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Politics and Uncertainty: Lockheed Martin Response to the US Government

Lockheed Martin is cutting 4,000 jobs across the US as part of its response to the uncertain future of the US Defense Budget. CEO Marillyn Hewson said “In the face of government budget cuts and an increasingly complex global security landscape, these actions are necessary for the future of our business.” In total eight locations will be closed: four in California, and one each in Pennsylvania, Ohio, Arizona, and Texas.

Defense contractors in the United States are largely dependent on the federal government for their revenue. For example, in 2012 Lockheed Martin received $39 billion in federal contracts; this income represented over 80% of total firm revenue. This wave of firings is not the company’s first drastic response to US Government instability; in October 3,000 workers were furloughed for the duration of the government shutdown. Further, the firm has significantly downsized since 2008, with 20% of its employees, 30,000 workers, cut since that year.

This case is an example of the way in which uncertainty can severely impact firms. In particular, firms that are dependent on governments, and by extension, political concerns for their funding are at serious risk. In spite of these cuts, however, Lockheed Martin has been growing in profitability, with its share prices up almost 50% in the 2013 year. Whether this means that the company is just playing politics with the federal government, or is simply cutting operations that are expensive or unprofitable, is uncertain.

One Comment

  1. reilly reilly

    In one of my own articles I talked about the rise of personal armies. Might these defense contractors see a larger share of their sales comes from this segment of the market?

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