Incorporated: 1995
NAIC: 334511 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334290 Other Communication Equipment Manufacturing; 336411 Aircraft Manufacturing; 336413 Other Aircraft Part and Auxiliary Equipment Manufacturing; 336414 Guided Missile and Space Vehicle Manufacturing; 541710 Research and Development in the Physical, Engineering, and Life Sciences; 551112 Offices of Other Holding Companies
SIC: 3812 Search & Navigation Equipment; 3663 Radio & T.V. Communications Equipment; 3669 Communications Equipment Nec; 3721 Aircraft; 3728 Aircraft Parts & Equipment Nec; 3761 Guided Missiles & Space Vehicles; 8731 Commercial Physical Research; 8733 Noncommercial Research Organizations; 6719 Holding Companies Nec
Lockheed Martin Corporation is the one of the world's largest defense contractors. The company is a leading supplier to the U.S. government in systems integration and information technology as well as in aerospace. The company also does some trade with foreign governments and the private sector. Lockheed Martin was formed in 1995 via the union of the nation's second- and third-ranking defense contractors, Lockheed Corporation and Martin Marietta Corporation. Both Lockheed and Martin Marietta had evolved from relatively small aerospace manufacturers into titans of the global defense industry. A thorough treatment of Lockheed's history appears elsewhere in this series, while the Martin Marietta saga is recounted here.
The Martin Story
In 1905 a youthful Glenn Martin moved with his family to California. In the hills of Santa Ana, Martin built and flew his first experimental gliders. Not long afterward Martin started a small airplane factory while working as a salesman for Ford and Maxwell cars. Martin applied his earnings from the auto sales, as well as money from barnstorming performances, to finance an airplane business. During this time he hired a man named Donald Douglas to help him develop new airplanes. Soon thereafter, Douglas and Martin collaborated to produce a small flight trainer called a Model TT which was sold to the U.S. Army and the Dutch government.
On the eve of World War I, Douglas was summoned to Washington to help the Army develop its aerial capabilities. Less than a year later, he became frustrated with the slow-moving bureaucracy in Washington and returned to work for Martin, who had relocated to Cleveland. While there, Douglas directed the development of Martin's unnamed twin-engine bomber. Neither he nor Martin was willing to compromise or shorten the period of time needed for the development of their airplane. For that reason the "Martin" bomber arrived too late to see action in World War I. When Martin moved to Baltimore in 1929, Douglas left the company to start his own aircraft company in California.
Martin continued to impress the military with his aircraft demonstrations even after the war. In July 1921, off the Virginia Capes, seven Martin MB-2 bombers under the command of General Billy Mitchell sank the captured German battleship Ostfreisland. Continued interest from the War Department led Martin's company to develop its next generation of airplanes, culminating with the B-10 bomber. The B-10 was a durable bomber, able to carry heavy payloads and cruise 100 miles per hour faster than conventional bombers of the day. Martin's work on the B-10 bomber earned him the Collier Trophy in 1932.
Although Martin continued to manufacture bombers throughout the 1930s, he also began to branch out into commercial passenger aircraft. With substantial financial backing from Pan Am's Juan Trippe, Martin developed the M-130 "China Clipper," the first of which was delivered in 1932. The clipper weighed 26 tons, carried up to 32 passengers, and was capable of flying the entire 2,500 miles between San Francisco and Honolulu. Pan Am flew Martin's planes to a variety of Asian destinations, including Manila and Hong Kong.
However, Martin's consistent development of military aircraft through the decade prepared it well for the start of World War II. The company produced thousands of airplanes for the Allied war effort, including the A-30 Baltimore, the B-26 and B-29 bombers, the PBM Mariner flying boat, and the 70-ton amphibious Mars air freighter. Martin invited some criticism in 1942 when he suggested that the United States could dispense with its costly two-ocean navy and defense of the Panama Canal if it had enough airplanes like the Mars.
After the war ended Martin continued to manufacture what few airplanes the Army and Navy were still ordering. In 1947 the company reentered the highly competitive commercial airliner market with a model called the M-202. The development of later aircraft, the M-303 (which was never built) and the M-404, was a severe drain on company finances. Despite loans from the Reconstruction Finance Corporation, the Mellon Bank of Pittsburgh, and a number of other sources, the Martin Company was unable to generate an operating profit.
