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Lockheed Martin to Cut Overhead Costs Amid Tepid Budget

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In recent times, defense contractors are resorting to reducing headcount to cut overhead costs owing to the weak defense budget environment in the U.S. Recently, Lockheed Martin Corporation (LMT - Free Report) announced that it has launched a review to cut corporate overhead costs by as much as 30%.

This move was one of several initiatives to reduce overhead expenses, which included the previously announced plan to sell or spin off various services businesses.

Earlier, Lockheed had announced that it will lay off 250 employees at its Missiles and Fire Control (“MFC”) business segment by the end of November.

Lockheed employs about 112,000 people worldwide, with about 15,000 working under MFC. However, the segment has been under pressure owing to reduced government spending.

The layoffs would likely affect its operations in New Mexico and most U.S. operations to some extent.

In Sep 2015, Lockheed announced that it will lay off 500 employees at its Information Systems & Global Solutions (“IS&GS”) segment by mid-Nov 2015 due to a shift in government priorities and changing industry dynamics as well as to increase IS&GS’ competitive edge.

Earlier in Nov 2013, Lockheed had announced 4,000 job cuts over the following 18 months due to ongoing restructuring of the company’s space business and uncertainties related to domestic and international defense spending.

Like Lockheed, other defense contractors have laid off thousands of workers over the past few years and restructured their businesses to retain profitability amid the constrained budget environment in the U.S., and the consequent delays and cancellation of new contracts.

Northrop Grumman Corporation (NOC - Free Report) recently announced that it intends to reorganize its business sectors to three from the previous four to better align its business with changing customer preferences and enhance innovation across the company.

In Aug 2015, The Boeing Co. (BA - Free Report) announced that it intends to reduce its headcount by several hundred employees at its satellite business over the upcoming months till early 2016 due to delays in commercial orders and downswing in the U.S. military spending.

In Jul 2015, Huntington Ingalls Industries, Inc. (HII - Free Report) announced that it intends to lay off at least 1,500 employees over the following 18 months to offset an expected two-year slowdown in work.

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