Lockheed Martin plans to reduce 1% of its workforce yearly to save money and streamline operations.
Job Cuts in Business and Enterprise Operations
As mentioned in a statement to Reuters, the job cuts will affect roles across its business and enterprise operations to implement cost-cutting measures, including hiring freezes and voluntary separations. The Maryland-based company has 122,000 employees globally, and the cost cuts will help the company transform its operations digitally.
1LMX-Driven Efficiencies
Lockheed Martin's CFO Jay Malave mentioned in the company's post-earnings conference call on Tuesday that they are reducing costs by supply chain optimization, factory productivity, and "1LMX"-driven efficiencies, which is Lockheed's name for its transformation program.
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Profit Fall Prediction for 2024
On Tuesday, Lockheed predicted a 2024 profit below Wall Street expectations, pointing to supply chain disruptions in its main aeronautics segment responsible for producing F-35 jets.
U.S. defense firms are seeing notable order increases amid escalating tensions between China-Philippines, Russia-Ukraine conflicts, and Middle East issues. However, labor and supply chain disruptions from the pandemic weigh most on the sector, where companies across different industries also cut jobs to save money, with tech firms topping the list.
Upgraded F-35 Joint Strike Fighters Slipping Behind Schedule
According to the company's statement on Tuesday, Lockheed Martin's latest upgraded F-35 Joint Strike Fighters production is slipping behind schedule. It will not likely resume in the third quarter of 2024. The delay in delivering the latest F-35s, designed with upgrades called Technology Refresh 3, resulted in a $400 million reduction in Lockheed's sales last year.
Lockheed CEO Jim Taiclet mentioned that the company is advancing with the jets equipped with TR-3 upgrades, which involve enhancements in both software and hardware, such as improved displays, computer memory, and processing power. But the system maturation process "is taking somewhat more time than we originally anticipated," he added.
In a statement to Defense News, the F-35 Joint Program Office (JPO) and industry partners mentioned prioritizing the delivery of capable fighters. However, delays in software maturity are putting those deliveries at risk. The JPO stated that it and Lockheed are developing a plan to enable the government to accept undelivered jets, even before the complete validation of TR-3 capabilities.
Taiclet informed investors in an earnings call that the company anticipates delivering 75 to 110 F-35s this year, less than the usual annual target of around 150.
The pause in deliveries caused Lockheed's F-35 net sales for the year to decrease by $400 million, partially offsetting growth in other sectors. Lockheed's classified Skunk Works unit experienced a $540 million increase in sales in 2023, and the increased production of F-16s contributed to a $230 million growth in sales for the year, according to the company. Even with the F-35's troubles, Lockheed's aeronautics sector experienced a 2% growth in sales in 2023, reaching almost $27.5 billion, slightly decreased by about 1% to $2.8 billion.
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