Ready for the Future

Remarks By Robert J. Stevens
Chairman And Chief Executive Officer,
Lockheed Martin Corporation
Arlington, Va.  06/19/2012

Thank you, and let me say good morning and welcome. I know many of you had to rearrange your schedules to be here with us today for our Third Annual Media Day. We're grateful that you found time in your schedule to join us.

This year we mark a very significant event for our company and that is our 100th anniversary – our centennial year.

A century ago this August, 26 year-old Glenn Martin started the Martin Company in Los Angeles, California. He was encouraged by another young aviation pioneer named Orville Wright to assemble a very innovative biplane. And he did this in the only rented space that he could afford that would fit the prototype, which turned out to be a church. So our first factory floor was, in fact, a church.

We've often thought, with the huge amount of technology in the company, it's always good to have a little faith.  And we've never forgotten that.

Unfortunately, this prototype was slightly too big to fit through the doorway of the church.  So the wall had to be taken down to get the airplane out.

Because Mr. Martin was a man of honor, he made a commitment to the pastor of the church to not only repair the wall that was taken down but to re-establish the vestibule of the church in very fine form, which he did, setting a tone of integrity across our company that we work hard to uphold to this very day.

While Glenn was at work in Los Angeles, 400 miles away in San Francisco two truly talented engineers, named Allan and Malcolm Lockheed, established the Alco Hydro-Aeroplane Company, which was soon known as the Lockheed Aircraft Company.

They operated their facility out of a garage.  During their days they repaired automobiles and on nights and weekends they built seaplanes that would go on to set speed and distance records.

Conditions for our founding namesakes were really never easy.  But the dream of creating something new, meeting some great challenges, and doing important work fueled their inspiration and sustained them.  And it inspires and sustains us to this day.

Allan Lockheed once confidently told a group of friends that he was absolutely certain that airplanes were going to be the safest, the cheapest and the fastest means of transportation, achieving speeds of 40 to 60 miles an hour.

It turns out he was right.  The SR-71 Blackbird, built almost 50 years ago and retired in the 1990s, remains the fastest and highest flying manned aircraft of all time.  The Blackbird flew from Los Angeles, California, to Washington, D.C., in 67 minutes.  We've done some calculus here and realized that's a fraction of the time it would take for you to get from this Global Vision Center to Dulles Airport during rush hour.

Experience through our first 100 years has informed us in many ways and shaped who we are, our ideals, and our culture.  The ability to drive the cutting edge of advanced technology has always been a central focus for us.  But we are reminded daily of the great privilege that we have of supporting those who serve our nation … and the critical role played by ethics and integrity, leadership and professionalism, in all that we do.

We're grateful to those who came before us who set and achieved very high standards.  And we believe it is these lessons that prepare us well for the future.

I've spoken to you all many times before about the reality in which we operate, a global security environment characterized by increasing volatility combined with enormous economic uncertainties here in the United States and abroad.

Put simply, the demands on our customers are only going up and the resources available to meet those demands are only declining.  The Department of Defense has committed to reduce spending by $487 billion over the next decade with $47 billion of that reduction occurring in Fiscal 2013.

We have been responding to this challenge by reducing our overheads, cutting capital expenses, curtailing research and development, consolidating facilities, and engaging in very painful but necessary reductions in force across our company.

We understand the need to address our nation's fiscal challenges and we are very much doing our part.  Over the past few years, we have reduced costs by billions of dollars.  We've removed a million and a half square feet from our facilities’ footprint and we will reduce another 2.9 million square feet before the end of 2014.

Today our workforce is 18 percent smaller than it was just three years ago and the pace of our hiring has slowed considerably.

And in each of our programs, we know that program execution is critical to delivering affordable products and services to our customers … and we stay focused on that priority every day.

But the single greatest challenge faced by our company and by our industry, for which we have no good response, is sequestration.  Despite increasingly urgent expressions of concern by industry and Government, sequestration remains the law.

In January, both Defense and non-Defense accounts will be cut by about a half a trillion dollars each.  For defense, that's an additional half a trillion dollars beyond the Budget Control Act commitments already in place.

Our Secretary of Defense has described the sequestration process as a meat axe.  It is.  There is no strategy or force structure or concept of operations for our nation that is supported by these reductions.  From an industry perspective, the near-term horizon is completely obscured by a fog of uncertainty.

With only 196 days remaining, we have no insight as to how sequestration, this law, will be implemented … which programs will be curtailed; which sites will be closed; which technologies will be discontinued; which contracts will be reformed; which suppliers—particularly our small business participants, who are so vital to our supply chain—will be impacted; and certainly most tragically, how many people are going to be affected.  How many dedicated employees are going to lose their jobs?  How many families are going to be disrupted?

I suspect that on one level it might be flattering to believe that our industry is so robust, so durable, so as to absorb the impact of sequestration without breaking stride.  But this is a fiction.

With the widespread disruption associated with across-the-board cuts and significant layoffs, I fear our industry will suffer a loss of learning, a depletion of talent, and an erosion in quality.  And I again ask our nation's leaders to address sequestration without delay.

Let me offer a word about the leadership transition that we announced last April.  On January 1, 2013, Chris Kubasik will assume all responsibilities as our company's chief executive officer and Marillyn Hewson will become our next president and chief operating officer.

I'm so very proud of these two executives.  I've had the opportunity to work with them for many years.  They are outstanding, as is the balance of our executive leadership, who are here in the room today, and many others who could not be here whom we have the great privilege of representing.

They have worked well together, they have had an enormous number of successes in their professional careers and we expect many more successes to come.
                             
Working together—Marillyn, Chris, myself and others in the room—we've built an excellent portfolio of highly relevant global capabilities.

We have refined a highly integrated strategy across our corporation.  We've made smart investments.  We've ensured that we have financial capacity and flexibility, and we have extraordinary talent and dedicated leadership at all levels of our organization.  We are very much ready for future challenges.

As for me, it has been and it remains a tremendous privilege to be part of such an outstanding group of mission-driven women and men who serve our customers, who deliver value for our shareholders, and who help safeguard our nation's freedom.

It's also been a great personal pleasure of mine to know and work with all of you.  I will miss you, and you might think that sounds like an exaggeration, but it is not even in the slightest.  And I will tell you why.

We've spent a lot of time together over the years and you have made me and our executive team much better informed about how the world looks through your eyes.  You've done it in ways you might not have fully appreciated.

In the way you formulate your ideas, in the way you ask your questions, in the way you prioritize the issues that you think are important that you want to ask of us.  And in every one of those exchanges I've certainly been a better executive for it.

But I will tell you there's much more.  I am absolutely certain that our company plays a vital role in the functioning of our nation, assuring that we have the means to defend ourselves, assuring that we equip friends and allies who share our values, and in assuring that our civil government agencies have the kind of capabilities that enable those who serve our citizens to provide high quality, efficient and effective services.

I am also absolutely certain that our democracy fails without a free and energetic press.  Yours is a mission as vital as any that we might undertake here.  You know, honestly I'm certain that we enjoy you most when you're exercising all that freedom and all that energy focusing on others, rather than on us—we love what you write about other companies.

But we do thank you very much for the service that you render to all our citizens.  You have treated me and my colleagues with respect and decency and fairness and we think that reflects enormously well on each of you, especially in a world that seems to be progressively lacking in some of these graces.

So I personally thank you for that.  I'm very grateful for all that you've done with us.  And with that, I think we should open the floor for discussion.