- Associated Press - Tuesday, July 6, 2010

WASHINGTON (AP) — Lockheed Martin Corp. is moving to trim its executive ranks as the Pentagon, its biggest customer, pressures defense contractors to cut overhead costs on huge weapons programs.

Lockheed said Tuesday it is offering directors and vice presidents financial incentives to leave voluntarily by Feb. 1. The nation’s largest defense contractor did not say how many employees qualify for the buyout or are expected to leave the company under the program. Lockheed spokesman Jeff Adams said the company does not have a specific target number for the buyout.

Defense Secretary Robert Gates said last week that he wants to find savings among the roughly $400 billion the Pentagon will spend this fiscal year on defense contractors. The companies, which also include Northrop Grumman Corp., Raytheon Co. and Boeing Co., among others, provide the military with a wide range of weapons and services.

One potential area of savings highlighted by the Pentagon was cutting the number of workers that defense contractors put on projects. The military hopes for annual savings of about 2 percent to 3 percent per year, money that will be shifted to war fighting operations.

About 85 percent of Lockheed’s $45 billion in sales last year came from U.S. government clients, with the Pentagon making up the biggest share.

Lockheed has already faced some push back on its big contracts, including a $323 billion project to build 2,450 new F-35 fighter planes. The lead contractor on the program, Lockheed is currently in talks with the Pentagon to reduce the cost of the jet by nearly 20 percent.

“Our customers are facing increasing demands with constrained resources, and they are relying on us to give them the very best value within these constraints,” said Lockheed CEO Robert Stevens.

Recent cost-cutting actions include the planned divestiture of two units and a significant reduction in international trade show participation.

Shares of the Bethesda, Md., company fell 27 cents to $74.17 in afternoon trading.


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