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Lockheed recovers from leadership shakeup


Buried under Friday's David Petraeus news blitz, Lockheed Martin announced it's own extramarital scandal. The appointed heir to Robert Stevens, Lockheed Martin's outgoing CEO, resigned after admitting to his own "inappropriate relationship."

Christopher Kubasik resigned after Lockheed Martin completed an investigation into an inappropriate relationship between Kubasik and a female subordinate. The subordinate was not named although Lockheed officials said she is no  longer with the company.

Lockheed Martin tapped Marillyn Hewson, a 29-year Lockheed veteran, to instead take over for Stevens on Jan. 1 when Stevens takes a step back and starts a new role as an executive chairman. Lockheed officials had previously chosen Hewson to take over as the chief operation officer. She now takes over as one of the very few female CEOs in the defense industry as she heads the largest defense company in the world.

Stevens claimed the leadership shakeup has not put Lockheed in "crisis" during a conference call Friday. He said Kubasik's mistakes were solely personal and should not be interpreted as problems within the company. If anything, Stevens said the ease in which company officials could trust Hewson to take over showed the depth of executive leadership within the company.

"Marillyn is an exceptional leader with impeccable credentials and a deep understanding of our business, customers, shareholders and employees," Stevens said. "She is an example of the extraordinary bench strength we've developed through our talent management and development actions taken over many years. I'm confident that her extensive and diverse leadership and multiple roles during her career has prepared her to assume this new realm seamlessly."

Hewson has led the Electronics Systems unit -- the largest division in the company eclipsing Lockheed's aeronautics division. No small feat considering Lockheed's Joint Strike Fighter contract, the largest awarded by the U.S. Defense Department. As Lexington Institute's Loren Thompson noted, her ability to grow the electronics unit is only the latest project she's led and elevated within the company.

In the 19 assignments Hewson has had with the company and eight moves she's made in the past 12 years, Hewson has run the gamut of Lockheed's massive portfolio. She will lead Lockheed at an uncertain time for the defense giant. As the U.S. transitions its military with a forthcoming slew of defense cuts, Hewson will face a steep challenge to maintain profit margins and keep investors happy.

Sequestration poses a potential $500 billion cut to U.S. defense spending over the next decade if Congress can not come to a deficit reduction agreement by Jan. 2. Stevens has said Lockheed Martin would be forced to lay off hundreds, maybe thousands, of employees if sequestration occurs. Stevens butted heads with the Obama administration when he said publicly the WARN Act would force Lockheed Martin to send out potential layoff notices to his 120,000 workers just days before the election.

Hewson said she is confident Lockheed Martin will get through this down turn in defense spending following the ten years of close to a blank check to fund the wars in Iraq and Afghanistan.

"We have the talent, we've got the capabilities, we have a very strong backlog as a corporation. And we'll weather this, and we will excel in this environment."

The Joint Strike Fighter program will sit on top of her docket as Lockheed Martin officials continue negotiating Low-Rate Initial Production Lot Five with the Pentagon. Air Force Maj. Gen. Christopher Bogdan, the new F-35 acquisition chief, lambasted Lockheed Martin in September for the poor relationship they've fostered with the military in regards to the Joint Strike Fighter Program.

“I will tell you the relationship with Lockheed Martin and our stakeholders is the worst I’ve ever seen,” Bogdan said in September. “We will not succeed on this program if we don’t get past that.”

He highlighted the difficulty in finishing the LRIP 5 contract.

“It should not take 10, 11 or 12 months to negotiate a contract with someone we’ve been doing business with for 11 years,” Bogdan said in September.

Hewson said she's been involved in the LRIP negotiations and remains confident the Joint Strike Fighter program is progressing well.

"I'll be very much engaged and we shouldn't -- we won't miss a beat on F-35," Hewson said.

The size of Kubasik's separation settlement raised eyebrows when it was announced he would receive a $3.5 million payment. Kubasik was Lockheed’s vice chairman and chief operating officer.

Investors asked Hewson Friday where she expected the company to capitalize on market openings. She highlighted the companies work on cyber security, space systems, airlift and fighter jets. Overall, she said the company must remain focused on the F-35 program and work to continue to grow in the international market.

"So in terms of challenges, looking out and priorities, it is F-35, growing internationally, working with Bob and making sure our lawmakers find an alternative to sequestration, and then dealing with the fiscal pressures they're going to continue to have as the global security environment ... increasingly escalates," Hewson said.

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