In July 1949 Chester C. Pearson was hired as president and general manager of the company. Glenn Martin, at the age of 63, was moved up to the position of chairman. Despite the new management and an increase in orders as a result of the Korean War, the Martin Company was still losing money. There were two reasons: first, production of the 404 was interrupted, which, in turn, halted delivery and therefore payment for the aircraft. Second, the company hired hundreds of new but unskilled workers, which lowered productivity.
By the end of 1951 George M. Bunker and J. Bradford Wharton, Jr., were asked to take over the management of the company. As part of a refinancing plan Glenn Martin was given the title of honorary chairman and his 275,000 shares in the company were placed in a voting trust. Martin resigned his position in the company in May 1953, but remained as a company director until his death. George Bunker succeeded Martin as president and chairman and directed the company for the next 20 years. Pearson, who was demoted to vice-president, later resigned. Bunker and Wharton were successful in arresting the company's losses and by the end of 1954 declared the company out of debt. Martin, who never married, died of a stroke in 1955 at the age of 69.
Under its new leadership, Martin substantially reengineered a version of the English Electric Canberra bomber for the U.S. Air Force. Known as the M-272, the bomber was given the Air Force designation B-57. Martin built a number of scout and patrol planes, including the P5-M and P6-M flying boats, and expanded its interest in the development of rockets and missiles. One of Martin's first projects in this area was the Viking high-altitude research rocket, followed by the Vanguard missile. By the 1960s the company was a leader in the manufacture of second-generation rockets including the Titan II.
Despite the company's return to profitability after the Korean War, the larger airplane manufacturers such as Boeing, Douglas, and Lockheed had the advantage of size, which allowed them to compete more effectively with smaller companies including Martin, Vought, and Grumman. These smaller companies, however, retained very different kinds of engineering teams which allowed them to continue developing unique aeronautic equipment and weapons systems.
The company was largely unsuccessful in achieving diversification in anything but its number of government customers. Martin aircraft was subject to the whims of the Department of Defense with its unstable pattern of purchases. By December 1960 Martin's last airplane, a Navy P5M-2 antisubmarine patrol plane, rolled off the production line. From this point forward the company produced only missiles, including the Bullpup, Matador, Titan, and Pershing among them.
Merger with Marietta
The Martin Company diversified through a merger with the American-Marietta Corporation, a manufacturer of chemical products, paints, inks, household products, and construction materials, in 1961. After convincing the government that the merger would not reduce competition in any of either company's industries, the two companies formed Martin Marietta. The diversification continued in 1968 with the purchase of Harvey Aluminum. The name of the subsidiary was changed to Martin Marietta Aluminum in 1971.
Martin Marietta became known for its space projects, but remained a major producer of aluminum and construction materials during the late 1960s and early 1970s. In 1969 the company's aerospace unit was selected to lead construction of the two Viking capsules that landed on Mars in 1976. In 1973 the company was awarded a contract to build the external fuel tank for NASA's space shuttles.
Thomas G. Pownall advanced to the presidency of Martin Marietta in 1977 and chief executive officer in 1982, succeeding J. Donald Rauth. The same year Martin Marietta faced the most significant challenge to its existence in its history: a hostile takeover bid from the Bendix Corporation. Bendix, which had earlier abandoned an attempt to take over RCA, was led at the time by Bill Agee. For several years Agee had been divesting Bendix of its residual businesses, accumulating a $500 million "war chest" in the process. In 1982, he leveraged that fund into a $1.5 billion bid for Martin Marietta.
Martin Marietta responded with a surprising turnabout. CEO Pownall invited a friend, Harry Gray of United Technologies, to assist with a takeover strategy of their own. Pownall and Gray agreed to divide Bendix among them in the event that either Martin Marietta or United Technologies was successful in taking over Bendix. The takeover was stalemated until a three-way deal was arranged wherein the Allied Corporation agreed to purchase Martin Marietta's holdings in Bendix on the condition that Bendix abandon its bid for Martin Marietta. The deal left Allied with a 39 percent ownership of Martin Marietta, but it was agreed that Allied's voting share would be directed by Martin's board until such time that Allied could sell its interest in Martin. Bill Agee joined Allied's board of directors but later left the company. In the meantime, Martin Marietta went $1.34 billion into debt as a result of its takeover defense.
