On the defense

first_img The U.S. Navy last week canceled a shipbuilding contract with Lockheed after negotiations to control costs on the second of two Littoral Combat Ships failed. The Government Accountability Office last month criticized Lockheed’s work on a new fleet of Marine One helicopters for exceeding program costs and for being at least 1,200 pounds overweight. And in February, the Department of Homeland Security’s inspector general concluded in a report that Lockheed knowingly equipped 123-foot Coast Guard cutters with unauthorized electronics, an investigation that was prompted by Michael DeKort, a former Lockheed employee who detailed safety and security issues beginning in 2003, and later chronicled his complaints in a YouTube video. Testifying Wednesday before the House Transportation and Infrastructure Committee, DeKort said the problems he identified were “not simply mistakes … They were informed, deliberate acts.” The Coast Guard this week permanently decommissioned the eight cutters that had been removed from service late last year because of hull problems. Committee Chairman James L. Oberstar, D-Minn., said the Justice Department is “conducting its own inquiry into this matter.” WASHINGTON – Lockheed Martin is taking hits right and left – criticism of its newly designed presidential helicopter, the unusual Navy cancellation of a multimillion-dollar combat ship and losing its shared oversight role on a Coast Guard project worth billions. Wall Street so far has shrugged at the missteps of the nation’s top defense contractor, since its bottom line won’t be hurt in the near term. But Lockheed executives are worried, experts say, and not just about the negative headlines. The Democrat-led Congress is scrutinizing defense spending more closely and each time Lockheed stumbles, it gives rivals an opportunity to horn in on its business. “These are significant setbacks for Lockheed that occur against a backdrop of remarkable success over the last five years,” said Loren Thompson, a defense analyst at the Lexington Institute in Arlington, Va. “The real question is if that trend is going to continue. The Coast Guard this week said it is taking over management of a troubled $24 billion modernization program dubbed Deepwater that had been run by a joint venture of Lockheed Martin Corp. and Northrop Grumman Corp. since its 2002 inception. Despite these events, Lockheed’s stock price has been relatively steady and Wall Street analysts have barely raised an eyebrow. In fact, many analysts praised Lockheed’s financial discipline for walking away from the combat ship deal after weeks of fruitless negotiations. Analysts said the canceled Navy deal would have little effect on the bottom line of the Bethesda, Md.-based company, which reported a 6.5 percent jump in 2006 sales to $39.6 billion. Since the beginning of the month, Lockheed’s stock has dipped about 1 percent, while some of its rivals, including General Dynamics Corp., Boeing Co. and others, have seen modest gains. But government and technology industry experts said Lockheed is concerned about the high-profile problems on government deals. Although continued contract wins in a variety of areas suggest Lockheed’s reputation remains solid, any problems that arise bring unwanted attention from the news media and lawmakers. “If you’re going to build a new technology, you’re going to have to accept some failures,” said James Lewis, director of the technology and public policy program at the Center for Strategic and International Studies, a Washington think tank. And the company is not shy about branching out. While being known for making fighter jets and missiles, it also is expanding into government information technology and shipbuilding. Lockheed Martin used to be considered an aerospace firm, but Lewis said a company executive recently corrected him by saying, “we’re an IT company now.”160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img