in 2015.
|Lockheed Martin President and CEO Marillyn Hewson. Photo: Lockheed Martin|
Lockheed Martin didn’t say what the projected cost savings from these actions would be, although in the filing with the Securities and Exchange Commission where it disclosed the severance costs it said it “expects a substantial amount of the severance, depreciation and other costs will be recovered by the” affected business segments in the future.
The pending layoffs and facility consolidations follow a strategic review by Lockheed Martin of its current and future work expectations. In the past five years, the company has already eliminated 1.5 million square feet of facility space and slashed its workforce by 30,000 employees down to 116,000. The facility closures announced yesterday will cut another 2.5 million square feet of facility space.
“In the face of government budget cuts and an increasingly complex global security landscape, these actions are necessary for the future of our business and will position Lockheed Martin to better serve our customers,” Marillyn Hewson, Lockheed Martin’s president and CEO, said in a statement. In a memo to the company’s employees that was released yesterday, Hewson said these actions were announced “as early as possible to provide employees with enough time to prepare for their future and to complete a structured transition of our programs.”
Consolidation plans call for the closure of operations in Newtown, Pa., Akron, Ohio, Goodyear, Ariz., and Horizon City, Texas, and several buildings on its Sunnyvale, Calif., campus. These closures will lead to the elimination of 2,000 positions with ongoing operational efficiency initiatives at the Information Systems & Global Solutions, Mission System and Training, and Space Systems business areas will result in an additional 2,000 job cuts by the end of 2014. The facility closures are expected to be complete by mid-2015.
Several company facilities will gain work and employees as a result of the consolidations. IS&GS and Space Systems will transfer work to operations in Denver, Colo., and Valley Forge, Pa. The company is reviewing where to transfer work being done at MST facilities that will be closed with facilities in Owego, N.Y., and Orlando, Fla., being considered as prospects.