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Efficiencies Begin to Bite; 600 Execs Leaving Lockheed

UPDATED: Top ATL Official Calls Departures "Natural Course of The Business Cycle"

Lockheed Martin announced today that some 25 percent -- 600 -- of its top people accepted buyout offers and will leave the company.

This enormous wave of some of the world's top defense executives will doubtless swell the ranks of consultants around Washington, but it also marks a watershed in the defense industry's management of what many expect will be at least several years of reduced defense budgets. Of course, this all takes place in light of Defense Secretary Robert Gates' pursuit of $100 billion in Pentagon efficiencies over the next five years.

A senior acquisition official described the buyouts as a result of "the natural course of the business cycle." I asked Brett Lambert, the Pentagon's director of industrial policy who spoke at the Comdef defense conference in Washington this afternoon, what signal the buyouts sent to the Pentagon. "We are not going to have double digit growth and there is a natural outcome to that," he said.

Bottom line for the company is that, while the executives contributions were praised by CEO Bob Stevens, their departures will "enable us to achieve significant cost savings and a leaner management structure at a time when our customers have an urgent need for more affordable solutions to the global security challenges they face."

The departures "will yield substantial savings in 2011 and on a recurring basis in 2012 and beyond," the company said in a statement. Their departures "will help align the number of senior leaders with the overall decline of about 10,000 in the employee population since the beginning of last year, cut overhead costs and management layers, and increase the Corporation’s speed and agility in meeting commitments."

Conversations with several senior defense executives indicate that Lockheed offered very substantial incentives to encourage people to take the offers. But as a sign of just how tough the decision must have been for each person, we understand that several hundred of those who accepted the buyout offers did so within 24 hours of the deadline.

Boeing, of course, announced employee reductions of 10,000 people back in 2009 but those were employees across the company, not the executive corps. And Boeing's culture hews more closely to that of the commercial airplane business, not to the defense world.

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