Has Sequestration Rocked Lockheed’s Boat?

Lockheed Martin

Job losses are coming in Lockheed Martin Corp. (NYSE:LMT) with a cut of 4,000 employees expected to take place, as well as the cessation of a number of company operations. According to Bloomberg, this is in the wake of a rather decent third-quarter earnings report, with profit rising 16 percent from the last. Out of five business segments, four will be removed, leaving its high earning Aeronautics program intact. Lockheed’s Aeronautics produces 30 percent of its sales and contains the Pentagon’s highest priced weapons program.

“You’ve got to keep your cost structure under wraps. They’re not evil. They have to be competitive going forward, and the way you stay competitive is by keeping costs under control,” said Brian Ruttenbur, analyst at CRT Capital Group LLC. He also notes that job cuts of this sort may very well be in the futures of other defense companies — a result of the decrease in government spending on military matters post Iraq and Afghanistan.

The sequestration has brought down nearly $500 billion in budget reductions for the Defense Department, taking $52 billion from the department during this fiscal year. As a result, companies like Lockheed are understandably concerned, and making moves to deal with budget changes.

Back in March, when the sequester began, bringing harsh budget cuts to a number of areas of government funding, the government noted the difficulty it would bring. “We deeply regret the effect that sequestration is having on our dedicated and hard-working employees,” said a company press release at the time.

“While we await more specific direction from our government customers, we are concerned with the lack of progress toward a solution to reverse the negative impacts of sequestration. We continue to assess the likely impact that sequestration will have on our programs and have taken steps to manage its effects. However, while we understand that the impacts are likely to play out over a period of time, we continue to believe that sequestration will lead to furlough in some situations and could trigger layoffs of our current employees,” it read.

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