In order to reduce the company's debt load, Pownall divested its cement, chemical, and aluminum operations, and accelerated a reorganization begun before the takeover crisis. By 1986 debt was down to $220 million, giving Martin Marietta a comfortable debt-to-total capitalization ratio of 24 percent. In retrospect, Tom Pownall acknowledged that his company had emerged from Bendix's takeover attempt as a more tightly managed and efficient business.
In the late 1980s, the company became active in the design, manufacture, and management of energy, electronics communication, and information systems, including the highly sophisticated level of computer technology known as artificial intelligence. Even with this diversification, 80 percent of Martin Marietta's revenues continued to be generated via U.S. government contracts. The company supplied the Pentagon with a number of weapons systems, including the Pershing II missile, a major part of the MX missile; the Patriot missile, designed for air defense of field armies; and the Copperhead, a "smart," or guided, cannon shell. Martin Marietta also developed a series of night vision devices for combat aircraft.
The company continued to build external fuel tanks for NASA's space shuttle program, despite the temporary suspension of that program following the Challenger tragedy. Martin Marietta was also a major contractor for the International space station. In another public project, the company was working on a new air traffic management system for the Federal Aviation Administration.
Norman R. Augustine, Tom Pownall's handpicked successor, succeeded his mentor as chairman and CEO upon the latter's mid-1980s retirement. Augustine proved an auspicious choice. Anticipating the impending reductions in the U.S. defense budget, which slid from a high of $96 billion in 1987 down to $75 billion by 1992, the new leader and his executive team developed a three-pronged plan to survive the shakeout. Dubbed the "Peace Dividend Strategy," the blueprint called for growth through acquisition, diversification into civil and commercial infrastructure markets, and maintaining financial health. Under Augustine, Martin Marietta dived into the wave of consolidation that swept over the American defense industry in the early 1990s. He guided the $3 billion acquisition of General Electric Co.'s aerospace operations in 1992. The merger, which added about $6 billion in annual sales, boosted Martin Marietta's capabilities in digital processing, artificial intelligence, and electronics. Two years later, Martin Marietta expanded its capabilities in the wireless communications and commercial aviation markets with the acquisition of Grumman Corp. for $1.9 billion.
Formation of Lockheed Martin: 1995
However, Augustine's most dramatic move came in 1994, when Martin Marietta and Lockheed Corporation announced a "merger of equals." It took the Federal Trade Commission several months to approve the union, which created the world's largest defense company. While the federal government typically discouraged such massive combinations within the same business area, it regarded this consolidation in the defense industry with favor, since, according to one statement, it "boosts the industry's efficiency and lowers costs for the government, which in turn benefits taxpayers, shareholders and employees."
The spring 1995 exchange of stock created an advanced technology conglomerate with interests in the defense, space, energy, and government sectors serving the commercial, civil, and international markets. Daniel M. Tellep, chairman and CEO of Lockheed, held those same positions at the new company. Martin Marietta leader Augustine stepped into the office of president with the promise that he would advance into the top spots upon Tellep's retirement.
Headquartered in Bethesda, Maryland, Lockheed Martin began a process of consolidation and reorganization even before the merger was completed in March 1995. An organizational consolidation grouped operations around four major business sectors: space and strategic missiles, aeronautics, electronics, and information technology services. The plan merged and eliminated dozens of offices and functions, rendering thousands of jobs redundant in the process. In fact, Lockheed Martin slashed its workforce from a combined total of 170,000 people to 130,000 by mid-1995 and expected to furlough another 12,000 by 1999.
The unified company was involved in a number of well-publicized projects, including the Hubble Space Telescope, Motorola's Iridium satellite telecommunications system, the F-22 Stealth fighter, Titan and Atlas space launch vehicles, the space shuttle program, and the space station Freedom.
