November 12, 2012 / 4:33 PM / in 8 years

Pentagon's message to Lockheed: Stay focused on F-35

WASHINGTON (Reuters) - Lockheed Martin Corp on Monday said Pentagon officials had underscored their support for Marillyn Hewson, named to take over as chief executive in January after an ethics scandal, and urged the company to stay focused on its flagship program the F-35 Joint Strike Fighter.

Current Chief Executive Bob Stevens, who will stay on as executive chairman when he retires at the end of the year, told analysts that the Defense Department was understanding about the management changes, but also reiterated the importance of keeping such programs such as the F-35 fighter on track.

Hewson and Stevens spoke with analysts on Monday morning in an effort to reassure investors that the company’s leadership changes would not alter its focus on cutting costs, delivering programs and expanding international sales.

Lockheed shares were trading slightly lower on Monday morning dropping 44 cents to trade at $89.54.

Stevens said Lockheed informed the Pentagon after the close of the stock market that its president and chief operating officer, Chris Kubasik, had been forced out after admitting to an inappropriate personal relationship.

Kubasik had been set to replace Stevens as chief executive officer in January. The news on Kubasik emerged hours after CIA Director David Petraeus resigned after admitting to an extramarital affair.

“The initial response has been an understanding of the situation that we faced here and an understanding of the actions that we’ve taken and a full measure of support for Marillyn in her new position,” Stevens said on Monday.

He said officials also told the company: “Don’t lose focus on the commitments that you’ve made on the F35 specifically and on other programs.”

Stevens said Hewson was very familiar with the breadth and depth of Lockheed’s operations and had been deeply immersed over nearly 30 years in many of the company’s key programs, including the F-35 fighter program over the past nine months.

Hewson, who was already slated to become president and chief operating officer in January, said she had taken part in high-level talks with the Pentagon about a contract for a fifth batch of F-35 jets, and would remain closely engaged in the process.

Those talks have been under way for nearly a year, prompting one of the Pentagon’s top F-35 officials to describe ties between Lockheed and the government as the worst he’d ever seen.

Hewson said she was committed to securing a contract for those planes, which is needed to free up funds for a sixth batch of planes, and said the company would deliver all the airplanes it was committed to this year, despite a strike that slowed production earlier in the year.

Lockheed last month warned investors that it faced a potential termination liability of $1.1 billion on the F-35 fighter program unless it received additional funding for work on a sixth batch of airplanes by year end.

“We are going to meet our commitments this year on delivering the aircraft that we committed to, the support for the customer is strong and so we’ll continue to be very much engaged and we won’t miss a beat on F-35,” Hewson said.

Stevens said Hewson was well suited for the top job because of her long years of experience in running various company divisions, as well as what he described as her “remarkable” people skills.

“I know you’re going to find this extraordinarily hard to believe, people seem to like Marillyn more than they like me,” Stevens joked, adding that he had learned “a lot from her in our ability to work together over the years.”

For her part, Hewson said she was focused on clearly communicating the company’s priorities, fostering innovation, listening to customers, and continuing to develop its workforce.

“I think it’s also important that a leader put in place an environment where people can do their best work, where they feel comfortable to bring their best ideas forward,” Hewson said.

Reporting By Andrea Shalal-Esa; editing by Andrew Hay

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