The January 1996 acquisition of Loral Corp.'s Defense Electronics and Systems Integration business made it clear that Lockheed Martin would not soon relinquish its number one status. Established in 1948, the Loral division was a $6.8 billion operation and a global leader in defense electronics, communications, space, and systems integration. The acquisition was initially categorized as a sixth division, Tactical Systems, at Lockheed Martin. Anthony L. Velocci, Jr., an analyst with Aviation Week and Space Technology, predicted that Lockheed Martin would encounter difficulty in consolidating the Loral operations into its own recently reorganized divisions, but that the acquisition would bring economies of scale and boost electronics, tactical systems, and information technology.
Loral Chairman and CEO Bernard Schwartz held those same positions at the newly formed Lockheed Martin subsidiary and was invited to join the latter company's board of directors. Schwartz, Tellep, and Augustine became the first members of Lockheed Martin's three-man office of the chairman as a result of the acquisition. Augustine retired in 1997 to teach at Princeton. His successor, Vance D. Coffman, had been an executive at Martin Marietta before the merger.
Lockheed Martin was a member of the United Space Alliance, which had been handling launch operations for the space shuttle since 1995. In 1998 the U.S. Air Force selected Lockheed Martin to build the Evolved Expendable Launch Vehicle (EELV), or Atlas V. It was first launched in 2002, three years before the final flight of the Titan IV, which had been in service for a half-century.
The company's Mars Odyssey reached Mars in 2001, while the Spitzer Space Telescope was launched in 2003. Lockheed Martin joined the Boeing Company in a joint venture called the United Launch Alliance in 2005. The next year, it was chosen to build NASA's Orion Crew Exploration Vehicle, the successor to the space shuttle.
Still an Aeronautics Giant
Lockheed Martin aircraft continued to be a mainstay of NATO air fleets. The company was bringing out new versions of designs dating back to the 1950s, such as the C-130 Hercules transport and U-2 spy plane. At the same time, it was successful in landing contracts to develop the next generation of fighter aircraft. The company's candidate won the Joint Strike Fighter competition in 2001. This aircraft, dubbed the F-35 Lightning II, first flew in 2006. Several countries, led by the United States and United Kingdom, were involved in the program. The United States expected to pay more than $200 billion for its first 3,000 planes. Lockheed Martin's aeronautics division was working on an unmanned variant of the F-35.
The F-22 Raptor, the Lockheed Martin/Boeing fifth-generation replacement for the F-15 fighter, entered flight testing in 1997 after a decade and a half in development. Lockheed Martin delivered 74 of the planes to the Air Force by mid-2006 although Congress had nearly killed the program several years earlier. Lockheed Martin was also the prime contractor for a helicopter that was chosen as the new Marine One, the helicopter dedicated to transporting the U.S. president, in 2005.
Serving Civil Servants
In the late 1990s, Lockheed Martin designed a number of systems for the U.S. Postal Service. Its corporate information technology business was growing with the addition of clients such as NIKE, Inc., as well as federal agencies.
Lockheed Martin systems were used to process forms for the U.S. census in 2000 and the U.K. census in 2001. A 2004 contract extended Lockheed Martin's relationship with the Social Security Administration, begun in 1989, through to 2011. The company was chosen to handle the National Archives' electronic records in 2005.
After the September 11, 2001, terrorist attacks on the United States, Lockheed Martin trained tens of thousands of screeners for the newly formed Transportation Security Administration. In 2002, the company won a contract to modernize air traffic control systems for the Federal Aviation Administration.
The company was also performing complicated systems integration services for the military. In 2000 it won a bid to coordinate warfare systems for the Navy's new CVN-77 aircraft carrier. It was also updating command and control systems for the U.S. Air Force.
Growth in the Face of Challenges
Lockheed Martin had revenues approaching $40 billion in 2006. There were 140,000 employees. The U.S. government accounted for 84 percent of net sales. There had been some stumbles along the way. The company had ended the millennium with a couple of rocket failures and some Congressional opposition to its capable but very expensive fifth-generation fighter programs. Saddled with $12 billion in debt from acquisitions, Lockheed Martin began to miss earnings targets until a new chief financial officer was hired. Staff cuts and more than $1 billion worth of divestments followed.
The company continued to expand its capabilities through acquisitions, however. It bought Comsat Corp., the U.S. representative on international communications satellite networks, for $2.1 billion in 2001. Other purchases included records management specialist Aspen Systems, Savi Technology, Pacific Architects and Engineers, and the United Kingdom's HMT Vehicles Ltd.
The company bought OAO Corporation in 2001. Two more information technology providers, ACS and Orincon, were acquired a couple of years later, and a third, SYTEX Group Inc., was added in 2004. In 2005 Lockheed Martin bought Coherent Technologies, provider of laser-based remote sensing systems. Lockheed Martin bought Sippican Holdings Inc., which supplied technology for naval warfare applications, in 2004. U.K. firms STASY Ltd. and INSYS Group Ltd. were acquired the next year.
Principal Subsidiaries
Advanced Technologies Laboratories; Center for Innovation; LMC Properties, Inc.; Lockheed Martin UK; United Space Alliance, LLC.
Principal Operating Units
Aeronautics, Electronic Systems; Information Systems & Global Services; Space Systems.
Principal Competitors
Boeing Company; EADS; Northrop Grumman Corp.; Raytheon Co.
Further Reading
Banks, Howard, "Aerospace & Defense," Forbes, January 4, 1993, p. 96.
Biddle, Wayne, Barons of the Sky, New York: Simon & Schuster, 1991.
Borrus, Amy, "This Is Going to Be the Biggest Kahuna Around," Business Week, September 12, 1994, p. 32.
"A Conversation with ... Norman R. Augustine; President and Chief Executive of Lockheed Martin Corp.," Washington Post, March 24, 1997, p. F9.
Dutt, Jill, "Taking an Engineer's Approach at Lockheed Martin," Washington Post, May 1, 2006, p. D1.
Foust, Dean, "Guns, No Butter at Martin Marietta," Business Week, March 21, 1994, p. 39.
Haber, Carol, "Lockheed Martin to Buy Loral Defense," Electronic News, January 15, 1996, p. 6.
Hartung, William, "Stormin' Norman; When the Chief of Lockheed Martin Talks, the Pentagon Listens," Washington Post, July 28, 1996, p. C1.
"Lockheed Corporation," International Directory of Company Histories (vol. 11), Detroit: St. James Press, 1995, pp. 266-69.
"Lockheed Martin Setting $1.7 Billion Consolidation," Electronic News, July 3, 1995, p. 12.
"Lockheed to Buy Most of Loral Corp.," Cleveland Plain Dealer, January 9, 1996, p. 1C.
Merle, Renae, "Lockheed Says F-35 Could Fly Pilotless; Pentagon Demand for Drones Grows," Washington Post, August 16, 2006, p. D1.
Rich, Ben R., Skunk Works: A Personal Memoir of My Years at Lockheed, Boston: Little, Brown, 1994.
Schneider, Greg, "Allies Enlisted to Pay for Jet; Overseas Help May Make Warplane Hard to Kill," Washington Post, March 11, 2001, p. A1.
------, "Lockheed Martin Plans for Change; Pentagon Supplier Would Ride Out Cuts," Washington Post, February 14, 2001, p. E1.
------, "Lockheed Martin's Mr. Fix-It; Turnaround at Troubled Company Shows the Importance of a Good Chief Financial Officer," Washington Post, September 4, 2000, p. F14.
Solberg, Carl, Conquest of the Skies, Boston: Little, Brown, 1979.
Vander Meulen, Jacob A., The Politics of Aircraft: Building an American Military Industry, Lawrence: University Press of Kansas, 1991.
Velocci, Anthony L., Jr., "Loral Buy Challenges Lockheed Martin Skills," Aviation Week & Space Technology, January 15, 1996, p. 22.
------, "Merger Now Must Meet Lofty Expectations," Aviation Week & Space Technology, November 30, 1992, pp. 23-24.
------, "Merger Partners Poised to Fulfill Strategic Plan," Aviation Week & Space Technology, November 14, 1994, pp. 40-42.
Whitehouse, Arthur, The Sky's the Limit, London: Macmillan, 1979.
— Updated by Jeffrey L. Covell, April Dougal Gasbarre, Frederick C. Ingram
